the indian media business and the indian newspaper revolution

Vanita Kohli-KhandekarRobin Jeffrey

04/20/23 1Sanjay Ranade, Head, DCJ, UoM

Why Media MattersInvestors have poured in over Rs 20 billion

into the Indian media and entertainment (M&E) industry over 2004 and 2005.

Across the business, in multiplexes, digital theatres, publishing, DTH broadcast services, film production and distribution, television software, and several other areas investors are parking their money and sitting back to wait for the market to deliver.


Why will the Indian market deliver?DemocracyProfits and returnsM&E liberalisation


The Indian industry is small by global standardsAt Rs 420 odd billion or over $9 billion it is a

tiny fraction of the global market that is estimated to touch $ 1,375 billion in 2005.

However, India is one of the most important markets for investors within the Asia-Pacific

from a growth perspective.


What could trip this growth are not limitations of size but haphazard regulation.

There is ad hocism in India’s media policy and policy makers have yet to learn to separate infrastructure from content.

This leads to the constant threat of content regulation by government.

However, as Indian media companies gain in size and power they will be able to lobby better and tackle the bogey of regulation better.


Another factor that could trip growth is that all media is booming at the same time.


Press

04/20/23 Sanjay Ranade, Head, DCJ, UoM 7

In 2005, print seemed to pick up business to the extent that it appeared to beat television.

There were three reasons why this happened.


In 2004, print actually gained in ad revenues over TV.

Across the country young blood was taking over the print business from Malayala Manorama in Kerala, to Jagran Prakashan in Uttar Pradesh to Bennett, Coleman & Co in Mumbai.

Foreign institutional investment into print was allowed in 2005 making it easier for financial investors to pick up shares in publishing companies – this increased liquidity or tradability of shares of listed print company – this made it easier for private equity investors or others to exit from the company when they wanted to.


As a result after decades of inaction over Rs 10 billion of capital came into the sector over 2004-05


Apart from the growth in circulation and therefore a dependable ad-revenue business there was the potential of being in one of the youngest markets in the Asia-Pacific region where newspaper circulation and readership was growing - the other two being China and Singapore.


The optimism drove some of the largest media deals of the time…..


Henderson Asia Pacific Equity Partners picked up an over 19 per cent stake in HT Media for about Rs One billion.

Business Standard-Financial Times and Dainik Jagran-Independent followed.

The Hyderabad-based Deccan Chronicle Holdings targeted Rs 1.3-1.5 billion and raised Rs 1.49 billion from an issue that was oversubscribed 9.5 times.

In August 2005, HT Media raised Rs 4 billion and made it to the top ten media IPOs in Asia over 2004 and 2005. It gave HT Media a valuation of Rs 24.95 billion – over 90 times the profit it made in the financial year ending March 2005.


From the first newspaper to the newspapers of the pre-independence years, the aim was a cause, a revolt, a message and a tool to counter propaganda or spread some of their own.

Many of the top publications today are the ones that have lived through the freedom struggle- The Times of India, Mumbai Samachar, Malayala Manorama, Ananda Bazaar Patrika and The Hindu.

Many of these newspapers were financed by benevolent or patriotic businessmen or through donations.


Indian publishing was always a family owned business that never looked beyond its own general reserves and the owner’s limited vision of growth.

For a long time Indian publishers did not thing of their publications as a business.


The First Press Commission report (1953) looked carefully at the capital invested, returns generated and revenues and costs of newspapers.

There is a heavy influence of socialism and the notion of protecting anything small against anything big.

It talks of limiting the growth of large metropolitan newspapers. There is a proposal to make it mandatory for large newspapers to increase their price when they increase their pages – this later morphed into the Newspapers [Price and Page] Act.


A comment from the report said

The great advantages possessed by the metropolitan press has tended to draw away from the districts the talent that might have gone into the development of a local press. We do not consider concentration of the press in metropolitan cities a desirable feature, however inevitable it was in the early stages.


A sample of 127 dailies had total revenues of Rs 110 million.

The split between circulation and advertising revenues was a healthy 60:40. It showed that the industry was not completely advertising driven and that readers were paying the bulk of the cost of producing and selling a newspaper.

