Where Print Still Makes Sense: Business Publications Are Booming in IndiaPublished: May 15, 2008 in India Knowledge@Wharton
A business daily is apparently good business in India. Though The Economic Times is the clear leader, India's rapid economic growth has encouraged a sixth national contender. The emergence of small-town and rural India has similarly encouraged Hindi and other-language ventures. And what is happening in newspapers is being repeated in magazines.
In April, the Financial Chronicle, from the Hyderabad-based Deccan Chronicle group, joined the contest, starting with editions in Hyderabad and Chennai with a print run of 70,000. That is less than a tenth of the circulation of The Economic Times. But India's changing demographics, and lower production costs than elsewhere in the world, make the economics of even a small business daily promising.
In most mature markets there is a single leader, whether it's the Financial Times in the United Kingdom or The Wall Street Journal in the United States. That is the case in India, too. The Economic Times had average net paid sales of 750,621 in the July-December 2007 period, according to the Audit Bureau of Circulations (ABC). Business Standard was a distant second with 170,378 and The Hindu Business Line was third at 146,925. Two others, The Financial Express and Mint -- the product of a Hindustan Times-Wall Street Journal tie-up -- did not participate in the ABC audits. Mint started in February 2007 with an initial print order of around 80,000.
DNA Money (a part of Daily News & Analysis -- DNA -- of the Dainik Bhaskar group) is available as a stand-alone product in some markets. And waiting in the wings is the Financial Times (FT) of London, which could be on the stands in its Indian edition as early as January. "This is like the gold rush of the mid-nineteenth century," says Pheroza Bilimoria, managing director of the Business India Group of Publications, publisher of Business India magazine. "All these new entrants hope to emerge among the winners."
India's publishing environment suggests there is room for many winners. "In the business space, The Economic Times probably has 90% market share," says Ravi Bapna, a professor and executive director of the Centre for Information Technology and the Networked Economy at the Hyderabad-based Indian School of Business. "In terms of actual readership, it is pretty much the same story in India as elsewhere of having only one dominant player. But the other players still feel that the economics work out for them and that they don't need that particular kind of scale. The challenge abroad is the cost of production, which is much higher than the cost of production here. Given the low production cost, there is room for smaller players here. Whether they will sustain their operations in the long run depends on how differentiated they can be. But one can expect some kind of M&A activity in the next two to three years."
A Raft of Magazines
What's happening in newspapers is being repeated in magazines. Three magazines -- Business India, Businessworld and Business Today -- have been around for a few decades. According to the latest Indian Readership Survey, Business Today had readership of 416,000. Business India followed with 291,000 and Businessworld had 224,000. A newcomer, Outlook Business, launched in April 2006, had readership of 226,000.
More magazines are in the works, and foreign publications are attracting the most attention. Local media house Network18 is working on an Indian edition of Forbes. The Economist has been looking for a partner. McGraw-Hill has explored publishing an Indian edition of BusinessWeek with Delhi-based Cyber Media. Calcutta-based ABP, which publishes Bengali daily Anandabazar Patrika, English morning newspaper The Telegraph and Businessworld, has tied up with Fortune to bring out a local edition. "The rush to launch business newspapers and magazines in India can be explained by the economic growth India is experiencing now," says ABP chief executive officer Dipankar Das Purkayastha. "On the other hand, the U.S. is in the grip of a recession. And there is hardly any growth in Europe."
Other-language business publications also have been active. Business Standard and The Economic Times have launched Hindi editions in several cities. Writing in Business Standard on the occasion of the recent launch, editor T.N. Ninan explained: "Business Standard has launched itself today as a Hindi business newspaper ... in addition to the 33-year-old English one. We have started with the New Delhi and Mumbai editions; other editions will roll out in the coming days. And we know that we will have company. Rival Hindi business newspapers, too, will enter the market in the coming weeks and months, because every market in emerging India is going to be competitive."
