At The Crossroads

Written by Anushree Chandran | Updated: Oct 2 2013, 03:10am hrs
Media slowdown that was restricted to the distant shores of the west, has now spilled into India, causing print and broadcast companies to crimp operations and introspect over editorial and business practices.

The countrys largest media buying company GroupM India, part of the Martin Sorrell owned WPP Plc, has slashed ad expenditure estimates for year 2013 to R44,755 crore from its earlier projection of R45,334 crore. Ad expenditure for year 2012 was pegged at R41,264 crore, GroupM said. The second half of the year is usually harvest season for media companies. But this time around, ad expenditure for the second half of the year (July-December 2013 period) will grow by 4.7% from the earlier projection of 7.3%. The two big advertising mediumsprint and televisionsee a sharp fall. Television will grow at 5.9%, from the earlier 7.6%. Print will see growth of 0.7% in ad expenditure from the earlier estimated 4.8%.

CVL Srinivas, chief executive officer of GroupM South Asia, said that the advertiser sentiment was fairly negative. Advertisers are shying away from media channels with inflated costs. They are broad-basing themselves and are looking at other media options such as digital and activation that are under-utilised in this country. Digital, for instance, is a 150-200 million highly influential target group.

Srinivas said that it is tough to say when the market is likely to recover, considering that economic troubles come and go in phases. The troubles that print and broadcast were seeing were not typical of this sector. All companies across the board were facing economic difficulties.

Advertising is just one part of the problem. Both print and broadcast companies are up against excessive competition which has led to unviable business models. For print, the situation is particularly dire because newsprint costs are increasing while subscription revenues are barely existent. The price for 1 metric ton of newsprint is R37,000 currently, up from R31,000 a year back. It is also unclear as to what kind of business models can sustain newspapers in a digital era. Consumers in India are still getting used to paying for content online.

Ravindra Kumar, editor and managing director of The Statesman says,Our dependence on advertising is because we refuse to increase the cover prices. The first thing that newspaper publishers ought to do is to stop subsidising what they produce. What the reader pays should at least cover the cost of the newsprint. Countries such as Bangladesh and Pakistan have managed to do so. In India, the cover prices have been kept low since the nineties. Monopolistic newspaper groups have kept the prices low, in order to get greater market share. A 24-page newspaper should ideally be priced between R10 and R12, depending on the cost

of the newsprint.

Said a publisher who did not want to be named, Weve created our own Frankenstein. Our models are just not scalable. Weve seen warning signs coming from the West but we chose to ignore them. Newsweek, an 80-year-old US magazine, was forced to shut down its print operations and go online and we just thought that this could never happen to us in India. But we are fast realising that we are not as insulated from the rest of the world as we believed ourselves to be.

Television companies have frequently undersold advertising inventory, in order to pip the next guy. Ad rates in India have been kept low because of increased competition. A cap of 12 minutes of advertising in an hour is also being proposed as per a directive by the Telecom Regulatory Authority of India (Trai). After many of the television broadcasters did not comply with the 12-minute per hour ad cap, the matter landed with the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) and the case will be heard in November. Television broadcasters are also grappling with transition to digitally addressable systems (DAS) leading to erratic shifts in television ratings and therefore,

ad revenues. A parallel system of audience measurement to TAM Media Researchs service is still

underway and could take at least a year to be operational. Ad revenues are also trickling in at a slower

pace, leading to closures and layoffs. The broadcasters were initially hoping to raise ad rates by at least 20% in order to prepare for the regimented capped advertisement world, but the advertising slowdown has made that kind of hike in rates impossible.

Advertisers are reluctant to commit to long-term ad deals. It cant be disputed that this is the worst possible time for an advertising cap. While bigger networks like us will survive this, smaller networks will have to close shop, says Rohit Gupta, president, Multi Screen Media (MSM). I Venkat, director at Eenadu, said that ad breaks on general entertainment channels were about 20 minutes in an hour. A cap of 12 minutes would mean a 60-70% loss in ad inventory. How will the broadcasters be able to recover that in a slowing ad market, even if they do hike the rates he queries.

