Scoop! Bankruptcy In Media

Costs have gone through the roof: newsprint prices have been on a roller-coaster; salaries have soared. Meet any of several publishers and they will tell you, Its never been as bad as this.

Some eight years ago, Lalit Mohan Thapar called a small war council at his elegant home on New Delhis tree-lined Amrita Shergil Marg. Thapar was planning to buy The Pioneer, then an Uttar Pradesh newspaper, and start a Delhi edition.

Dont do it, one of those present advised. Why not, Thapar asked. Because it will never make money, he was told. By way of an answer, the industrialist related a little story.

 

Mulayam Singh Yadav was then chief minister of Uttar Pradesh. Thapar recounted a meeting of businessmen that Yadav had called. Most of the invitees, people who had business interests in the state, had assembled dutifully when Yadav walked in, did a quick namaste and sat down to start the proceedings.

Shortly afterwards, in walked the portly Rajaram Jaipuria, at that time owner of The Pioneer. Yadav quickly got up, made a bit of a song and dance about welcoming Jaipuria and then got back to the proceedings.

What is Jaipuria compared to me in the world of business, Thapar asked. But while I and all the others just got a simple, collective namaste, look at the way the chief minister had to bow and scrape before Jaipuria. Just because he owned a newspaper.

Thus began a publishing enterprise that teetered dangerously near the edge of closure this past week, with Thapar group companies stopping further cash infusion, under specific instructions from the public sector financial institutions.

In the intervening years, the world of Indian business had changed. Politicians were still important, but less so now. And in any case, there was little they could do to help Thapars group handle its desperate need for cash in a business climate that had become more competitive and less forgiving of follies.

Along the way, Thapar sold several businesses, including the publishing companys Hindi newspaper (Swatantra Bharat). When that didnt help, he told the Pioneers editor Chandan Mitra last October that he couldnt continue sustaining the losseswhich crossed Rs 56 crore a year ago and have been climbing at a crore a month since then.

Funding by the papers parent company, Ballarpur Industries, stopped in November last year. Eight months earlier, the paper owed Ballarpur nearly Rs 30 crore, and Rs 8 crore to other creditors even as both circulation and advertising revenue had been plummeting downwards.

Finally, three months ago, Thapar declared in a newspaper interview that the paper was up for sale. Salaries were paid three weeks late in April. Three days ago, the buzz in the papers offices was that it was curtains at the end of the month (Thursday). Then, late in the evening, fresh word came round: a two-week reprieve.

Various potential buyers have been contacted in the last few weeks. The inevitable rumour mills have mentioned names like the Mittals (of the Ispat group) and Sahara (which already runs a Hindi daily). One person who had been contacted said he was offered the paper free, but declined. Free means a crore a month, he said tartly.

If the Pioneer survives (the paper has some 500 employees including 175 journalists on its rolls), it will have a long haul ahead before viability can be reached. But businessmen who want to use newspapers to reach politicians are a rarer breed in todays business jungle. So publishing must make financial sense on its own.

A decade ago, the industrialist BK Modi had wanted to start a financial newspaper. Warned by an acquaintance that running a newspaper would be a headache, because politicians would keep calling and complaining about what the paper was reporting, Modi retorted: But they will call me, wont they?

For the ambitious and well-connected Modi, thats all that mattereda newspaper would force politicians to call him. Such facile logic for starting a publishing business is a luxury today, even as the Thapars and Modis (and several other business groups) have fallen on hard times.

Naturally, then, The Pioneer is not alone in its troubles. Revenues for the press as a whole have plunged because of the three-year slump in advertising, and also because price wars started by the more prosperous newspapers have forced even the losing publications to follow suit, and sink deeper into the red.

And costs have gone through the roof: newsprint prices have been on a roller-coaster, salaries have soared. Meet any of several publishers and they will tell you, Its never been as bad as this.