Today on an average only 15-20 per cent of the revenue of an English newspaper is recovered from

circulation revenue.

Advertising is the biggest and only alternative source for most newspapers.


Out of 47 companies only the 19 that were more than 15 years old gave a return of more than ten per cent on capital invested.

As a whole the industry generated a profit of Rs 0.6 million or less than one per cent on a capital investment of about Rs 70 million.

The industry was owner-driven, capital intensive, long-gestation business and it remains that way even today.


Why then did proprietors remain in the business? – according to the Press

Commission reportThe rest of the industry was flush with post-

second-World War profits which were parked in various businesses – print was one of them.

Money also came in from persons anxious to wield influence in public affairs


So why do people continue to be drawn to it?

Many of the things the Press Commission said in its 1953 report remain true today. Newspapers continue to be a capital intensive, long-gestation, low-return business.


If a newspaper is at no 1 or 2 or 3 even then it tends to get a disproportionate share of revenues and profits. This is true for every medium. (BCCL, which publishes the TOI generates anywhere between 25-40 per cent in gross margins. In FY 2003-04 its net profit was over 20 per cent, above the average in many industries).

Newspapers are still treated as tools of influence.


Yet, newspaper as a business attracted very few entrepreneurs, especially in the 60s and the 70s.

This was because it was, and still is to some extent, a difficult business to be in.


ReasonsLow returnsHigh capital investmentShortage of newsprint – especially in the 60s and

70s - the Newsprint Control Order 1962 fixed quotas on the basis of a CA certificate on proof of circulation. Only 30 per cent of the requirement could be imported through the State Trading Corporation. The rest had to be purchased from domestic producers who sold poor quality newsprint.

Importing printing machinery in the age of duties as high as 100-150 per cent


Publishers, on the other hand, were guilty of under invoicing of newsprint and selling off the surplus in the black market.

Newspapers were registered and licences procured to import newsprint and these were sold at exorbitant rates.

Editorially too, there were biases for and against specific politicians and government in general and the media appeared to have an agenda of its own.

There were arbitrary levies on newsprint, a wage tribunal was set up and mandated salaries, curbs on freedom of the press were instituted during the same period.


This was the period when the trade unions within the media industry had begun to strengthen themselves both for rights of journalists as well as the employees in the printing presses.


The transformation of the publishing industry into a business began post 1977, after the National Emergency declared on June 25, 1975, was lifted.


Three factors were responsible for thisGrowth of literacyRise of capitalismSpread of technology


Eenadu – owned by Ramoji Rao with interests in Margadarsi Chitfunds, Priya Pickles and Hotels

Launched in Hyderabad in 1975.Competitor was Indian Express’ Andhra Prabha with

74,000 copies. Andhra Patrika, another competitor was losing circulation.

Editions launched – Tirupati 1982, Ananthapur 1991, Karimnagar 1992, Rajamundry 1992.

By 1978 Eenadu surpassed Andhra Prabha in circulation.

By 1995 Eenadu commanded 75 per cent of the audited circulation of Telugu dailies.


Mid-day – launched in 1979, an afternoon dailyThe paper led to the closure of TOI’s Evening

News.The 16-page tabloid was priced at 25 paise.Its revenues in March 2005 were Rs 1.02

billion up from Rs 70 million in 1983.It launched the Sunday Mid-Day, Gujarati

Mid-Day and even a Delhi edition, which was sold off later.


Magazines launched at the time offered more than just politics, were in colour and made a

difference to how much advertisers and readers were willing to pay for the same product

India TodaySundayStardustSavvyDebonairSocietyIslandParade


Chitralekha – Gujarati magazineShifted to offset printing in the late 70sIntroduced computers for the first time in

1981. Began to take colour ads and pushed its

cover price from 60 paise to Rs 1.80.


Newspapers caught up with supplements

TOI came up with the full colour The Sunday Times, The Sunday Review, Brand Equity and a host of supplements that followed.


