Picture of Boom Times All Round | Wage Needs Drastic Revision

Picture of Boom Times All Round

Growith is the trend in Advt. Revenue, Redership

The analysis we have made of the financial position of the newspaper industry clearly underlines the "boom times" newspaper managements themselves forecast (Business India, Jan. 30 - Feb 12,1995). The apprehensions expressed in the immediate post-Bachawat award days have been proved to be unfounded. If some newspapers closed down certain editions, others have opened more. Like Financial Express opening its Ahmedabad edition, Dainik Bhaskar barging into Rajasthan, Varta starting an edition from almost every district of Andhra Pradesh, etc. In Vol I we had listed the new features, supplements etc added to some of the leading newspapers. In 1990, in the first year after the Bachawat report came out, there were 28,491 newspapers according to RNI report (1997), This rose to 39,149 in 1996. As many as 1896 newspapers were "taken on record " of the RNI in that year alone. The number of dailies that commenced publication in 1996 was 136, of these 14 were English dailies , 79 Hindi, 2 in Bengali, in Kannada, 2 in Marathi, 3 in Telugu, etc. Even in smaller towns there are 320 English, 4572 Hindi, 751 Bengali, 336 Gujarati, 477 Malayalam, 122 Punjabi, 246 Telugu newspapers being published from there. Almost every language group had newspapers published from such small towns. As many as 1089 dailies are being published from smaller town with a population of less than one lakh. Both the number of newspapers and circulation increased by 5 per cent and 12.8 per cent respectively.

The RNI report (please see table on circulations and ad. space at chapter end.) shows continued increase in circulation of daily newspapers between 1990 and 1996. Where circulation of big newspapers had marginally come down, the circulation of medium and small newspapers ( dailies) was considerably higher: the fall in circualtion was only 1.6 per cent in big category dailies, that too becasue four newspapers in this category did not submit their circulation figures while in medium dailies it was up by 32 per cent and similar growth of circulation of smaller newspapers. The clubbing of newspapers under common ownership seems to have strengthened them as in these six years number of newspapers under common ownership rose from 450 to 710. Circulation of news interest dailies under common ownership also rose from 13.8 million to 21.2 million. We have separately noted the circulation increases (decreases) of a cross section of Indian newspaper (mainly dailies) which only further strengthens our contention that newspaper industry is booming (Newspaper Readership Survey results).

Coming to advertisements, the boom time and the projections that we made in our Vol. I continue to hold the ground even in 1998. The small dip in the rate of growth of advertisements in the last two years is only the result of the slow down in the economy which, according to official sources, will soon turn round. The statements of the Union Finance Minister Shri. Yashwant Sinha, former Finance Secretary Montek Singh Ahluvalia, the recent RBI report, all indicate optimism. Suffice it to quote the RBI report for 1997-98 published on September 5, 98 which says:

Therefore, the prospects ahead are quite optimistic despite the slowdown in 1997 and in the begining of 1998. The Chief Economic Adviser to the Union Government, Dr Shankar N. Acharya, said in an interview with the Business Standard (issue dated Sept 18, ’98): "I think there are some good spots in the economy, all the more if you look at it in an international context...........Against this background for a largish economy like India to continue to grow at 5 - 6.5 per cent is a very good story....I think 6 to 6.5 per cent growth is a reasonable estimate....". Annexure 19 Therefore, there should be no cause of pessimism at all so far as the economy is concerned.

The INS has expressed concern over the so called decline in the economy and prospects for the future. But this is not borne out by expert opinion. We have already quoted the statement of the Chief Economic Advisor Dr Acharya. In a paper prepared for ASSOCHAM, Dr.B.B.Bhattacharya, Head, Development Planning Centre, Institue of Economic Growth, Delhi says:- "Even with a trend growth rate of GDP from services about 8-9 per cent, the overall GDP growth rate this year would be around 5 per cent, the same as in the last year....". But prospects for the next year are very optimistic. Dr Bhattacharya says : " It is very important to note that desquite deceleration India may record one of the highest GDP growth rates in the world not only during the current year but also around the turn of the century. The current growth rate of GDP in India also compares very favourably with the long term growth of the GDP in India........".

Commenting on it ASSOCHAM President L.Lakshman, says that the growth rate this year would be 5.5 per cent and 6.5 per cent next year.

Other sectors too, like hotels, real estate, cement and paper have shown signs of revival. That led us to conclude that an industrial recovery may be around the corner.

When we talk of early signs of recovery it does not imply that from the very next morning factories will start producing more, consumer spending will shoot up, incomes will rise or there will be allround prosperity. It only implies that advance indicators show that things would look up in the near future.

