Home >industry >media >Slowdown takes a toll on media houses

New Delhi: Not the Internet, but a slowing economic growth, the falling rupee, a regulation capping advertising time on television channels, and years of indiscriminate expansion (and profligate spending), seem to have caught up with the Indian media.

Ironically, the result, apart from the usual response that comprises layoffs and cost reductions, could be a faster move into the digital domain. It could also see publications increasing cover prices and TV channels getting more aggressive about subscriptions.

In the past six months, several media companies, especially those in the news media space, have cut hundreds of jobs and restructured their offerings.

Some newspapers and magazines are thinner. TV channels have cut back on programming. And several publications and channels are on the block.

A sampling: In May, NDTV Profit cut back on all non-market-hour programming, which meant the channel only needed a handful of anchors and reporters. In August, in a widely reported exercise, the TV 18 group laid off around 500 employees, including many people responsible for its features programming. In July, Outlook Publishing (India) Pvt. Ltd discontinued the publication of three foreign titles, Marie Claire, Geo, and People—around 130 people were laid off—and also converted its personal finance magazine from a fortnightly into a monthly. Business Standard sold its motoring magazine to Delhi Press. ABP Pvt. Ltd put its flailing business magazine Businessworld up for sale. And last week, Bloomberg India TV laid off 30-40 people.

For newspapers, many of which import newsprint, the falling rupee—the currency has lost 17.9% against the dollar since 1 April—has pinched the most.

“In the current financial year, we will spend an additional 300 crore on newsprint just on account of rupee depreciation," said Mohit Jain, executive president, supply chain, at Bennett, Coleman and Co. Ltd (BCCL), the largest buyer of imported newsprint in the country.

For HT Media Ltd, the publisher of Mint and the Hindustan Times, the newsprint cost will be up by 120 crore this year, Jain added. Rajiv Verma, chief executive officer, HT Media, said the figure was exaggerated but declined to share details of the company’s additional spending on newsprint in 2013-14.

“These are difficult times for the media industry. But HT has robust brands and we will emerge stronger," he said.

BCCL and HT Media compete in several markets.

If it is paper for publications, it is satellites for TV channels. Broadcasting companies use foreign satellites to beam their channels and pay a monthly rent in dollars.

The premium television equipment is imported and even the subscription fee for news feeds by news channels is paid for in dollars.

“Right now, there is no question of upgrading cameras. The hardware and software cost is prohibitive. So there will be no capital acquisition," explained K.V.L. Narayan Rao, executive vice-chairman, NDTV Ltd. “Of course, the implication of the fall of the rupee is greater for print media," he added.

Newsprint accounts for almost 30% of the total cost of a newspaper. And in India, few media companies try to recover the cost from the customer, depending instead on advertising that is drying up because of slowing economic growth. The Indian economy expanded by a mere 4.4% in the first quarter of 2013-14, the slowest in four years.

Magazines import all their newsprint. All told, India’s publications import 1.2 million tonnes of newsprint every year.

News magazines in India are waking up to the challenges faced by their global counterparts in the face of 24X7 TV, the Internet, and integrated newsrooms that many newspapers have moved to. “News weeklies are finding it tough not only in India but elsewhere in the world. One of the reasons is that news is available 24X7," said Tarun Rai, CEO of Worldwide Media, a wholly owned subsidiary of BCCL, that publishes 13 consumer magazines including Lonely Planet, Top Gear and Hello. Rai added that lifestyle and special interest magazines still have room to grow.

Not everyone agrees with that, especially when the magazines in question are foreign titles on which royalty has to be paid. Indranil Roy, president of the Outlook Group, said the royalty payments for the foreign titles became unaffordable as the deals were negotiated when the dollar was closer to 40 and not upward of 60.

Anant Nath, director, Delhi Press, which publishes the well-regarded long-form focused The Caravan, and children’s magazine Champak and several other titles, is glad he did not sign on the dotted line to license two foreign titles. “Look at the rupee. We, too, would have been paying royalty and content cost in dollars," he said, adding that Delhi Press’ home-grown titles are all doing well.

Roy denied that Outlook, the news and current affairs weekly that is a shadow of its former self, is closing down. Aroon Purie, editor-in-chief and promoter of the India Today group, India’s largest magazine publisher, did not respond to Mint’s queries on the state of the Indian media. D.D. Purkayastha, managing director and CEO of ABP Pvt. Ltd, declined comment on the sale or closure of Businessworld, although he did admit that it was a bad time “primarily due to the rupee’s depreciation and economic slowdown".

Even the 2008 “slowdown was milder", he said.

Satellite rentals apart, TV channels also face the prospect of the Telecom Regulatory Authority of India’s cap of 12 minutes on advertising per hour of programming that was notified earlier. The matter is currently sub judice, awaiting resolution.

The rapid expansion of TV—there are around 800 TV channels in the country—has also resulted in problems.

“Why did the government give 800 channel licences when it knew that India operates on an analogue cable distribution system that can carry only 90 channels? That gave birth to carriage fee. Besides, even the tariffs and subscription prices were fixed by the regulator. They made the industry sick," said Barun Das, broadcast consultant and former CEO of Zee News.

His reference is to the high fee, sometimes as much as 40 crore a year, that channels pay cable networks to ensure they are carried.