Ninan is correct about rivals. The Dainik Bhaskar group, which publishes Hindi daily Dainik Bhaskar, the Gujarati Divya Bhaskar as well as DNA and DNA Money, will launch a Hindi business daily soon. "We have done our research," says group director Girish Agarwaal. The initial print order is likely to be 200,000. Meanwhile, rival Dainik Jagran is also planning a Hindi business daily in a joint venture with media conglomerate Network18.
The Hindi and other-language ventures are springing up because small-town and rural India is coming into its own. Spending power is moving to smaller cities. English, the language of the metro elites, is not on their agenda. But English business newspapers and magazines don't think their market is saturated.
Rising Literacy Levels
Newspapers are recording handsome growth in India and also in China. This has a lot to with the growth of their economies, but other reasons exist. China has only recently opened up and has developed a huge appetite for newspapers and magazines. In India, literacy levels are low, but they are rising. "Look at the total population," says Agarwaal of Dainik Bhaskar. "There are the people who can read newspapers and those who cannot. Among the people who can read newspapers, there are those who do not. In the U.S., newspaper marketers are aiming to fill that gap. In India, we also have the gap of those who cannot read newspapers."
T. Venkattram Reddy, chairman of the Deccan Chronicle group, similarly implied while launching his new paper that rising literacy levels provided new opportunities. "Financial Chronicle has been crafted as a pure-play business daily to build on the aspirations of a young and prosperous India," he said. Business newspapers and magazines also appeal to publishers because they are seen as serious products in an age where content is being "dumbed down."
According to a PricewaterhouseCoopers (PwC) report, "In 2007, the Indian print media industry recorded a growth of 16% over the previous year. Newspaper publishing, which constitutes 87% of the segment, grew at 17%, whereas magazine publishing, which contributes the remaining 13%, grew at a marginally lower rate of 15%. On an overall basis, the print media industry stood at Rs. 149 billion [14,900 crore] in 2007, up from Rs. 128 billion [12,800 crore] in 2006." PwC estimated the compound annual growth rate (CAGR) for 2008 through 2012 at 13% for newspapers and 15% for magazines. The comparative estimated CAGR internationally (for 2007 through 2011) is 2.1% for newspapers and 3.1% for magazines.
Among the reasons for the PwC report's bullishness about India's newspapers and magazines:
- Low print media penetration. The reach of print media in India is 38%. Its reach in urban areas is 58%, substantially higher than in rural areas, at 30%.
- Rising literacy rates. The number of potential readers is growing. Additionally, 359 million literate people in the country do not read any publication, which leaves further scope for improvement in penetration levels.
- Increasing spending on circulation. Penetration of print media is improving owing to growing income levels and aggressive marketing. Subscription schemes have not only accelerated penetration of dailies, but also have helped push multiple dailies into homes.
Such factors have made a lot of people gung-ho about the business. Unlike in most parts of the world, readership is growing. "The overall globalization, the growing interest in India, and the sheer size of the India market is driving the foreign media interest in India," says Bapna, of the Indian School of Business. "This is no different from players from any other industry. What all the global publications are probably looking for is to get an increasing mind share of the large Indian middle class, which is becoming [more and more] global." Adds Business India Group's Bilimoria: "India is the flavor of the next few decades in other business areas. So why should publishing be left out?"
Prohibitions on Foreign Ownership
India is relatively virgin territory whereas the rest of the world is saturated. But it has its challenges, too. Indian law prohibits foreign ownership of more than 26% in a newspaper or newsmagazine. The stricture applies to "news"; foreign stakes could be higher in non-news products. In March, information and broadcasting minister Priya Ranjan Dasmunshi told Parliament that 172 foreign magazines in the specialty, scientific and technical sectors had been given permission to launch Indian editions. Many are in tie-ups with Indian partners.
Not all deals will work out, however. The first such deal dates to September 2003. The Pearson Group of the United Kingdom (which owns the Financial Times, among other titles) took a 13.85% stake in Business Standard Ltd.; that deal has fallen apart. Business Standard is now going it alone. Pearson paid Rs. 14.1 crore for the stake; it is not clear how much it got back. Now, however, it has freedom to pursue new plans with Network18.