There are many reasons why we expect an industrial recovery. The first is that the Indian currency has suffered a real competitive depreciation in October vis-a-vis the South Asian currencies with whom we really compete in market. Last year when the rupee depreciated vis-a-vis the US dollar, other Asian currencies like the Indonesian Rupiah, South Korean Won, Thai Baht, Phillipines Peso, Singapore $ and Malaysian Ringgit had fallen even more. In effect, even though the rupee fell, it did not give us an advantage over our competitors. Thus, there were huge imports of cement, steel, and petrochemicals from South Asian countries. Even where imports did not take place, fall in global prices depressed domestic prices squeezing Indian companies margins.

NCAER, an authoritative body in these matters, has "revised" its economic predictions upward. The GDP growth in 1998-89 has been forecast to be 5.7 per cent from 5.5 per cent. Last year it was 5.1 per cent, as was reported in Observer of Business and Politics (PTI reports) in the issue of 29 Oct.1998. Business confidance index has also been revised upward 81.5 from 68 in June. (Annexure 1). The Planning Commission has stated that in the draft of the Ninth plan, 1997-2002, the growth rate would be 6.5 per cent.

The position regarding advertisement billings till 1995 was given in our Vol.1. As for the subsequent years the magazine A&M has reported the growth in advertising in capitilised billing as follows:

               (Source : A&M 31 Dec.,1997)

Note : The number of reporting agencies is not the same from year to year. But the trend is clear as most large agencies are included.

The average growth rate of advertising still comes to 31.21 and even though there may still be a possible slow growth in the year 97-98, the average growth rate would still be above 22 per cent for the first eight years of the decade followed by an accelerated growth.

The impression sought to be given that there is in 97-98 a huge slump in advertising is not borne out by facts. Analysis made by Economic Times Research Bureau (ET Sept.1,1998) lists 100 sample companies advertising for 1997-98. This is the latest available. Of the 100, 68 had raised advertising budgets, 31 had lowered it , one company figure was not available. Aggregate advertisement for 97-98 for the 100 sample companies which include all the advertising majors like HLL, ITC, Nestle, Bajaj etc is up by 23.8 per cent to Rs 1,997 crore in 97-98 compared to Rs 1,613 crore in 96-97. It is significant that this growth rate is above the growth rate of their total sales at 17 per cent. Advertising spending as share of total sales has been going up, 1.7, 1.8 and 1.9 per cent in 95-96, 96-97, and 97-98 respectively.

This should grow further due to the expected upturn in the economy ( already the Sensex figures are up showing a rise in market sentiment). The recent response to the Resurgent India Bond of 4.1 billion dollars has further changed this sentiment to one of optimism.

Another important factor is that the Ad. spending of top consumer product companies which is the most important thing for newspaper, has been rising, not falling. The figures available for 1997-98 are even more encouraging : The advertisement spending of HLL alone jumped by 61.8 per cent in 97-98 over previous year and in 96-97 by 153.4 per cent over the 94-95 figure. In 97-98 HLL alone was spending over Rs 440 crores in ads. Another big spender was Bajaj Auto whose expenditure went up by 42.7 per cent and of Reliance by 119 per cent.

One of the most compelling piece of evidence in this regard comes from the NCAER report "India Market Demographics" . The report says that "consumer India will clock high speed growth in the next eight years and expand to cover nearly half the population." (Economic Times ,June 14, 1998 Annexures 9). It tracks a "remarkable expansion in the top end of the consumption pyramid, particularly in the segments classified as the very rich ( income range in 1994-95 prices of Rs 2.15 lakhs per annum and over) and the consuming class ( Rs 45,000 to Rs 2.16 lakhs). The study forecasts that the very rich would increase by six fold by the year 2006, that is, from one million to 6.2 million households.

It is the growth of the "consuming class" that is most interesting: it will grow by 218 per cent, that is, from 28.6 to 90.9 million households. The two segments together would constitute 49 per cent of the population. (Please also see news item "Rising incomes foretell durable consurerism : NCAER;Indian Express, Nov.28,1998, Annexures)

The foreign and local investors who are sinking enormous funds in such items as automobile manufacture and white goods, are fully aware of this potential and are targeting it. Even though the immediate situation may be one of a slow down they know that this will change.