Its not the print media alone. Just about the time that Thapar began his date with the Pioneer, satellite television came into its own in India. Ten years ago, there was no escape from Doordarshan. Today there are over a dozen alternatives, counting just Hindi and English channels.

And of the lot, just one (Zee) makes moneyRs 44 crore in 1997-98. All the othersthe Star network, Sony, MTV, ESPN, Home TV, Discovery, TVIare bleeding. Even Doordarshan, king of the market, saw ad revenues drop last year, for the first time in its history.

At TVI, staff complain that salaries are overdue by months, a fate shared by their compatriots in group publication Business India. Last week the word in the companys office was that even Business India Editor Omkar Goswamis salary cheque had bounced and that he was busy yelling long distance at the publisherwho has already been dragged to court by several creditors for unpaid bills.

At TV-18, the television software company, some 55 people were retrenched in January immediately after its promoter, Raghav Bahl, announced at a meeting that the company would be downsizing. It closed down its television training institute, Academy-18. Home TV has recently changed hands, with the ever-hungry Sahara picking up a controlling interest.

Some media groups have more or less drowned in a sea of red ink. The briefly high-flying Dalal Street Journal and Capital Market hit the iceberg of falling stock prices and a collapsing primary capital market (no more public issues of shares, with all the attendant advertising).

Even the doughty Indian Express has been forced to economise by splitting its Delhi office into three and moving to farflung parts of town, including Noida in neighbouring UP. In Mumbai, the groups newspapers are moving out of downtown Nariman Point and into midtown mill land, so that the Nariman Point space can be rented out.

The losses incurred by these battle-weary media enterprises arent small by any means. The Pioneer has probably lost something in the region of Rs 70 crore. The Indian Express (Bombay) balance sheet for 1995-96 (the latest that appears to be available) reports a profit of a few lakhs of rupees, but go through the numbers more carefully and it appears that the companys publishing business loses at least Rs 3 crore a month, or Rs 36 crore annually. This is compensated for by advance rentals from the 25-storey building in Mumbais Nariman Point and other income.

Even a successfully launched publication like Outlook, which is challenging India Todays dominance in the newsmagazine market, is believed (according to a source in Hathway Investments, the publishers of Outlook) to have sunk in something like Rs 35 crore over the past three years. Inevitably, India Today has seen its own profits shrivel.

Business Standard has suffered too. With advertising volumes in the financial newspapers as a whole shrinking by a staggering 50 per cent over the past three years, revenues have been well short of costscausing a sellout by the Ananda Bazar Patrika (now ABP) group in early 1997, and the injection of substantial fresh capital each time new shareholders came in.

The message comes through loud and clear. The market simply isnt big enough to support so many newspapers and TV channels. Some have to shut down. And the shake-out is going to be painful.

Blame it on the excesses of the 1991-94 phase. In the heady days of the Manmohan Singh era, everything seemed possible. The stock market soared, advertising flourished, media ambitions flowered, and costs went up and up. Newspapers increased pages and sections; newsprint imports became costlier as the rupee plunged; journalist salaries doubled and trebled as publications fought off staff raids by richer TV companies and then the new profession of stock analysts; where five-figure salaries were rare, people now began to talk of six-figure pay packets.

New money came into the business. Over the past decade, the Ambanis, Singhanias, Dalmias and others (including of course the Thapars) have all got into publishing, and quickly exited or reduced the scale of their operations.

But for a brief while, it all seemed viable. Publishers looked at the fantastic profits being raked in by the leading publications (the Times of India group made Rs 91 crore post-tax profits two years ago, making it among the most profitable companies in the country) and sought to chase them into a fatally beckoning market. More staff were hired than ever before. By one count the number of business journalists in the country has more than trebled in the last decade, to something like 1200.

Now the boot is on the other foot. The annual pay hikes have become modest, jobs are scarce, downsizing is the order of the day, and cost-cutting a daily discipline.

