Last month, Essel Group, the company that owns India’s largest media group, Zee, moved the Delhi High Court to restrain the shareholders of Amar Ujala Publications (it publishes Amar Ujala, the hugely popular Hindi newspaper) from entering into any agreement for the sale of the company till December 31. That is when Essel’s memorandum of understanding (MoU) to buy a majority stake in Amar Ujala expires. Acting on the plea, the court passed a restraining order about a month ago. So, the end of this year will determine who eventually controls one of India’s biggest Hindi dailies: Subhash Chandra’s Essel Group or Jagran Prakashan, the other reported bidder and publisher of Dainik Jagran, or some other publishing firm? There were, at last count, several in the fray.
Amar Ujala, the Hindi newspaper with editions in 12 states, is an asset that any media firm would like to own. With a readership of roughly 8.6 million, it leads in three states: Jammu & Kashmir, Uttarakhand and Himachal Pradesh. Dainik Jagran is the largest-read Hindi daily and is present in 15 states. However, it leads on readership only in Uttar Pradesh. Taking over Amar Ujala can give it leadership in five key states, including Delhi.
“The combination (of Amar Ujala and Dainik Jagran) will also ensure that rivals such as Dainik Bhaskar and Hindustan (published by HT Media) are miles behind in the national ranking,” says A S Raghunath, a media consultant. For Zee, the paper has synergies with its Hindi television news business and its English paper, DNA
This fight for Amar Ujala underscores the importance of Hindi to any publishing firm’s national ambitions. Of the Rs 19,100-crore newspaper industry, Hindi is roughly 30 per cent, up from 20 per cent only five years back (see table). That is when the first flush of investor money had come into the sector. As they scrambled to meet investor expectations on scale and profitability, the three publishers listed on the stock market, Dainik Jagran, Dainik Bhaskar and Hindustan, have been expanding rapidly. And so are the closely-held ones such as Rajasthan Patrika and Amar Ujala, which are defending their territories and getting into new ones. Most are discovering that the fragmented Indian newspaper business makes for a nightmarish market for mergers and acquisitions. There are more than 32,000 Hindi publications (a bulk of them newspapers) in India. Most are irrelevant. Many of the good brands — Amar Ujala, Rajasthan Patrika or Prabhat Khabar — are not really interested in selling. Others such as Nai Dunia have already been snapped up (by Jagran earlier this year).(THE SHAPE OF THE MARKET)
Widening their horizons
The battle for scale, however, is not just that. As advertising growth slows to single digits and price wars eat up what was once healthy subscription revenue, bulking up on readership and circulation numbers in each state is critical. That is the only way to get the best ad rates and keep the cash coming. “The only state for which Dainik Jagran can command its own ad rates is Uttar Pradesh. For all the other states it has to negotiate,” says one media analyst. Even in Uttar Pradesh, Dainik Jagran now faces a new threat: HT Media’s Hindustan.
The paper is racing ahead of Dainik Jagran in key towns of the state, such as Lucknow. “The Amar Ujala acquisition would have helped Dainik Jagran keep Hindustan in check,” says another media consultant. Sanjay Gupta, the editor and CEO of Jagran Prakashan, did not respond to our request for an interview.
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Girish Agarwal, director of DB Corporation, which publishes Dainik Bhaskar, says the tide is turning in favour of the regional (non-English) media. About seven years back, metros, and therefore, English papers, got 60 per cent of all the print media advertising in India. The rest of India, which means all other Indian languages, got the remaining 40 per cent. That ratio now stands reversed. “The potential, size and vibrancy of the market are now getting reflected,” says Agarwal.
He is right. As middle-class families in small towns prosper, advertisers want to reach out to them. While this has led to a boom in all Indian languages, Hindi happens to be the biggest beneficiary. The language, spoken by roughly 500 million Indians across 13 states and Union Territories, offers a Rs 6,200-crore newspaper market growing at just over 10 per cent, way above the national average. All other Indian languages put together get the same revenues as the Hindi market.
Now, take a look at the other side of this rosy picture. At almost 64 million readers, Hindi papers have over three times the audience English ones do. Yet, the ad rates that an English paper commands are about five times more than Hindi. It perhaps reflects the superior purchasing power of the English readers. But, the Hindi readers are catching up. The current ratio of 5 is better than that of 10-12 seven years back because the “perception of advertisers” towards the Hindi newspapers is very positive today, points out Arvind Kalia, national head of marketing, Patrika Group (it publishes Rajasthan Patrika). Therefore, as literacy increases and small towns in the Hindi heartland continue to grow at a brisk pace, more growth will come from improving rates vis-à-vis the declining English newspaper market.
But, this will happen only for brands that can deliver the Hindi market en bloc. For instance, even if Dainik Bhaskar doesn’t lead in all the cities in Madhya Pradesh, as long as it is the overall leader in the state, advertisers will include it in their plan. The same goes for Hindustan, the leader in Bihar. But, when it comes to a national ad plan, then Dainik Bhaskar, which has more editions across the Hindi belt than Hindustan, which focuses only in four states, wins. That explains why everyone is in a rush to expand, organically as well as inorganically.
When five really big brands want to expand at the same time, price cuts are inevitable. “The big trouble is they are entering into each other’s market. As a result, circulation revenues for Hindi print have fallen from 25-30 per cent of sales to 20 per cent over the past five years,” says Vikash Mantri, vice-president of ICICI Securities. Traditionally, Indian language papers have had healthy subscription revenues, unlike the 10 per cent that English gets. So, this drop in annuity income worries investors. It did not matter till last year when advertising was growing at 10-12 per cent. But, as ad growth slumps to an estimated 7 per cent this year and newsprint costs rise by 20 per cent thanks to a depreciating rupee, margins are being squeezed. Price wars make it a triple whammy on the bottom-line.
Way forward
The easy solution is to stay put and consolidate. Hindustan, which in the past five years has doubled revenues and grown operating profits 10 times, is a good case in point. It has consciously stuck to four states: Bihar, Jharkhand, Uttar Pradesh and Uttarakhand. It has now covered Uttar Pradesh more or less completely. Hindustan does not plan to go outside of these states, for now. “In a state that already has three or more players, it is not easy for a new player to build scale and it could also be very expensive,” says Amit Chopra, the CEO of Hindustan Media Ventures. He points out that it could take more than five years for a daily to achieve breakeven in a new state. The other option is to acquire newspapers and scale up fast, which is turning out to be messy. Given the fragmented market and egotistical owners, this may not happen through buyouts but through distress sales as margin squeezes hit smaller players. “More than consolidation, it is a question of attrition. Many of these (small) brands will die out, but will not sell,” says Ajay Upadhyay, consulting editor, Amar Ujala.
Does any of this matter when the internet is taking away large chunks of audiences? While that is true for the metro-English speaking market, “in the Hindi belt, newspapers are the last word on anything,” says Chopra. The aspirational value of newspapers and the fact that they have right of way into homes, unlike the internet, make them powerful media vehicles, much like English papers were in Mumbai or Delhi in the ’90s. Besides, Hindi papers reach barely 20 per cent of a market where literacy is about 65 per cent. So, the headroom for growth is significant. As one media baron puts it, “Indian language papers’ fight for acquisitions will continue because they want real estate (brands that could give them large geographies).” Wait then for some more skirmishes.