The newspapers have one new medium opening up with the Internet. Many dailies both English and language, are now on the Net. This increases their reach to national and international audience and the expectation surely is that advertisers would also respond to this reach. How much this new medium will bvring in revenues is clear from the statement made by the Express group of newspapers. "After completing its first two years of operation this September, the Indian Express On Line Media Ltd (IEOLML) has targeted a turnover of Rs 10 crores for the year ending March 1999. The company had already crossed Rs 1 crores in revenues during the first year and the revenues surged to almost Rs 3 crores in the subsequent year......Out of the current turnover, approximately 45 per cent comes from banner advertising sales on its website...NetExpress has over 100 advertisers...." (Indian Express Delhi edition, dated sept 17, 98)

This gives an idea of the huge potential of Internet advertising that newspapers have in the coming years.

Right now the Internet is constrained by inadequate bandwidth. But DoT is building a Rs 700 crores Internet backbone network; the tenders for the first phase of this, have already been received. The Government has gazetted the recommendations of the Task Force in expanding Internet access and service providers would pop up in every street so to say. So with just one lakh subscribers in the country, Internet could gross such revenues, imagine what would be the prospects if the susbcribers go up to 1 million or even 10 million. Of course some of the users of the Internet sites are from abroad where Internet is having a total subscriber base of over 100 million. (ITU report 1997).

The growth of advertising has pushed back the fears that the TV would destroy the newspaper’s share of advertising. While percentage wise the newspaper share of the ad market has come down to around 60, the ad cake has expanded from Rs 750 crores in 1988 to over Rs 3000 crores by 1994. The rate of growth continues to be high as discussed earlier despite fluctuations. Besides, TV is not picking up the same level of advertisement as it used to once. As a result several early birds in television have closed down like Home TV, Jain TV,TV 18, etc.

The primacy of the print media in advertisement is brought out in the following table from the Far Eastern Review dated October 5, 1995 :

THE AD PIE
INDIA’S PRINT MEDIA TAKES THE LION’S
SHARE OF ADVERTISING REVENUE
$ MILLION (figures in bracket per centages)

                              SOURCE : ASIAN ADVERTISING & MARKETING

Of the 15 top ad agencies, figures for which are available, the distribution of the ad money between Press & TV shows the Press is the preferred medium - 57.45 per cent of the total.

Even at the height of the ad boom in this decade it was evident that the Press was being rediscovered by the ad agencies as the favourite medium for advertising. A research paper by Centre for Media Studies said that press advertising continued to dominate the media scene. "On top of the charts is the Hindi press which has witnessed a volume growth of 31 per cent. It is followed by English at 20 per cent and regional publications six per cent." writes Ritwika Chaudhari in the Business Standard.

There are also many segments of advertisements which can only be displayed in the print media. These are company prospectus which are carefully read by millions of investors, job advertisements , classifieds, announcements, legal notices, spot advertisements like discount sale, etc. INS itself had sometime back started an ad campaign to educate prospective advertisers over the benefits of print media as against the electronic. Now with the newspapers going on the Internet they have a further advantage in attracting advertisements that are not only local but global. ADVERTISERS HOPING TO CATCH GLOBAL MARKETS WILL SOON BE GOING FOR INTERNET BASED ADS IN DAILY NEWSPAPER PAGES AS INDIAN NEWSPAPERS LIKE TIMES AND HINDUSTAN TIMES OR REGIONAL PAPERS LIKE MALAYALA MANORAMA GET A GLOBAL AUDIENCE ON THE INTERNET.

One other point newspaper managements often put forward is that the bulk of the advertisement on the print media is concentrated in the English language newspapers and the regionl and language press does not get much. This may have been true at one time but it is no longer so. This is proved by the enormous growth of the language press which now surpasses the English Press. Of the total of 89.434 million circulation of the daily Press, English claims only 11.735 million while Hindi claims 37.231 million according to the RNI figures. Bengali, Malayalam, Gujarati, Tamil, Urdu etc are the other language groups with circulations exceeding three million.

The advertisement income of the Nav Bharat group, a clutch of Hindi dailies circulating in Central India which is very low in literacy and is just industrialising, is a good indicator.From Rs 8.5 crores in 88-89, it has gone upto Rs 22.97 crores in 95-96,almost 270 per cent growth in seven years or 83.5 per cent average growth per annum which is higher than the national growth of advertising. Even a small Assamese paper Janmabhumi has increased its advertisement from Rs 64 lakhs to Rs 161 lakhs. In Maharashtra the Marathi paper Sakal has increased its ad revenue from Rs11.75 crores to Rs 35.95 crores, a 305 per cent growth. Manipal Printers which publish a weekly Udayam in Kannada has similar growth from Rs 3.51 crores to Rs 10.12 crores, nearly 300 per cent. The Samaj, the leading daily of Orissa has garnered similar growth from Rs 2.27 crores to Rs 7.25 crores. Goa’s Nav Hind papers, both Konkani and English, together raised ad revenue from Rs 91.93 lakhs to Rs 525 lakhs, over five times. Malayalam’s number two newsapper Mathrubhumi raised its ad revenue from Rs 4.88 crores to Rs 34.50 crores.Samyukta Karnataka a Karnataka group mainly in North Karnataka and also in Bangalore, saw its ad revenue going up from 2.31 crores to Rs 7.39 crores.