Market realities

Anandabazar Patrika Group (ABP) has sold its long-ailing business magazine Businessworld to media entrepreneur Anurag Batra and investment banker Vikram Jhunjhunwala. The ownership pattern of Businessworld remains unclear. DD Purkayastha, managing director, ABP, when contacted said, Anurag and Vikram represent an investor I cannot name. We already have one well-performing magazine brand in the form of Fortune. We were not able to focus on multiple magazine brands. Businessworld was accumulating losses. He declined to comment on the valuation of the deal or the nature of losses incurred by Businessworld.

A publisher who was in talks with ABP for the magazine said, They (ABP) were not looking at much in terms of value from the deal. They just wanted someone to pay the salaries of the employees and keep the operations going. They had been deliberating shutting down the magazine for a long time. The publisher did not want his name to be revealed.

After 18 long years of bringing out auto magazine BS Motoring, Business Standard Ltd sold it to Delhi Press for an unspecified amount in April this year. Business Standard said that it was not a magazine company and that it wanted to concentrate on its news operations.

The Outlook Group enforced a closure in its magazine units, namely Marie Claire, People and Geo. In the process, more than a 100 journalists and numerous non-journalist newspaper employees were displaced. Prior to this, Bennett, Coleman and Co. Ltd (BCCL) closed down its weekend newspaper, The Times of India Crest edition. Crest had been launched in 2009 and was positioned as a weekend paper. It sold over 2 lakh copies nationally. In television, NDTV India, TV18 Group and Bloomberg TV have downsized operations and rendered at least 600 people jobless. NDTV India and Network 18 officials did not revert to BrandWagons queries by email. Bloomberg TV officials declined to comment when contacted on phone.

Outlook Group president Indranil Roy said that Outlook Money magazine will turn monthly October 1 onwards and will now be available in a new avatar. We are changing the target profile for Outlook Money. Now, we will be advising the reader who is an evolved investor. In a monthly format, we will have more pages in the issue, he said. When asked if the group had merged the editorial teams of Outlook Money and Outlook Business, Roy said, We have not merged Outlook Money and Outlook Business. This was a rumour that was reported by a media website without checking their facts.

Paresh Nath, publisher of Delhi Press, said that there were problems in the licensing model of international titles. The overseas parent companies of such titles do not help with the ad support domestically. Once there is a contract in place, the Indian publisher is not at liberty to discontinue the title in case it doesnt perform in terms of ad revenues. Huge penalties are imposed on dissolving the contract.

Roy of Outlook however says that licensors have their requirements which need to be fulfilled by licensees and that is applicable for any product under the licensor-licensee agreement. I dont see a problem in this relationship at all. It was our business that we did not want to renew the licences, said Roy, referring to the groups international titles that had been discontinued.Zee-owned newspaper DNA was expected to launch its Delhi edition in May this year, but the launch is seeing unexpected delays, on account of unsavory market conditions. There is an entire team that sits out of Delhi and we do dry runs every day. But there is no clarity from the management on the launch. Its like a dress rehearsal for a show that may never happen, said a DNA employee who did not want to be named. Till the time of filing the story, the Zee spokesperson had not reverted to BrandWagons queries on the launch date. Zee Media Corp owns DNA through Diligent Media Corporation.

Slowing sponsorships

Some of the new shows on Hindi general entertainment channels have failed to get known brands as sponsors, say media buyers. Raj Nayak, chief executive officer of ColorsViacom18, however, said that he has increased the ad rates of his channel. All ad deals are negotiated separately and it is difficult to give specific figures. If we get a 25-30% hike on deals on an average, we are happy, he said.

Television ratings are the basis for commercial deals between advertisers and broadcasters. But the transition to DAS has given rise to a lot of anomalies in viewership data and violent swings are observed almost every week. We have been bitten by the digitisation bogey, said a television broadcaster on the condition of anonymity because the issue is a sensitive one. The path towards digitised systems has achieved nothing much for broadcasters other than the fact that a few million set-top boxes have been deployed on ground. Carriage fees havent been done away with; subscription revenues havent seen much increase. But what it has done is to create more uncertainties on account of flip-flops in television ratings.