Samir Jain years and the transformation of BCCL

Took over in 1986The family business New Central Jute and Rohtas

Industries were in declineHired people from FMCG background and fixed value

targets instead of volume targets for his sales peopleLaunched colour supplementsDifferential pricingCross brand advertising packages Price cuttingShut down ‘editorial’ brands like the Illustrated

Weekly, Dharmayug, Dinman and Vama because they were not making money.


Rasna was the first ad that encroached on editorial space in The Saturday Times, a colour

supplement from TOI.

The notion that there should be a total divorce between a paper’s editorial and its marketing

was completely shattered by Jain.


By 1992, both newsprint and printing machinery were placed under the open general license, making import easier

And

Advertising was changing hands with multinational corporations taking charge of the ad industry.


While the publishing industry was busy with discovering the business of publishing it missed the opportunity of the future – television.

Except for BCCL, Living Media and Business India nobody saw an opportunity in broadcasting or cable.

It took a CNN and a Star TV to make publishers realised the potential in broadcasting


Between 1976 and 1996, the total daily circulation of all Indian newspapers increased four times, and by 1996 there were five times as many newspapers published as in 1976.

The winners in this newspaper boom were daily papers printed in vernacular languages. By the early 1990s, the circulation of Hindi newspapers was almost three times that of the English press.

The English-language press also grew, but it did so much more modestly.


Sustained by advertising, the boom of Indian-language

newspapers transformed readers into consumers at the same time as it met their increased desire

for information and political participation.


Computers made both printing in Indian characters and distribution across the Indian territory easier. For this very reason, in post-Emergency India, computers also became one of the means whereby “locales are thoroughly penetrated by and shaped in terms of social influences quite distant from them”

(The Consequences of Modernity, by Anthony Giddens [Stanford, Calif.: Stanford University Press, 1990], p. 18).


The Satellite TV yearsCame to India in 1991Zee, Sony, Home TV, Sun TV launched between

1991 and 1995.Publishing was dominant with a 70 per cent share

of the market.Television made newspapers less newsy.Television began to eat into print’s share of

audience.General interest magazines suffered and special

interest ones – A&M, Dalal Street Journal, Dataquest, Health & Nutrition – took off.


The shape of the Indian print industry today is like no other in the world


ReasonsLow literacy – differential in ad rates,

dominance of EnglishStrong sense of the ‘national’ – all brands

want to be seen as being ‘national’ brandsDependence on advertising – cover price,

advertising tariffs, cost cutting are only tools available – debate about the mix of advertising and editorial is reduced to one of degree of intrusion, not the right or wrong of it.


Possible solutions

De-risking the business by getting into other media, increasing revenue streams from publishing,creating a pan-India presence.


Living Media spun off a television division, placed equity with financial institutions and took its television business public.

Hathway welcomed Star India into the cable businessMid-Day took a shot at outdoor media, radio and even a

free newspaper, Metro, in MumbaiTOI successfully entered Internet, TV and popular music,

forayed into radio and even into real estate and banking.Dainik Jagran launched more editions and a television

channel. Dainik Bhaskar launched several Hindi editions, Divya

Bhaskar in Gujarati and DNA in English in a joint venture with Zee Telefilms.


Hurdles to de-riskingLack of access to capitalOwner’s love of their stake


In June 2002 the government decided to allow 26 per cent FDI into Indian print. The policy was further liberalised in 2005.


Rules for FDI in print areFIIs to be part of the 26 percent investment in print media in the

news categoryPublication of Indian editions of foreign scientific, technical and

specialty magazines, periodicals and journals.Foreign investment up to 100 per cent in Indian entities

publishing scientific, technical and specialty magazines, periodicals or journals.

All registered newspapers (Indian publications) are authorised to make syndication arrangements to procure material including photographs, cartoons, crossword puzzles, articles and features from foreign publications under automatic approval. The total material so procured and actually printed in an issue of an Indian publication cannot exceed 20 per cent of total printed areas of that time. It should not include full of copy of editorial page or the front page or the masthead of the foreign publication.


