It may be a bit of a stretch but there are only two people globally with the money and the inclination to invest in print media at the moment. Rupert Murdoch, executive chairman of News Corp., and Jeff Bezos, founder and chief executive of Amazon.com Inc. Media magnate Murdoch owns several newspapers in the US, Australia and the UK (The Wall Street Journal, The Sunday Times and The Sun, to name a few) in addition to film studios and television broadcasting businesses. Bezos purchased The Washington Post for $250 million in October 2013. (The newspaper was owned by the Graham family).
Going by the verdict of experts in the media sector, India may continue to be starved for foreign investments in newspapers even if the government finally clears the proposal allowing 49% foreign direct investment (FDI) in the segment. Last week, Bloomberg reported the finance ministry’s view on raising the foreign investment cap on India’s print media from the present 26% to 49%, bringing it on a par with norms for television news segment. The limit for TV news was raised to 49% in November 2015. The report further stated that the department of industrial policy and promotion under the commerce and industry ministry will take the final call on the matter.
To be sure, the government has already liberalized the rest of the media sector and permitted 100% FDI through the automatic route in television broadcast carriage services like direct-to-home firms, cable TV networks and headend-in-the-sky platforms. The changes were notified in June.
The hint of opening up print media to foreign investors first came in January 2015 from Arun Jaitley, when, as the information and broadcasting minister, he said that the debate on permissible limits on FDI in news media has been rendered irrelevant by technology. All foreign newspapers are accessible over the Internet, he noted, speaking at the Justice J.S. Verma Memorial Lecture organized by the News Broadcasters Association.
Although after last week’s Bloomberg report, shares of print media companies like Jagran Prakashan Ltd (publisher of Hindi daily Dainik Jagran) and HT Media Ltd (publisher of Hindustan Times and Mint) rose, experts do not see this translating into a brighter future for the sector. While it is true that India’s print media sector continues to grow even as other markets are reporting a negative trend, this growth is expected to decline over the years. According to numbers from the Ficci-KPMG 2016 report on the media and entertainment sector, print media in India grew at 7.6% in 2015 over 2014 in terms of the overall industry size. Its compound annual growth rate (CAGR) is estimated at 7.8% between 2015 and 2020. Its CAGR for advertising revenue during the same period is projected at 8.6%.
Sceptics argue that in the absence of permission for majority ownership in the policy that is being discussed, the interest from strategic investors may be muted. However, financial investors may evince some degree of interest. Over the years, even at the 26% FDI limit, some newspapers managed to attract investors: private equity (PE) firm Warburg Pincus Llc invested in DB Corp Ltd, publisher of Dainik Bhaskar. Henderson Equity Partners Ltd invested in HT Media. Jagran Prakashan found a strategic investor in Independent News and Media Plc that bought a 26% stake in the company. Most of these investors have now exited these companies.
Financial investors may see some merit in investing in Indian print media companies because some of them have huge cash flows. “And you can do a lot with it", says Jehil Thakkar, head (media and entertainment) at consulting firm KPMG.
PE firms can add value to the newspaper businesses in case they have operational or other issues. Earlier, at a cap of 26%, they could exert no influence on the publisher. At 49%, they will have at least some level of influence. And unlike a strategic investor, they may not be really be interested in a controlling stake.
Both PE firms and strategic investors may also find it worth their while to invest in regional print media, which is growing at a faster rate than English print media.
“But I don’t see a huge wave of investment," says Thakkar. In fact, PE firms will have to worry about their exits as the print industry is expected to grow only for another seven-eight years.
In terms of growth rates, the India story in print may still hold promise but the growth rates are slowing. Under the circumstances, there are much better options available for investors in the new media space. Digital and radio are still growing in healthy
double-digits. In 2015 (over 2014), advertising in print media grew at 7.3%, compared to 15.3% in radio and 38.2% in digital media. Their growth rate projections for advertising between 2015 and 2020 are attractive too: 16.9% for radio and 33.5% for digital media. (Of course, profitable business models in digital remain elusive).
If the government does eventually open up the sector further for foreign investors, don’t expect a surfeit of deals immediately. The offer is too little and too late.
Shuchi Bansal is Mint’s media, marketing and advertising editor. Ordinary Post will look at pressing issues related to all three. Or just fun stuff.