In such a scenario, the cap on the pricing of individual channels doesnt help and stands in the way of realising subscription revenues. At a Confederation of Indian Industry (CII) summit in New Delhi recently, Uday Shankar, chief executive officer of Star India says that successive governments have created a web of policies and regulations which may have had the intent of protecting the consumer, but has had exactly the opposite effect. Even though the media and entertainment industry produces more than a million years of original content every year, the sectors inability to charge fairly for the content has severely compromised innovation, he said. No policy has done more damage to this industry than that of price controls on television content, Shankar said adding, Ironically, a regime that was brought to protect the consumer has ended up doing the most damage to consumer choice and quality.

Nayak says that all the uncertainties over the transition into digitisation will gradually get ironed out. This is a process of evolution. The cable industry in this country grew by default, not by design. Twenty years back, we were only 14 million households. We had wires going into peoples houses. We have come a long way since then. And we will continue to keep moving. The full impact of digitisation is not yet known to the broadcaster. There has already been a slight correction in carriage fees. Things will be clearer over the next 18-24 months when digitisation will be complete.

Vested interests

In the West, the declining revenues for media companies has led to a concept called native advertising where sponsored content poses as real journalistic work. In India, the debate on disclosure on sponsored content is an old one. Ravindra Kumar of The Statesman says, The advertiser realises that he is subsidising the cost of the publication for the reader and is beginning to dictate the editorial agenda of newspapers. This has also led to other tactics in order to survive, for instance, the dumping of newspapers in order to show good circulation numbers.

Kumar points out that the government also appears to be benevolent to those media companies that toe the line. On its part, the government pays hugely subsidised rates for advertising in newspapers. he says adding, The ad rates are fixed by the Directorate of Advertising and Visual Publicity (DAVP) for a fraction of the commercial rates. An advertiser who buys space in bulk is entitled to negotiate a rate. But in the governments case, the fixing of the rates is unilateral. Earlier the low rates for DAVP were validated by the government on the ground they were taking up social and public service campaigns in the

interests of the people. Today, these campaigns are mostly for self-propagation. The irony is that on the one side, the government imposes its own ad tariff structure and on the other hand, it also regulates wages. The newspaper industry is the only one where the wages are determined by the government."

An executive with a daily in Mumbai, who did not want to be named says, Our newsroom has a team known as the Custom Content Research Team. They appear to be journalists but only write sponsored content. Needless to say that there are no disclosures on such content. Editorial heads are also asked to chip in on advertising business. There have been occasions when ad sales executives have accompanied journalists to events and press conferences. These are desperate times for media companies."

An anchor on a news channel who did not want to be named says that increasingly, corporate groups are making their way into the news business. This isnt a profitable business to begin with, which makes you wonder why they want to enter it at all. For a news channel, the cost of operations is anywhere between R100-120 crore annually and out of that only R35-40 crore can be recovered from advertising. The media entrepreneurs are all

stepping aside, and paving way for corporate groups. And when these groups come in, they strictly look at this business in terms of profit and loss. That is why you see this kind of churn, he said.

Silver lining

Some of the regional publishing groups are benefiting as advertisers finally broad-base themselves and look for more cost-effective operations. A print executive with a regional publishing firm, who did not want to be named, says that his ad rates are 20-25% lower than that of mainstream English dailies. Our sales and marketing team has been very effective and we expect a good showing over the next few quarters, he said.

Shailesh Gupta, director at Jagran Prakashan, said that all indicators point to a good festive season for the group. The outlook to the next quarter seems fine as all indicators point to a good festive season. Immediately post-Diwali, there is the wedding season coming up. We are seeing an upswing across all categories of advertisers. There is increased attention for tier two and tier three towns from advertisers across segments

and we are best placed to deliver audiences there. With these towns being the new market drivers, we could see the advertising pie shift in proportionate terms.

Others in the broadcast sector say that a lot of issues for the sector can be resolved via debate and consultation. Shailesh Shah, secretary general, Indian Broadcasting Foundation says, India remains among the faster-growing larger economies. Our plural and fiscally conservative democracy will find its solutions to continue this growth. He added that television is a very competitive business today. The large number of channels and larger numbers of distributors makes the environment conducive for the market to determine the rates for commerce in advertising and distribution. The industry and the government need a greater research based debate on issues such as how tariffs that have been frozen since 2003 can align with ground realities and broadcasters and distributors are able to find fair share of viewer payments that accrue to each. Done sooner, the industry could see the short-term impetus it needs to ride out any slowdown.