Government rates on print ads to go up

Government rates on print ads to go up
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First Published: Sun, Aug 31 2008. 10 36 PM IST
Updated: Mon, Sep 01 2008. 11 49 AM IST
New Delhi: India’s newspaper industry, reeling under a sharp spike in newsprint prices and increased costs due to inflation, might get some respite from the government—its single largest advertiser—which is planning to raise ad rates.
Caving in to intense lobbying from newspaper owners, the government is expected to announce this week an increase in the ad rates paid by the directorate of advertising and visual publicity, or DAVP, a unit of the ministry of information and broadcasting that acts as the advertising and media-buying agency for the Union government.
The industry has been hit hard by newsprint prices, which have increased by more than 50% in recent months. Imported newsprint now costs $920 (about Rs40,000), and is expected to go up to $950-970, according to industry estimates.
“Publishers, through the Indian Newspaper Society (INS), have asked for a hike in DAVP rates,” said Ravi Dhariwal, chief executive of Bennett, Coleman and Co. Ltd, the publisher of The Times of India. “In the last eight-nine months, when newsprint prices have skyrocketed, most papers have effected at least two rounds of hikes in commercial ad rates, while DAVP rates continue to be unrealistically low.”
INS asked for a 50% increase in rates in a meeting with information and broadcasting minister Priya Ranjan Dasmunsi.
“The minister has assured us of at least (a) 30% hike,” said Rakesh Sharma, vice-president, operations, north, for HT Media Ltd, which publishes Hindustan Times, Mint and Hindi daily Hindustan. He also serves as INS treasurer and was present at the meeting.
“A hike at this point will help the industry as a whole, small and big newspapers,” Sharma said. “Government already advertises at a rate much cheaper than commercial rates, and we barely used to be able to meet the cost of printing those ads earlier.”
INS has requested the rate revision must be implemented with retroactive effect from 1 April. Manoj Agarwal, private secretary to the minister, said a final decision is likely to be announced in two-three days.
The timing of the increase in rates will also work for newspapers for another reason. The new rates will be in place well before government starts its advertising blitz that is typical of an election year. National elections are due in early 2009.
Any increase in ad rates paid by DAVP will also have a spiralling effect on rates paid by state governments as these are benchmarked against DAVP rates. State governments separately negotiate with media firms through their respective departments of information and public relations, and different states pay different rates, but negotiations are usually benchmarked against the generally lower DAVP rates.
Ad spending by the Union and state governments together accounts for about 20% of India’s advertising market, according to Sam Balsara, chairman of Madison Media Ltd, one of the country’s largest media buying agencies.
That’s Rs4,000 crore of India’s Rs20,000 crore annual ad market. In comparison, Madison accounted for some 9% of the market in 2007.
DAVP advertisements contribute significantly to the ad volumes of the 4,097 publications in 20 languages and different periodicals empanelled with the agency.
According to Dhariwal, DAVP commercials account for about 15% of the total ad volumes of T he Times of India, or TOI, the country’s largest circulated English daily.
But revenues from DAVP will be much smaller as the rates paid by the agency are a fraction of the commercial rates for a mass circulation paper. While the commercial rate for TOI’s New Delhi edition is Rs3,000 per sq. cm, DAVP’s rate for the same edition is Rs223.88 per sq. cm. The accepted circulation for the paper’s Delhi edition is 979,285.
The difference in ad rates is not as stark for a smaller paper. The Kashmir Times, an English daily published out of Jammu with an accepted circulation of 162,215, charges commercial advertisers Rs115 per sq. cm, while DAVP pays Rs37.08. “A hike will be good for the paper as the state... pays even less than what DAVP pays,” said Ved Bhasin, chairman of the Kashmir Times group. DAVP and the state’s department of information and public relations (DIPR) together account for 20-25% of Kashmir Times’ ad volumes.
For Desh Bandhu, a Hindi daily published out of Chhattisgarh, government ads account for more than 40% of ad volumes, according to Lalit Surjan, chairman and editor in chief of Patrakar Prakashan Pvt. Ltd, publisher of the daily. “Ads from DIPR (have) become significant as commercial advertisements are dropping,” he said.
DAVP rates are tied to the circulation of a particular edition of a publication. The agency divides publications into three slabs by circulation. Publications with a circulation of 75,000 and above are classified as large, while those with a circulation between 25,000 and 75,000 are classified as medium; those below 25,000 are classified as small.
DAVP’s current advertisement policy, which came into effect from 2 October 2007, mandates a ratio of distribution between newspapers of different sizes and languages. Small and medium publications must get a minimum of 15% and 35% of advertisements, respectively, while big newspapers can get a maximum of 50%. English language publications can get 30% of total ads while those in Hindi and regional languages must get about 35% of total ads.
“DAVP rates are out of tune with reality and are mechanically calculated based on the number of copies,” said N. Murali, joint managing director at Kasturi and Sons Ltd, publisher of The Hindu. “Earlier, most English newspapers, including The Hindu, did not accept DAVP ads. But increasing competition and the fact that some ads are of news value, made us change that stance.”
Today, DAVP accounts for 10-15% of The Hindu’s ad volume. “It’s crucial for many small papers, which predominantly depend on DAVP ads,” Murali said.
Newspapers and journals with a registration from the Registrar of Newspapers for India, or RNI, and that have been in publication for 36 months are eligible for empanelment by DAVP. Publications in regional languages in rural and so-called backward areas, however, are considered for empanelment if they have been in publication for six months.
Similarly, while a minimum circulation of 2,000 is mandatory, the limit is relaxed to 500 for rural publications. DAVP goes by the circulation certificate issued by Audit Bureau of Circulation, while certificates from RNI-authorized chartered accountants are also accepted for small and medium newspapers. For papers above a circulation of 100,000, the rate goes up for every additional 1,000 copies.
Data from INS’ annual report for 2007-08 says DAVP contributed Rs113.97 crore to the total ad revenues of Rs11,262 crore, reported by 273 members. While INS has 737 members, the reporting members are the larger, profitable publications that usually account for more than 80% of the industry’s revenues. DAVP, various governmenet entities, and tender ads together contributed Rs998 crore, or about 8% of ad revenues.
Government advertising is sometimes used as an instrument of political patronage, according to two newspaper executives, who were willing to be quoted on the matter and several others on condition of anonymity. “Political patronage is a major factor in getting government ads, particularly from state governments,” said Kasturi and Sons’ Murali. “Papers opposing the government are stifled by stopping government ads.”
The sentiment was echoed by Kashmir Times’ Bhasin. “For many years, the state government had completely stopped advertising with us. Whereas some publications, which are pro-establishment, get plenty of ads,” he said. “For some reason, we are perceived to be anti-establishment.”
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First Published: Sun, Aug 31 2008. 10 36 PM IST