Indian language print is the new growth story in the $17-billion Indian media and entertainment industry. In December 2009, DB Corporation, the publishers of Dainik Bhaskar, raised Rs 450 crore through an initial public offer (IPO). Later, in April 2010, Blackstone, a private equity fund, picked up an undisclosed stake in Jagran Prakashan, publishers of Dainik Jagran, for Rs 225 crore. Earlier this month, Jagran bought Mid-Day in a share-swap deal.
Hindustan Media Ventures (HMVL), an offshoot of HT Media, is planning to raise Rs 300 crore through an IPO later this year. HMVL houses all the Hindi brands from HT Media, including the Hindustan. Several other language publishers are expected to raise capital too.
KPMG recently released a report on the growth of print, with special emphasis on language media. Other analysts have been churning out reports on the implications of the latest Indian Readersship Survey results after ignoring them for years. When consultants and investment bankers start spotlighting an industry, you know it has arrived.
For more than 15 years, most language brands have struggled to establish their credentials as media vehicles that also reach an audience with significant purchasing power. Media buyers have been reluctant to acknowledge this power. There was a gap of about 1:10 between what an English brand could charge versus a language one. Though estimates on what the current gap is vary from 1:5 to 1:3, there is no doubt that it has been narrowing. Much of the growth in language media is the result of this narrowing — a sign that revenues are finally following the volumes the market offers.
However, it is not just the language media that investors are betting on, it is the whole small-town-India story that is being put to test here. The reason the gap between English and language ad rates narrowed is the evidence that the potential in non-metro India, where a lot of language media readers sit, is now overwhelming.
On affluence levels, market size and growth potential, towns such as Pune, Chandigarh, Indore and Jaipur are three-fourths or more of Mumbai, according to a 2008 report by Ernst & Young (The Dhoni Effect). A newer version of the report, being released this week, is packed with even more evidence of how much and what small-town India is buying.
“Small towns in India have reached an inflection point,” says Amit Chopra, CEO, HMVL. According to him, research shows that when a market reaches a per capita disposable income level of $550-$600, ad intensity or the ratio of ad spend to per capita consumption expenditure jumps. In markets such as Russia and China, ad intensity hit 1.4 and 1.2 per cent, respectively, after crossing the threshold. India is at half those levels.
Recently, India reached the $550 level in per capita disposable income. So, expect ad intensity to rise significantly. However, since metros reached this inflection point earlier, what is really pushing the average up is the growth in small-town India. Therefore, a larger share of the increased ad spends will now go to non-metro India, meaning to language publications and other media. This is expected to happen in 2011-12. All the capital going into language media will then begin to see returns.
It just may, but only if investment in content keeps pace. Most of the language biggies used the capital raised in the first round five years ago in spreading across regions and launching news editions.
However, in each of these markets, competition is getting very intense a la English. Bihar, for instance, is a hotspot for most major media brands like the Hindustan, Dainik Jagran and Prabhat Khabar among others. As the readers and advertisers in these markets get used to more options, from TV to radio, they will become more demanding.
That means investing in developing local, not regional, content. This involves hiring, training and retaining good reporters in non-metro India, not just using stringers who double as sales agents. It also means spending on developing local advertising. These take huge amounts of time and effort as any radio, TV or local newspaper company will tell you.
The easy part was showing the promise, the tough one begins now.