The battle for the Rs 15 billion of total advertising monney spent on reaching Indians in Mumbai is a case to study

The business environment became ‘competitive’ than ‘protective’

Other ways of raising capital than debtProblems of liquidity and exit resolvedExpansion and diversification emphasised


The Economics of the Publishing Business


CostsDepends on number of pages, the extent of colour,

quality of paper and total circulation – these are variable costs that change year on year.

Staff costs and other overheads – about 12 to 20 per cent are relatively fixed.

Marketing costs – depending on level of competition and degree of expansion and diversification

Distribution costs – trade margins (up to 40 per cent of the retail price of a newspaper and 45 per cent for a magazine), returns or unsolds (vary between 1-5 per cent).


RevenuesCirculation – the difference between cover or retail price

after deducting trade margins and cost of unsold copiesAdvertising – About 80 per cent comes from this source

that can be judged from ad rates and volumesSubscriptions – unless a product is making a profit on

every copy sold and sent to subscriber this tool is more used to ramp up circulation numbers and then used to demand a higher rate from advertisers.

Brand extensions – events, TV programmes, seminars etcOnline/Internet – Not as yet considered a very significant

tool


The numbers for revenues and costs and therefore margins depend on Position of the productLanguageNiche versus mass


MetricsIn the late 80s and 90s, media buyers took

whatever rate the newspapers offered without much negotiating.

Till satellite TV took off in 1992 a media buyer had to simply figure out which market a brand was addressing.

Since the magazine boom was still going strong, the real analysis took place while buying magazines.

Large media buyers contracted ads of a certain ‘cc’ space in a certain publication for a year and got bulk discounts.


The big difference between then and now is the respect that language publications have gained.

The big similarity between then and now is that dailies were and still are the most powerful vehicles to advertise in.


The important task is not deciding what brands to buy but to eliminate the duplication of readership.

Around 1989, Indian Market Research Bureau (IMRB) introduced the sofware called PEM that helped do the ‘duplication tables’ faster.


The biggest change in the buying and selling function in the last few years has been consolidating of media buying. It started in the mid-90s.


Reasons for consolidation in India different from the UK or the USFragmented Indian consumer marketFragmented and small size of the media.Volatility in ratesFragmentation kills margins because the

costs of doing business go up.


Media buying and planning agencies brought order to this chaos then.


Consolidation happened because several creative agencies typically handled different brands.

In the mid-90s MNCs like HLL and P&G two of the biggest advertisers in those days unbundled media from creative.

A large MNC with several brands has to choose between 100 channels, several dozen newspapers, half-a-dozen radio stations, outdoor, cinema, multiplexes, mobile and other options for advertising – buying separately for each brand brings no economies of scale.


All of them changed the texture, form and structure of media buying in many ways.04/20/23 Sanjay Ranade, Head, DCJ, UoM 61

The numbers gameTill consolidation happened buying and selling

was about relationships, intuition, gut feel.The planner at the creative agency brought an

‘understanding’ of brands, markets, and media to the table.

Media agencies shifted the focus to ‘efficiencies’, ‘rates’ and ‘numbers’ that looked more reliable and tangible especially on balance sheets where the largest items of costs were advertising and an attempt to push them down was encouraged.


Most agencies began to fight not on the fact that they offered a better, more impressive way of reaching the consumer but on rates!


This extreme number game has led to an atmosphere of mistrust where creative is taking a call on creative, media buyer is talking rates and PR is pushing editorial content leaving media owners feeling cheated.


Hugo Boss – looking past the Excel sheetP&G launched Hugo Boss, a premium product, for

women in India in 2002.Target audience was ‘premium’ defined as English

speaking types in the age group of 15-30 years reached through English magazines like Verve and Elle.

Starcom, Leo Burnett’s agency decided to research if the target audience arrived at ‘intuitively’ was right and found that the audience believed that good fragrances hit overseas markets first and usually asked friends to get them. They also used the product only on special occasions so consumption was less.


The real consumers? Wives of Gujarati and Marwari speaking traders

and brokers who watched soaps in the night and repeats in the afternoon, met to discuss the stories and wrote to Balaji Telefilms once a week.

The media plan did a U-turn and a bulk of the money was spent on mainline Hindi general entertainment channels.

