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Tier II and III cities to grow print industry
MUMBAI: The print industry is expected to ride on the back of growth in Tier II and III cities, with disposable income and rising rate of literacy in these cities providing a steady impetus.
Newspapers continue to contribute a major portion to the total revenue generated by the print industry. While niche magazines register some growth, general-interest magazines are seeing readership dips. New content and delivery formats have emerged in the industry, and both newspapers and magazines are leveraging this as additional distribution channels for future growth.
According to the FICCI KPMG report, the print industry is expected to grow at the rate of 8 per cent and touch Rs 284 billion by the end of 2015. The print industry is expected to contribute 19.7 per cent to the M&E industry by 2019. Going forward, industry players are expected to continue their focus on optimising efficiencies, rationalising newsprint consumption, expanding reach to new regions and consolidating in the existing markets.
As on 31 March 2014, the total number of registered publications stood at 99,660, out of which there were 13,350 dailies and 86,310 periodicals. Of the total registered print publications in India, over 40 per cent are Hindi and nearly 47 per cent vernacular (including bilingual and multilingual publications).
In 2014, the Indian print industry experienced a growth of 8.3 per cent from Rs 243 billion in 2013 to Rs 263 billion in 2014. The industry has witnessed a noticeable uptrend in earnings. One of the reasons for this is an increase in the circulation revenues of major players. The industry witnessed a 7.9 per cent rise in circulation revenue on the back of rising cover prices and subscriptions, aided by low media penetration, population growth and rising income and literacy levels. This growth is largely coming from Tier II and III cities with regional-language editions outperforming the national editions and English dailies. This trend is expected to continue as most of the major publishers are working towards strengthening their presence in the existing markets.
Over the recent years, print players have launched newer editions with an emphasis on non-metro cities and smaller towns. For instance, The Hindu launched its Tamil edition, HT Media launched separate editions for Gurgaon and Noida, Times of India launched a Gujarati edition ‘Nav Gujarat Samay’, and Dainik Bhaskar entered Patna.
However, with limited possibility for additional organic growth, the players seem to be consolidating their presence in existing markets and focusing their energy on gaining larger share of the overall revenue pie and subscriber base. The print sector’s share in the overall advertisement revenue pie still remains higher than other forms of media, despite having declined from 49 per cent in 2008 to 42 per cent in 2014.
Having grown by 8.5 per cent in 2014, the print advertisement revenue crossed Rs 176 billion. Ad revenues have grown at a CAGR of 8.8 per cent, whereas circulation revenues have displayed a CAGR of 6.8 per cent between 2010 and 2014. Advertisement revenues continued to be the main source of revenue for the print industry, contributing 67 per cent to the industry’s revenues.
Newspapers continue to be the biggest contributor of revenue to the print industry. In 2014, the contribution of newspapers to the total print revenue stood close to 95 per cent. The magazines category continued to struggle with just about five per cent share of the total revenue pie. While general-interest magazines recorded a dip in their growth, niche magazines are holding strong among both readers and advertisers. Recognising the potential of digital media, several magazine players launched digital versions of their magazines either in the form of mobile apps or e-magazines. Some even discontinued the physical version of their product entirely. For example, Indian edition of ‘Entrepreneur’ was discontinued from May onwards.
In 2014, the Time Out Group shut all its three print editions—Mumbai, Delhi, and Bangalore—and shifted to digital publications. With the rise of vernacular dailies, the size of the magazine segment in the overall revenue pie is expected to shrink in the coming years.
While globally the adverse impact of digital media is evident, digital has not been able to make a significant dent in the Indian print market yet. Contrary to the situation in the West, print and digital media are currently complementing each other in the Indian media space. The Indian print industry is still growing at a high single-digit rate and is expected to grow at a CAGR of 8 per cent during 2014–19. Most of the growth in the sector is expected to come from Tier II, Tier III cities and rural markets.
The percentage of revenues from regional ads has increased in the overall print ad pie. With high growth among all the language markets, Hindi markets continue to be the major driver of growth in the print sector. Together, Hindi and vernacular markets accounted for close to 64 per cent of the total print revenue in 2014. The Hindi print market grew from Rs 75 billion in 2013 to Rs 83 billion in 2014, whereas the vernacular print saw a growth of 9.8 per cent and touched Rs 84 billion in 2014. English print growth dropped from 5.8 per cent in 2013 to 5.2 per cent in 2014. While many English newspaper subscribers are shifting to online platforms (in line with the global phenomenon), regional print markets still remain largely isolated from this trend. Because of this, English print is estimated to continue to lose some market share over the years to digital media in the overall advertising spend.
