Indian language newspapers have declining readership per issue and less time spent on each copy. That doesn’t mean they are in trouble.
In 1996, DB Corporation, was a single brand company. Its Hindi daily, Dainik Bhaskar, was based out of Bhopal. Then, just as liberalisation was taking off, it started eyeing other markets. and began expanding, first going to Rajasthan, then to Punjab, Haryana and Gujarat. In March 2011, DB Corp logged revenues of Rs 1,265 crore, with seven brands in 11 states and ambitions for many more.
DB isn’t the only one growing stratospherically in India. Its story is being replicated across the country by other language newspaper groups such as Jagran Prakashan, Eenadu, Lokmat, Sakal and HT Media (Hindustan). Small-towns have become the centre of the India growth story and any media that serves this market—read: language newspapers—is critical for advertisers. They’ve been more than happy to aid in this growth story.
But is a dream run for these regional newspapers finally over?
A glance at the enclosed table shows some worrying trends. In many languages, Tamil, Marathi and Bangla for instance, the ‘average issue readership’(AIRs) has been going down, according to Indian Readership Survey (IRS) data. Ditto for amount of ‘time spent’ on the paper, which is another important category. AIRs and ‘time spent’ are key metrics, in addition to circulation, on which ad revenues—which comprise 70 to 80 per cent of the newspaper revenue pie—hinge on. Could this be the harbinger of bad times?
Investors, publishers and advertisers in the regional language trade don’t seem to think so, acknowledging a correction at best, but nothing more. “There might be an aberration for a quarter or two, but growth is there,” says Gaurav Gupta, executive director, Kotak Mahindra Capital. “Language newspapers and Hindi have a long way to go,” asserts Sanjay Gupta, editor and CEO, Jagran Prakashan.
If that is indeed true, how does one reconcile a drop in readership with robust growth in the regional language newspaper business?
The answer lies in the distinction between readership and circulation. The two do not necessarily share a directly proportional relationship with each other. Firstly, in India, a household often shares a newspaper which means that there is more than one pair of eyes reading it. However, as India has boomed, "sharing of newspapers has come down due to the increase of nuclear families. Therefore there is a significant drop in readers per copy," says Varghese Chandy, senior general manager, marketing, Malayala Manorama. It means people no longer share as many copies as they used to since fatter wallets have led to more individual copies being bought. While that explains increased circulation, what can explain fewer eyes on pages and that too for shorter periods of time?
Television. This is the one medium that has often proved to be a category killer for a variety of mediums, competing for attention. Television channels across the all languages, not just in Hindi, have affected regional papers. For instance, Bangla has seen a 15 per cent drop in time spent from 2006 to 2011, while circulation grew at a measly one per cent. It is obvious as to what has happened, if you know that in 2006 there were only nine Bangla channels. In 2011, there were 30, going by TAM data.
Malayalam in fact remains the only language where readership and circulation both grew in double digits. A big reason perhaps, is the fact that Malayalam television doesn’t have as many strong brands as Marathi or Bangla do. The other is that the newspaper market in Kerala is largely dominated by just two players – Malayala Manorama and Mathrubhumi - unlike say Hindi where there are at least four strong players in each state.
In other words, regional language papers are doing just fine. “Among the top 10 newspapers in India, nine are regional language newspapers and seven of them have shown growth,” K. Satyanarayana, vice president, R K Swamy Media Group. It is largely language papers that have catapulted the Indian print media business from just under Rs 9,000 crore in 2004 to Rs 18,000 crore in 2010. These figures include advertising and circulation revenues for both newspapers and magazines.
Still, the competition from multiple media sources has investors worried. One recent report from Citi, while lauding growth, worries about ‘near-term headwinds arising from newsprint prices, softness in advertising and competitive pressures.’ ICICI Securities recently sent out a report on print media titled, “Digging their own grave; Going the telecom way.” The report refers to the price wars, especially in Hindi newspapers.
The price to earnings ratio for language newspaper companies has gone down from a high of 25- 28 to 15-17, which means that the market isn’t all that bullish on their growth prospects—curious for an industry posting strong numbers. After all, the same analysts and investors pushed media companies to increase circulation—an expensive strategy because each additional copy costs anywhere between Rs 15 to 20 to produce but sells only for Rs 1 to 4 at most. After this exercise, there is no guarantee that advertisers will pay more just because the paper is selling a few thousand additional copies.
While these are valid concerns, there are some behavioural drivers that make it hard for regional language players to fail, at least for now. “Eighty five to ninety five per cent of the newspapers in India are delivered at home. So the question of not reading doesn’t arise,” says Venkat. This is something publishers across languages agree on. In the West, most readers pick up their paper at a newsstand. When the internet started giving the same paper online for free, they simply stopped picking it up. In India, home delivery works because of the low labour cost advantage. That alone will ensure the survival and longevity of newspapers, say media owners.
India’s macro story continues to buoy a variety of industries and print newspapers is one of them. The Indian newspaper industry makes just over Rs 12,000 crore ($2.5 billion) in ad revenues for reaching 345 million readers, compared to say $26 billion (Rs 1,20,000 crore) that the US industry does for 150 million readers. While India is no US, there is still a lot of juice to be extracted just from current readership numbers. As the economy keeps growing, the ad to GDP ratio is bound to keep moving from the half per cent or so, to the one per cent odd that an economy like India will at some point have. When that happens, the upside for language newspapers, with their volumes, is huge.
Meanwhile, everyone seems in expansion mode—not exactly what you expect from a struggling industry. Gupta reckons that in UP alone, Jagran could do five more print centres in addition to the 11 already there. This is because local advertising is growing from about 40 per cent of ad revenues a few years back to 60 per cent. The company is planning to launch a Punjabi paper. DB Corp is planning more editions of Divya Marathi. Malayala Manorama has one of the most successful internet portals from a media company.
It is ambition and risk taking that brought language publishers so far. That and the solidity of the India growth story will keep them going.