In three months Hugo Boss became the largest-selling foreign premium fragrance brand making India P&G’s third-largest market for the brand outside of Europe and a case study in the P&G network.


The transition from a numbers and rate-oriented media market to a consumer-

focused one is happening but not by design and not very fast.

There are three steps agencies, owners and advertisers are taking that are driving

the impact forward


Getting into the showInject the brand within the editorial pages of

newspapers and magazines of within TV shows or films or a radio programme.

It is called in-programme advertising or ‘soft’ advertising and it beats personal video recorders (PVRS) used in countries like the US by viewers to avoid ads.

Advertorials


Walking all aroundThe best way for media agencies and owners

to deliver impact is by offering the very things advertisers are looking for – whether it is inside a programme or outside.

Non-media events, shows, promotions, school contact programmes, merchandising and other ‘value adds’ are now offered routinely to advertisers


ComboA long term solution is to make media buying

an investment centre, no a profit centre by combining creative with media buying.

The ‘integrated planner’ examines the consumer from a creative, account planning, and media angle and plans media strategy.


However to make some sense of the bewildering maze of options, where someone who has just been hired is

deciding how the money will be spend and some form of corruption, either in the quality of buys or in the actual money spent is inevitable, an audit of the media buying becomes

imperative.04/20/23 Sanjay Ranade, Head, DCJ, UoM 71

The important metrics in the publishing business are


Circulation Measured by the ABC set up in 1948 and

made up of advertisers, advertising agencies and publishing companies


Readership Number of readers as opposed to buyers. NRS

initiated in 1974 using an urban sample of 50,000. Readership is measured using the mast head

method where respondents are shown a black and white reproduction of the mastheads of newspapers and magazines.

The time interval for a daily is the estimated number of readers that has looked at any issue of that daily ‘yesterday’. For a weekly it is ‘the last seven days’. This is called the ‘recent reading method’.


The average issue readership segregates readers into heavy, medium and light readers – heavy readers are those who read for more than 10 hours a week, medium give it between 3.01 to 10 hours and light readers give it less than three hours a week.

To counter NRS, supported by large number of newspaper groups, the Indian Readership Survey was launched in 1995.

Some media users got together to create the Media Research Users Council (MRUC).


IRS is a random sample survey wherein 2,20,000 respondents are selected and projected to the universe based on the last available census.

The IRS is a continuous survey, with ten months of fieldwork every year so that the data is released twice a year and also to mitigate any seasonal biases.


ReachMeasured in circulation and readership

numbers. It is also calculated as a percentage of the

population penetrated in a certain target group.


Cost per thousandThis is the cost of reaching thousand people

through a particular newspaper or magazine.These days planners also look at the average

cost per issue versus the readership.


Television


The first experience with television broadcasting in Indian involved a makeshift studio at Akashvani Bhavan in New Delhi, a low- power transmitter and 21 television sets.

These were installed in the homes of various bureaucrats and ministers.

Some of the equipment was a gift from a west European government.

This was September 1959.04/20/23 Sanjay Ranade, Head, DCJ, UoM 80

Today there are about 160 satellite channels earning revenues of more than Rs 79billion from advertising alone.

Add revenues from cable advertising, DTH, subscription and so on and the industry stands at close to Rs 185 billion.

At over 108 million TV homes, more than half of them cable-enabled, India is one of the largest cable-connected countries in the world, after China with 110 million and US about 70 million.


Yet, it is unable to achieve the shine of a China or excite the interest of a Brazil for three reasons


SizeAt an estimated $7 billion, China’s TV

broadcasting business is just under twice the size of India’s.


Bureaucracy and regulationAd hocism is the hall mark of Indian policy

over broadcasting.


Fragmented industryThe fragmentation is across its three main

segments – software, distribution and broadcasting.

Software has an estimated 6,000 one-man outfits.

Distribution has 35,000 operators who control the approximately 60 million cable homes

TV broad casting is yet to see a pan Indian behemoth.


The next round of growth that will give Indian broadcasting some heft will come from pay television There are already four distinct platforms that

offer TV programming – terrestrial, cable and satellite, DTH and IPTV. A fifth that is emerging is mobile phones.


