It is estimated to be a Rs 100-crore ad market. And, it is definitely not the fastest growing in India. Yet, Jharkhand is about to see a fourth newspaper. By the end of August this year, DB Corporation plans to launch its flagship Hindi daily, Dainik Bhaskar, in a state which already has three very strong brands. There is the Usha Martin group’s Prabhat Khabar, Hindustan Media Ventures’ (part of HT Media) Hindustan and Jagran Prakashan’s Dainik Jagran.
Some of the largest markets such as Punjab or Haryana did not see this kind of action for decades. By all accounts, Jharkhand is just about one per cent of the Rs 10,000 crore that newspapers made in ad revenues in 2009, according to Zenith Optimedia. So, what is it about Jharkhand?
The answer depends on whom you speak to. Kamal Kumar Goenka, managing director, Neutral Publishing House (Prabhat Khabar) points out that though there are three newspapers, they reach only 20 per cent of the literate population, so there is a lot of potential to grow. The national average is about 30 per cent.
“It is not just about Jharkhand. If you include Bihar into it, the total potential is about Rs 200 crore in ad revenues,” says Girish Agarwal, director, DB Corporation. He estimates that in the next three to four years this number could go up to Rs 400 crore.
One media consultant reckons that the whole Chhattisgarh, Orissa, Jharkhand mining belt is a lucrative ad market, especially from the government. So, most Hindi newspapers want to cover it. More importantly, many of them are flush with IPO funds and the pressure to show investments in growth is high. In the last 10 years, when Hindi newspaper brands were expanding into larger states such as Rajasthan, Punjab and Haryana, no one — the media or the financial community — was interested. “There is nothing unique about Jharkhand; because all of us are listed, everybody is seeing things so closely,” says one player.
Whatever the reasons, this leads to some interesting tactical play. In June this year all newspapers slashed prices from Rs 4 to Rs 2. Most have seen jumps of anywhere between 50,000 and 120,000 in the number of copies sold.
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However, this rise comes with a higher production cost, at lower circulation (cover price) revenues and without the guarantee of an increase in ad revenues. “If the market has expanded (in terms of number of copies) then the ad market will definitely expand,” thinks Goenka of Prabhat Khabar.
Prabhat Khabar launched in 1984, is, in fact, the paper that made the Bihar/Jharkhand potential evident with its success. It played a role in the formation of Jharkhand and commands a very loyal readership. For some time it was also everybody’s favourite takeover target, though nothing worked out. Now, Usha Martin, the (claimed) Rs 4,000-crore group that owns it, has agreed to back it. “Prabhat Khabar is the only newspaper in India which is fighting with three major national dailies and we are enjoying it,” says Goenka.
How long can these brands take the cash burn, about Rs 2 crore or more a month depending on the print run? “The cash burn is not significant for a company of our size. But we cannot be selling more copies quarter on quarter without monetising. This is not an ego battle but a strategy battle,” says Sanjay Gupta, editor and CEO, Jagran Prakashan.
Gupta is bang on. Many of the larger circulation battles across India have become just that — large cash burn exercises that erode value in the business and eventually pull down ad rates too since advertisers exploit the hyper competition. It did not start that way. Well into the sixties, circulation brought in a healthy 50-60 per cent for Indian newspapers. But newspaper wars in Delhi and later in the South and other parts of India changed that.
Now India is one of those rare markets where roughly 80 per cent of newspaper revenues come from advertising, against 50-60 per cent in global markets. A healthy mix of ad to circulation revenue is critical because it helps hang on to ad rates and editorial independence in the face of competitive pressures.
| THE NEWSPAPER MARKET | |||
| Total ad revenues Rs 100-150 crore | |||
| Company | Revenues (Rs crore) | Brand | Average issue readership in Jharkhand * |
| Hindustan Media Ventures | 439 | Hindustan | 13.53 |
| Usha Martin Group | 4000 | Prabhat Khabar | 9.81 |
| Jagran Prakashan | 942 | Dainik Jagran | 8.54 |
| DB Corporation | 1,026 | Dainik Bhaskar | Launching August/Sep |
| Source: Annual reports and IRS 2010 - Q-1 *(in lakhs) | |||
So, what this round of competition will do is evident: reduce prices and increase choice in the short run. In the long run, unless the ad market expands significantly – a big ‘if’, given Jharkhand’s political problems — it will mean some form of consolidation or value erosion.
The only thing that could work is stitching up Jharkhand, Bihar, Orissa and parts of West Bengal into one common market, either with editions or acquisitions, then be leveraged regionally and nationally. It would seem that was what some of the players were doing. Jagran, for instance, is reported to be very close to an acquisition in Orissa.
Meanwhile, DB Corporation is targeting 300,000 copies or half of what all the three players together sell currently. It has already covered over 300,000 homes through its usual door-to-door campaign that has marked every major launch it has done in the last few years – DNA in Mumbai or Divya Bhaskar in Gujarat.
By the end of the launch, across the three major cities of Ranchi, Dhanbad and Jamshedpur, Agarwal estimates the company would have covered close to 1 million homes in Jharkhand. It expects to break even in three to four years.