Foreign media houses may have deep pockets. But they also need to make money. Purkayastha of ABP estimates that a business newspaper could need a break-even period of around five years. "Magazines would need less investment with a similar break-even time," he says. Adds Bilimoria: "The economics of publishing in India are quite different from that in the West where markets are not so price-sensitive. Overseas publishers will need to come to terms with this reality."
The first challenge for a foreign business magazine or newspaper would be determining a cover price. The leading Indian business magazines are priced between Rs. 10 and Rs. 15. The cover price of Fortune, currently distributed in India by the Living Media group, is Rs. 180. An Indian edition of Fortune would not be so pricey. But it could hardly come down to local levels. The Fortunes and FTs would have to operate in niche markets. But the niches could be large. Says Bapna: "The global players will certainly focus on the higher end of the segment which, incidentally, is pretty large and underserved in India currently." And they may not be too bothered about the bottom line initially. "For the major players," Bapna says, "profitability is not a primary concern right now. I expect them to come in aggressively and compete for readership and grab market share."
The Importance of Advertising
Given the low cover prices, advertising is the principal revenue stream. Magazine advertising revenues are Rs. 1,400 crore, while circulation revenues are Rs. 500 crore. For newspapers, the corresponding figures are Rs. 8,000 crore and Rs. 5,000 crore. PwC projects growth in magazine advertising revenues over the next five years at 16%, compared with 10% growth for circulation revenues. For newspapers, the numbers are further skewed, at 16% and 8%, respectively.
"The primary source of revenue in the print media in India has always been advertising," Bilimoria says. "But slowly, sponsorships and associations are contributing a larger chunk of the revenue stream. It will be a while before circulation sales will contribute in any significant numbers to overall revenues."
The point is not that circulation does not bring in money; as the figures show, it does. But it does not pay for itself. Every extra copy sold is an additional loss, which must be made up by charging more for advertisements. This has its own problems, particularly in the area of newspapers' resisting advertiser pressure to encroach upon editorial.
The peculiar economics also make newspapers vulnerable to changes in input costs. Newspapers in India are facing a threat from an unexpected quarter: the price of newsprint, which has climbed more than 30% to $850 a ton in less than a year. An article in The Hindu, publisher of The Hindu Business Line, notes: "If newspapers in the U.S. are in crisis because their circulations are dropping, Indian newspapers will be in crisis because their circulations are rising."
The newer breed of papers uses pricing as a marketing strategy, which adds to the financial challenges. The Financial Chronicle, for instance, has been launched with a cover price of Rs. 1.50, which makes it the cheapest business daily. Some newspapers have taken to offering annual subscriptions. The Hindustan Times has a cover price of Rs. 2.50, but it is available at Rs. 1 under annual schemes. The Economic Times (or the morning tabloid Mumbai Mirror) is available free with flagship The Times of India in some markets. (They are also sold independently.)
For foreign media houses it is, therefore, a clear choice. They can pursue mass markets and lose money for some years. But more so they may lose their image as prestige publications. The alternative is to offer a quality product with a high cover price. "India is definitely underserved by way of quality," says Bapna. "The coming of global players in a big way will improve the overall quality of journalism in India and also open our minds to what is happening in the rest of the world. They will put in more resources, increase journalists' wages, and get more people into the profession. In that sense, it is a good development." It will also mean casualties in coming years. Consolidation is inevitable, Bapna says.
So why are so many Indian publications -- as distinct from foreign majors -- entering this bruising battle? For many it is a question of adding to their range of offerings. The Times of India has shown that it pays to offer advertisers package deals across various publications. So a Hindi and Gujarati general newspaper group like Dainik Bhaskar wants an English presence (DNA), an English business daily (DNA Money), a Hindi business daily (to be launched soon), radio, TV and the Internet. "Multi-publication advertising packages are very important," says Purkayastha of ABP.Eventually, strategies will go beyond advertising packages; all the different media will need to be integrated. Bapna thinks foreign media houses have an edge here. "In the long term, those players who are able to integrate their print with other channels like digital, web-based or even mobile and entertainment will have a clear differentiation because that is something that the Indian players have not been able to do from the ground up. That potential is waiting to be tapped," he says.