The fact is that the Indian publishing market isnt up for grabs; positions are entrenched in the classical market structure where the leader in a market makes a lot of money, the No.2 either breaks even or makes some money, and everyone else loses. If a new entrant or a challenger cant become No.1 or No.2, its going to come up against hard financial facts at some stage.

Thus, Zee can rake in the cash, and Sony may soon break even. The rest dont have much of a hope. The same is true in newspapers; the market leader in each city or segment makes a lot of money indeed; the Times of India in Mumbai, the Hindustan Times in Delhi, the Hindu in Chennai, Deccan Herald in Bangalore, Deccan Chronicle in Hyderabad, and the Economic Times in the financial newspaper market. Whoever comes second in the advertisers list of priority publications will probably get by. The rest feature so low on the typical advertisers list that the gravy train stops before their station.

Its the lesson that Jack Welch preached in General Electric when he began his revolution in that company. Stay in a business if youre No.1 or No.2; otherwise, get out. That explains the desperate advertising that so many publications are doing, claiming to be the leader or the runner-up in a variety of geographical and language markets.

It also explains why the Pioneer has run into a problem. Its readers enjoy its special flavour, like those who swear by that other boutique paper, the Asian Age. But the challenge lies in the circulation numbers, in a field where the giants are much bigger. An earlier experiment at an upmarket paper (the Singhanias Indian Post, in Mumbai) didnt survive very long.

The Asian Age is different because of a unique, and clever, business structure. The editorial content is provided by a company that lies at the centre of a web of territorial franchisees, in much the same way that a soft drink company has franchisee bottlers for different territories.

So the business of printing, distribution and ad collection is done mostly by the franchiseewho loses money if the business is not viable, while the manufacturer of the editorial concentrate gets paid its fees. The Ages franchisees have changed repeatedly in several markets, suggesting that people who got tired of waiting for profits were being replaced by new hopefuls. Its been a brilliant strategy that has kept the paper afloateven as circulation has done well in markets like Calcutta and Mumbai.

If the Asian Age strategy is unique, the crucial difference between print and television is that the TV guys have foreign money backing them, and therefore, much deeper pockets. They are also here for the long haul. Rupert Murdochs Asia-wide Star TV operation is said to be losing up to $100 million (Rs.400 crore) annually.

No Indian could think of investing on that scale in the hope of future success, though Outlooks Hathway Investments is said to have an investment war chest of over Rs 100 crore, and is among those to have lent money to the Business India group. Thats a lot of money for any Indian group.

But for global giants like CNN and MTV (which belong to global behemoths Time-Warner and Viacom respectively), such sums are small beer and the play for the Indian market is a long-term one. Sony Entertainment Television has been able to carve out enviable market share in the two years of its existence because of the foreign partners deep pockets.

In contrast, the print media has to survive on Indian money. And it doesnt help that the proliferation of TV channels and better quality programming have forced a huge shift of advertising into television. Companies like Hindustan Lever (by far the biggest ad spender in the country)) now devote 95 per cent of their ad budgets to TV.

These multiple forces are now bringing about an American (rather than a British) pattern to the Indian newspaper market. The British pattern is for several publications to co-exist, with most of them making money. In the American pattern, each city or state usually has just one dominant newspaper, the rest fall by the wayside or struggle to survive.

On a surface view, the Indian market looks like a mirror of the British patternDelhi alone has nearly a dozen morning papers in English. But in most of the top 10 cities, there is only one genuinely profit-making English language newspaper.

If that pattern holds, choice eventually gets restricted as the leading publications strengthen their hold on specific markets. Power in the press will then truly pass into the hands of publishers and away from journalists, perhaps even advertisers.

The tense drama being played out in the offices of the Pioneer, with alternating hope and despair for hundreds of employees, tells therefore of a larger story of change, consolidation and hard times in the media. Because if its the Pioneer today, it could be any of half a dozen others tomorrow.