However, vernacular print, which is perceived as an economical mode of reaching the target audience by advertisers in smaller cities and towns, is likely to grow at a CAGR of 10.5 per cent during 2014–2019 and will constitute nearly 36 per cent of the total revenue pie by 2019. The regional-language newspapers have a strong foothold in the Indian print market and are in a good position to monetise their audience base through both circulation and ad revenues.
With contribution of 13.5 per cent in 2014, FMCG emerged as the top spender on the print medium for the second year in succession. Of the total FMCG spends in 2014, personal care category contributed 8.2 per cent, household category contributed 4.8 per cent, and the remaining 0.5 per cent came from FMCG impulse category. Education, which was the leading contributor to the print medium until 2011, has lost its position to FMCG and auto in the last three years. In 2014, the sector witnessed a further dip in its contribution to the overall advertising pie. In 2014, while many of the leading sectors such as education, real estate, retail, BFSI, etc. reduced their advertising spend on the print medium, political advertisements during Lok Sabha elections and e-commerce strongly came to its rescue and together contributed close to 85 per cent of the total growth recorded by the sector during last year.
Though traditional heavy spenders like real estate and BFSI are still among the top advertising sectors, they were the worst hit in 2014. As anticipated, the Lok Sabha elections, coupled with assembly elections in a few states in 2014, provided the much-needed impetus to the overall media sector, with print emerging as a frontrunner. According to the Pitch Madison Media Outlook Report 2015, Rs 23 billion of advertisement revenue was generated from elections across all the media segments against Rs 5 billion ad revenue accrued during the 2009 election. Election contribution to the print medium rose to 1.7 per cent in 2014 from meagre 0.6 per cent in 2013, a year-on-year growth of over 204 per cent.
The e-commerce push
E-commerce players, with large-format ads, especially during the festive season, garnered a bigger piece of print advertising revenue pie during the past year and recorded a staggering year-on-year growth of 155 per cent, second only to political ads. The substantial growth of the Indian e-commerce sector, riding on the back of fresh funding, is projected to further drive advertising spends. Given the ample cash at disposal, the e-commerce companies brought about an increment of 100 to 200 bps of ad growth for the leading print companies.
E-commerce as a category heavily invests in print advertisements to showcase its product catalogues especially on special offer days. The ad spend from this sector did experience a slowdown in the state of Kerala owing to Sales Tax issues with the government; however, those concerns are likely to get addressed with the introduction of GST.
Improved distribution, logistics and inventory management
The print sector in India is seen adopting innovations in distribution and logistics to drive more efficiency, cost rationalisation, and increased penetration in topologically challenged rural areas. Many print companies have adopted a ‘partnership model’—an emerging revenue-sharing model in the newspaper distribution space. This model thrives on the partnership between the publishing houses and rural entrepreneurs who are responsible for distribution of newspapers across smaller towns, cities, and rural communities.
Besides distribution, the print players are practising an efficient inventory management system by placing their newsprint stock in such a way that it does not have to travel more than 200 km to reach the printing houses. Additionally, hedging is also done in proportion to the foreign currency exposure as a standard practice.
Lack of a robust measurement standard: With a resurgent economy and a new government, opportunities are getting created across sections of the Indian population. The consumption of print media is directly proportional to the level of economic prosperity in the country. Hence, there is a need for a measurement standard that can offer an analysis across socio-economic classes and across regions of the country experiencing different levels of growth. The measurement currency that existed in the form of Indian Readership Survey (IRS) released by Media Research Users Council (MRUC) in 2013 was challenged by many publishers. In 2014, the new Indian Readership Survey (IRS) was finally released in Mumbai with multiple changes to the methodology to improve accuracy of the data findings.
The introduction of DS CAPI (a digital entry system) and data fusion (involves segmenting the survey into parts) was to make it easier for the respondents taking the interview. Even with the changes, many companies remain hesitant to rely on the IRS data for devising their strategies. As an alternative, the Audit Bureau of Circulation (ABC), which depicts circulation numbers, is again being cited by companies. However, circulation numbers alone are often insufficient for advertisers to take an informed decision, considering it neither offers insights into readership, demographic profiling, incremental reach, nor covers all the publications. The print sector needs to come together on completely backing IRS or an alternative currency.