To accelerate this growth and ensure this choice, regulation has to ‘incentivise’ investment in broadcasting infrastructure instead of focusing on what Indians should or should not watch.


Three steps that need political will -Allow the last mile copper loop that state-

owned telephone companies like BSNL sit on, to be used by anyone who wants to sell television, data or voice.

Allow 100 per cent investment in alternate ways of broadcasting, such as digital, terrestrial and DTHTV services without equity and cross-media restrictions.

Both of them must allow cable operators to offer ‘voice or telephony on their pipes.


Indian television has the range in programming, now it needs to achieve that in distribution technology and infrastructure.


The PastThe first school television service was

commissioned in New Delhi two years after the first few experiments. This was for the institutions run by the Delhi Municipal corporation.

By 1965 television broadcasting matured to a one-hour service which included a news bulletin.

In 1972 television went to Bombay.By 1975 five more cities each had a television

station called Doordarshan Kendra.04/20/23 Sanjay Ranade, Head, DCJ, UoM 90

Today there are 1090 transmitters spread across India and according to NRS 2005 there are 108 million television homes


The first satellite television experiments were undertaken by DD as early as 1975-76.

It was under the Satellite Instructional Television Experiment (SITE) that the Indian government used the US-based National Aeronautics and Space Administration (NASA) satellite ATS-6 for educational programme broadcasts in Indian villages.

SITE was an attempt to see if bouncing the signal off a satellite would increase its coverage – it did.


By 1978 the government was encouraged to implement its own satellite system.

This was contracted out to Ford Aerospace and Communication Corporation.

Then came Indian National Satellite (INSAT) programmes, a joint effort by the Indian Space Research Organisation (ISRO), the Indian Posts and Telegraph Department, the Ministry of Civil Aviation and the Ministry of Information and Broadcasting.

The INSAT series of satellites got DD into the maximum number of community television sets.


It was around this time that the commercial contours of the industry

started taking shape

Colour television began in 1982, thanks to the Asian Games, hosted in New Delhi


In 1983 came India’s first sponsored programme, Show Theme, produced by Manju Singh – it is disputed that Hum Log was the first.


Hum LogIn 1984, a US-based non-government organisation

approached the I&B Ministry to do a serial that would couch the family planning message in entertainment.

It was an experiment that had worked successfully in Catholic Mexico where over family planning messages could not be used.

Hum Log was aired in July 1984 to showcase the travails of a large lower-middle class Indian family – poverty, alcoholism, and illiteracy –

hallmarks of India’s problems with population.


Unfortunately for family planning, and fortunately for commercial television the message was lost in the made popularity of the serial.

More than 80 per cent of the 3.6 million Indian television sets at that time tuned in to Hum Log every week.

Maggi Noodles, a brand owned by Nestle India, sponsored the first soap on Indian television. The multinational paid for the telecast fee and production cost of Hum Log and got about five minutes of commercial time in exchange.


The success of Hum Log was followed by Buniyaad, Katha Sagar, Khandaan, Nukkad.

Telecast fees and commercial airtime rates on DD rose and revenues rose from Rs 170 million in 1983-84 to Rs 2.1 billion in 1989-90.

By the early 90s DD began charging anywhere between Rs 100,000 to 500,000 as minimum guarantee or telecast fees in exchange giving a portion of the programme’s airtime to the producer.


Cable yearsThe Asian Games and colour television and

subsequently the Los Angeles Olympics in 1984 kicked off a spurt in the sale of colour sets and thereby viewer’s desire for sharp reception.

This was especially true of Mumbai where tall buildings hampered the quality of terrestrial transmission.

That is how entrepreneurs like Siddharth Srivastava, Radhakrishnan, Jagjit Kohli, Yogesh Shah, Ronnie Screwvala and companies like Nelco stepped in.


Unlike the US local authorities did not intervene in the cable operations in India and without official guidelines, operators mushroomed, propelled first by the video boom and then the coming of satellite television.


the indian media business and the indian newspaper revolution

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