Digitization of cable networks was seen as a solution and also to make it impossible for cable companies to fudge the number of subscribers (thereby increasing the subscription revenue of channels) but the process is yet to be completed. And where it is complete, the results aren’t what was expected.

“Digitization of cable network was supposed to diminish the cost of carriage by about 20-30%. It’s reduced only by 3-4%, making no difference to channel businesses," said Sunil Lulla, managing director and chief executive officer, Times Television Network, which operates news channels Times NOW and ET NOW.

Meanwhile, slowing economic growth has resulted in a fall in advertising. C.V.L. Srinivas, chief executive officer of one of the country’s largest media buying agencies GroupM, says he gets a sense of “gloom and doom" when he talks to his clients. Advertisers always knew things would be bad this year, he said, but no one expected them to turn as bad as they are so soon. The result: “They are exercising far more caution (in advertising) and print, television and radio are all in trouble."

“The news turned bad quickly whether it’s the markets, the rupee or the economy. The media industry is in a shock," said Arunabh Das Sharma, BCCL’s Mumbai-based president.

Worse, no one expects things to get better before the next elections, and it does seem like those will happen only on schedule, in mid-2014, and not earlier as many were hoping.

Both print and broadcast companies have been hit, but the impact of the blow varies, said experts, even as they highlighted that this was only what was to be expected with business models that are hugely dependent on advertising.

News, for instance, has been hit harder than entertainment in the case of TV channels, they said. English language dailies, and within this segment, business dailies, have been hit harder than regional language ones because at least 60% of the revenue of the latter comes from local advertisers. “National advertisers have cut back on spends, adversely impacting the English newspapers," said Amit Patil, media analyst at brokerage firm Angel Broking Pvt. Ltd.

Lulla said that advertising had dried up and advertisers are bargain hunting. Indeed, English news channels have seen a 25% fall in advertising in the past two months, said a news channel executive who spoke on condition of anonymity. And the festive season, between September and December when consumption soars, may not be all that good this year.

Sales are down 10%, said Kamal Nandi, vice-president (sales and marketing), Godrej Appliances. “There is no volume growth, only value growth because of price increases. This obviously impacts ad spends."

Sanjay Chitkara, head (sales and marketing) at LG Electronics India Pvt. Ltd, said the company was in the process of reviewing its advertising and marketing budget although it has not trimmed them yet.

Most consumer products have seen their costs soar because of the weak rupee—they import components in some cases, entire products in others. Such companies “advertise big time during festivals but that may be impacted (this year)", according to media buyer Satyajit Sen, CEO, Zenith Optimedia.

In January, GroupM projected 9% growth for the advertising sector. This month, it may be revising the growth rate to about 6%, which may not be enough to accommodate the rising cost of operations for media companies. Put together, advertisers spent 29,254 crore on television and print in 2012, according to GroupM.

The sudden storm has made several media executives look closely at digital—and far sooner than they expected to—although many still think the medium will take time to evolve commercially. Kasturi and Sons Ltd, publisher of The Hindu, has, in the last six months, launched iPad and mobile apps for its general and financial newspapers.

“We need to be on these platforms as they will be the future. Currently, they act as a branding vehicle and are used for product experience. We are also evaluating ways of monetizing our digital presence," said Arun Anant, CEO, Kasturi and Sons.

However, he said, the economic slowdown had not triggered an advertising shift from television or print to digital. Choice of media depends on several strategic and opportunistic reasons, explained Srinivas. Dissonance among industry stakeholders or regulatory issues in the broadcasting sector will not move money to digital. “However, digital is on a natural upswing," he said.

For instance, consumer goods companies are spending over 10% of their total ad budgets on digital advertising, especially video, compared to less than 5% a year ago. For automobile and finance clients, the sectors that aren’t spending much money on traditional media, this number is above 20%.

The size of the digital advertising market is estimated at 2,260 crore in the current fiscal year by the Internet and Mobile Association of India (IAMAI), and is expected to touch 2,938 crore by the end of the next year. Ad spending on social media went up from 94 crore in FY2012 to 300 crore in FY2013, according to IAMAI. Video advertising on the Internet has been growing at a rapid 40% over the past one year and is expected to speed up further to 60% in the next few months, according to estimates by media buyers.

Other than laying off people, newspaper companies are cutting the number of pages to control costs. Efforts are on to increase the cover prices in some markets.

Anant of Kasturi and Sons said the company was reducing miscellaneous costs by 10%. “We will cut costs and re-look at pagination. We have not laid off employees but recruitments are tightly controlled," he said.

The Hindu has increased its cover price in some markets.

Mohit Jain of BCCL said the newspaper industry has been discussing a surcharge for advertisers and consumers—in the form of a hike in ad rates or cover price—to offset the higher newsprint import bill.

INS is in talks with the Directorate of Advertising and Visual Publicity (DAVP) that falls under the ministry of information and broadcasting and is responsible for releasing ads on behalf of ministries and government departments.

“The advertising rates that DAVP offers are very low. They have not been increased since 2010. Besides, they are decided on the cost-plus formula and not quality or number of eyeballs. Since our costs have gone up dramatically, we are presenting the facts before them," said Jain, who was among the INS representatives who met DAVP.

Vidhi Choudhary in New Delhi and S. Bridget Leena in Chennai contributed to this story.

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