Re-skilling of talent to adapt to organisational changes: This is the second challenge. With the increased focus on shift to digital technology and implementation of the integrated newsroom concept, re-skilling of the existing staff and recruitment of new, enhanced workforce with the right skills has become a challenge for the print industry. The integrated services are expected to transform news planning operations for all forms of media, including print, and help companies in resource sharing. The skill sets of the resource base need to be rescaled from just space selling to also focus on multimedia services. Traditionally, the print houses generate maximum revenue (nearly 90 per cent) via space selling and that is where currently the majority of their employee pool is concentrated. Companies need to strike a right balance and adopt a mixed strategy to embed the digital culture within the organisation by investing in adequate training.
Moreover, the M&E industry including the print sector involves high level of uncertainty with new regulations being introduced by policymakers each year. To deal with such an environment, an organisation needs to have dynamism in its talent base.
Current competitive landscape restricts organic growth: The regional markets have experienced rapid expansion by print players over the past few years and are becoming saturated in terms of number of players operating in each market. Currently, most of the Hindi-speaking states have a formidable presence of Hindi and other vernacular players. This has resulted in an immense scarcity of new markets that can be explored profitably for business expansion. Even in vernacular markets such as Tamil, Telegu, Malayalam, Kannada, Bengali, Odiya, etc., a high degree of competition exists among the print players, which limits the opportunity to expand organically.
Earlier, the presence of two or three players allowed new entrants to gain relatively easy scale in the regional markets. However, the current competitive environment requires a substantial amount of investment to enter these highly competitive regional markets. This has resulted in the print players realigning their investment focus on the existing markets to strengthen their presence and leverage their readership base for better monetisation, the FICCI KPMG report said.
With a stable overall macroeconomic environment in the country, the print industry is expected to demonstrate a slightly increased pace of growth in CY 2015, backed by the swelling marketing budgets of e-commerce companies, increased localised advertisements by brands and promotional activities revolving around the Cricket World Cup 2015 and IPL sports events. Going forward, the sustainability of the industry will likely depend on improved efficiencies in the business models and better adaptability to the influx of the digital medium.
Many players are currently adopting models like the integrated newsroom, partnership with rural level entrepreneurs to optimise distribution and logistics processes, and better inventory management systems. In the near future, we may see many more collaboration among the competing firms for excess unused production capacity sharing to meet the dynamic challenges posed by the print sector. Several organisations are embarking on defining the right cost structures and bringing efficiencies across news gathering, editorial, advertising, printing and circulation.
Future trends: The traditional business model is evolving into an integrated newsroom model. Print players, both national and regional, are evolving to move towards the integrated newsroom concept where digital and print will grow together as an integrated solution over a multimedia platform comprising the internet, OOH, events, radio, etc. Amid rising operational costs, stagnating revenues, and varying content consumption patterns, integrated newsroom or publishing room is in much demand.
The current image and text management systems are becoming outdated and inefficient, thus giving way to a system that allows for the flow of images, text, and videos between different media platforms operating around a centrally supported system. Players such as Bloomberg, CNN, and the BBC have already integrated their news operations across various media arms. In 2013, Zee News merged its broadcasting business with DNA, the newspaper. India Today shifted its office to a new building with a focus on integrating its TV, print, radio and online arms, and foster enhanced collaboration. Recently, CNBC TV-18 joined hands with Mint to further extend integrated newsroom model by sharing content, analysing, and working on joint editorial initiatives.
Major Indian dailies join hands to offer pan-India coverage to advertisers: In 2014, six major dailies, namely Hindustan Times, Hindustan, Ananda Bazar Patrika (Bengali), The Telegraph, The Hindu, and The Hindu Tamil from three major media houses, collaborated to form a unified group named ‘OneIndia’. In an effort to provide pan-India coverage to advertisers, the joint group has been introduced as a common platform for selling ad space for the vehicles owned by member companies in addition to individual sale of ad space. Though limited in its geographic reach at present, they are open to include more members by invite.
The group offers bundled ads at a discounted price in all the newspapers that are part of this group to cover all corners of the country through a single window. The move is likely to create a favourable proposition for both advertisers and print players. While advertisers could get unduplicated reach, print players will not miss out on opportunities arising from demand for a nationwide coverage.