A 5 a m cup of tea at Supela Chowk on National Highway 6 in the steel city of Bhilai is an unlikely place to understand the economics of the newspaper business. But over tea, newspaper vendors and agents talk of the unspoken part of the business. Two leading newspaper publishers in Chhattisgarh, they claim, buy about 50,000 copies of each other’s newspapers every morning. The idea is to prevent the competitor’s product from reaching the reader. Ex-employees, with some pride, tell you war stories of how the two publishers have dedicated staff and godowns from where they manage this operation. They add quirky tales of how at one stage the rate of “raddi”, or old newspapers, was higher in Nagpur, 275 km from Raipur, capital of Chhattisgarh, and they hired trucks to ship the “raddi” to Nagpur to get better value.
Similar stories are heard in Bhopal, where two publishers have been engaged in tough competition. Action like this has unintended consequences. The Audit Bureau of Circulation, or ABC, certifies the circulation numbers of publishers, and these numbers get boosted as a result of such competitor action! In turn, advertisers rely on ABC certificates to know which newspaper sells how many copies. So while buying a rival’s copy is intended to hurt him, it unwittingly ends up also helping the rival through higher certified circulation numbers. Inevitably, there are also multiple cases of newspaper companies across the country doing voluntary “raddi” of their own newspaper in order to get higher certified circulation.
In her article “The trouble with English Papers” (Business Standard, February 28), Vanita Kohli-Khandekar pointed out that while the circulation of English newspapers has grown 70 per cent in the last six years, readership as put out by the Indian Readership Survey (IRS) has hardly grown by two per cent. The “raddi” business is one of the key reasons for this trend. Copies that get printed are not reaching readers, and in fact are not intended to reach any reader.
An important reason is the low price at which newspapers are sold. Compared to a cost of about Rs 15, newspapers in India are priced mostly between Rs 2 and Rs 4. For ABC certification, newspaper companies have to show recovery of at least the “raddi” value (Rs 1 to Rs 1.50 per copy). The difference between the cover price and “raddi” value can be paid by publishers to agents as commission, and used for other incentives. The low cover price creates plenty of room for misuse.
It gets worse, because most newspaper companies promote special schemes like one- to two-year subscriptions at rock-bottom prices, and combo plans for multiple publications of the same group at attractive prices. This not only makes the product very cheap for readers but also makes copies vulnerable for further misuse in the hands of vendors. For such copies, the ABC certification rules are even easier. Newspaper companies have to recover just 10 per cent of the cover price of the newspaper to get certification, which is typically less than half the “raddi” value.
Sample this: The manager of a housing society with 20 flats in Mumbai’s Vile Parle got an unbelievable offer. The newspaper agent wanted the society, on behalf of its members, to subscribe to the two-year subscription scheme of two popular city newspapers by paying about Rs 8,000. The publishers were running a two-year, Rs 199 subscription offer. In return, the agent, instead of supplying the newspapers every day, promised to give the society Rs 30,000 back after six months. To the manager it sounded like a Ponzi scheme, but he discovered that the two newspapers were willing to give a product with a cover price of more than Rs 70,000 over two years, for as little as Rs 8,000. The agent was merely using the society address to get 20 copies of each of the publications at the low subscription price, which he would then sell to his regular customers at the printed cover price. From this arbitrage, he was ready to share half his spoils with the society. ABC sometimes catches on to some schemes, and it is not infrequent that publishers’ circulation claims are rejected.
As it happens, these subscription copies would not qualify for ABC certification, so what was their purpose? This is where the readership survey comes in. The Indian Readership Survey, or IRS, is used to determine readership and consumption patterns for a lot of durable goods by households across India. The IRS numbers, now published every quarter, are the basis on which advertisers and ad agencies decide how to allocate some Rs 15,000 crore of advertising money among various publications. With a sample size of more than 250,000, collected through four quarterly cycles, the IRS is one of the most comprehensive efforts at collecting data.
But if you want to understand how IRS functions on the ground, you don’t need to meet any newspaper company CEO, or for that matter any Media Research Users Council (MRUC) office-bearer. The best person to go to is Sandeep (name changed), who lives near Laxmi Nagar in East Delhi. It is difficult to believe what Sandeep promises. He claims he can “fix” any newspaper’s readership for as little as Rs 5 lakh for each city. He claims that he and his masters do this for a living and boast of leading publications as their clients.
The method is simple. Just fix the sample at the data collection stage. This sample forms the basis of the IRS survey. Sandeep claims to have field staff in his pocket; through this network of people responsible for data collection, he can fix the sample not only to improve the readership of a particular newspaper but also to reduce the readership of a rival newspaper. He offers the personal contact details of senior managers at big publications who are involved.
It is not that MRUC and the industry, including advertisers and agencies, have not been warned of such misuse. Recently, MRUC wrote to its members asking them to bring to MRUC any such instance that comes to their knowledge. The letter warned that MRUC would take police action against guilty agents and field staff.
Earlier, a rival readership survey (National Readership Survey, or NRS) faced similar charges of quirky and unrealistic numbers, and court cases were filed. Eventually, NRS was discontinued as a separate entity. With IRS now the sole survivor, it is in the same position as the sole TV viewership survey — a monopoly means the industry has nowhere else to look for reliable numbers.
The trouble with newspaper companies, as Vanita Kohli-Khandekar pointed out in her article, is that they have run out of good ideas to increase genuine circulation and readership. The pressure to grow has led the industry to adopt practices that are both unethical and in the long run unsustainable. Executives in some publications now spend most of their time managing such distorted schemes.
It is not that all practices in the television industry are above board, so newspapers can hardly follow the lead of TV companies. But a newspaper industry that is in decline globally cannot hope to show growth in India by resorting to questionable practices that distort crucial industry matrices — or there will be fresh law suits filed.
The author is executive vice-president of Business Standard Ltd