Media | Bullishness makes way for caution

This was supposed to be a year of consolidation for media firms.

In 2006-07 and 2007-08, the country saw the launch of at least 75-80 channels, 60-odd new newspaper printing facilities, which means nearly as many new editions, and about 11 new newspapers (including Mint, published by HT Media Ltd), and 20 new magazines, according to industry estimates that took into account visible channels and publications.

The economy grew by 9.6% in 2006-07 and 8.7% in 2007-08. Coming on the back of 9.4% growth in 2005-06 and 7.5% in 2004-05, this translated into a “boom” period for most sectors. People and companies had more money to spend, and advertising in print and electronic media soared. While advertising in print media grew by 15% in 2005 over the previous year, it grew by 24% in 2006 and 21% in 2007, according to a report by industry body Ficci (Federation of Indian Chambers of Commerce and Industry) and audit firm PricewaterhouseCoopers. Advertising in TV grew by 14% in 2005 and 21% in 2006 and 2007 each, according to the report.

But the party may be winding down.

High growth has resulted in inflation that has been at a 13-year high. Economists and banks are revising downwards estimates of the rate at which the economy will expand this year — the consensus estimate is around 8.5%. And the Bombay Stock Exchange’s Sensex index was down 40.22% till 15 July (from January). And there is political uncertainty at the Centre.

Media is an extremely vulnerable sector during a recession, when advertising is bound to slow.

Uday Shankar

CEO, Star India

All that bad news gives news media a lot to write about, but newspapers (hit by newsprint prices that have risen 50% in 2008), news magazines and news channels aren’t cheering. And the bullishness of the past three years has given way to caution.

“The last fiscal has been good for us,” says Uday Shankar, CEO, Star India Pvt. Ltd, a leading broadcaster. “But, media is an extremely vulnerable sector during a recession, when advertising is bound to slow. In India, it is also typically seen that many smaller advertisers hold back ad spends ahead of elections. And now, we have some uncertainty at the Centre and elections in some key states are coming up. The combination of a slowing economy and political uncertainty is certainly not good news,” Shankar adds (Star is a subsidiary of News Corp., which owns The Wall Street Journal. Mint has an exclusive content partnership in India with the Journal).