THIS IS HAPPENING NOT BECAUSE ADVERTISERS HAVE BEGUN TO LOVE THE LANGUAGE PAPERS MORE THAN THE ENGLISH NEWSPAPERS BUT BECAUSE THE SHIFT IS TAKING PLACE OF CONSUMER CENTRES FROM THE BIG METROS TO SMALLER AND SMALLER TOWNS AND EVEN INTO THE RURAL HINTERLAND. THERE IS IRREFUTABLE EVIDENCE IN THIS REGARD.

From all this we can conclude that the advertisement revenue of the Print media is steadily going up, balooning in many years and even in low growth years growing at a nearly 20 per cent and the future prospects are even brighter, with the ad revenue spreading out to local newspapers, specially prominant and not so prominant Indian language newspapers.IT IS BECAUSE SOME OF THESE PAPERS DO NOT WANT TO REVEAL THIS FACT THAT THEY HAVE REFUSED TO PROVIDE THE BALANCE SHEET OR ANY OTHER FINANCIAL INFORMATION ABOUT THEIR PERFORMANCE TO THIS HON’BLE BOARD.

From all such accounts it is clear that price war is a localised phenomenon started by some leading newspaper groups themselves. Whether the way this is being carried on is in accordance with the law is a matter which can best be judged by such authorities as the MRTP Commission. Suffice it to say that the effect will not be long lasting as one newspaper starting it forces all other competitors also to follow suit, drastically reducing the competitor’s edge. And this war of attrition would one day force the same managements to give it up. Recently all the newspaper managements agreed among themselves to raise the advertisement charges by 15 per cent. So we urge the Board to ignore this localised temporary phenomenon of mutually destructive price war confident that this will be given up by the newspapers.

We may also point out to the Hon’ble Board that the RNI reports till 1997 for big newspapers reveal a rise in average price per copy as well as rise in the average number of pages. For small newspapers also there is a similar rise and the fall is seen only in the case of medium newspapers. Any argument that this is due merely to the discrepancy in the number of newspapers in each group from year to year, cannot hold water. For, in the caseof all types of newspapers, the TREND is clear: the number of pages per copy is increasing by and large. That itself shows that the trend in all other areas could also be revealing of the prevailing situation even though the figures may not be quite accurate.

In determining the capacity to pay the broad trends in advertisements also should be noted as revealed in the RNI figures. The managements claim that the newspapers which devote 60 per cent plus space to advertisement has swindled is not brone out by the RNI publication Press in India. Its annual figures show that between 1993 and 1996, the number of newspapers reportin 60 per cent plus space devoted to ads has gone up from one to three, even in the medium papers it is up from opne to two and significantly as manya s four small newspapers report 60 plus space for ad. The number of newspapers in the big category having 40 to 59 per cent ad space also show rising trend and though there is fluctuatuion in this , the over all trends show that bulk of the newspapers fall in this category. Advertisement space below 40 per cent at the same time does not mean any alarm as the ratio set for reasonable ad space itself is 40 per cent. Besides in many cases the rates vary widely witthe result that the big newspaper having lesthan 40 per cent ad might earn more in total revenue than the big newspaper having over 60 per cent ad. The best indicator is the ad revenue. Another point is that newspapers might increase pages and content and would have to wait for the impact to be felt on ad response. So one cannot go entirely by the immediate figures of ad space ratio but look to the long term trend or indication the RNI figures give.

The top 250 advertisement spender companies in 1997 spent over Rs 2800 Crore on advertising which was 108 % over high compared to Rs 2574 Crore in 1996. In 1996,44 of big spending 250 companies increased their ad spending by over 100 % and 43 companies increased spending by 50 to 100 %.

Source : A&M Agency Report, December 97.

The top adverising agency Hindustan Thompson Associates (HTA) which had reached capitalised billing of 100 Crore after 60 years in India only 1989-90 is projected to grow to capitalised billings of 1000 Crore before its target date of year 2000.

Collective Gross billing of 120 advertising agencies in 1995-96 which was 478.36 Crore (Capitalised billings 3190.63 Crore) rose to 585.59 crore (Capitalised billings 3905.89 Crore) in 1996-97.

Source : A&M Agency Report, December 97.