The Pew Research Centre’s latest “The State of the News Media (2011)” report says extreme dependence on advertisements made American newspapers an easy target for the internet. Readership, circulation and revenues have gone into free fall in the US market as readers shift to the internet. While this is true for large parts of Western Europe too, the rate of revenue fall in the US is sharper than in Europe. This is because of various factors, says the report. The biggest is the dis-aggregation of news by the internet. Since people go to specialised websites for news on, say, cars or technology, that advertising no longer comes to newspapers, which earlier used it to cross-subsidise plain news.
The report reckons that globally newspapers earn 57 per cent of their revenues from advertising and 43 per cent from other sources such as subscription, syndication and so on. In the US, the proportion is 73:27 in favour of advertising. In India, it is 80:20. Theoretically, therefore, the Indian market is as susceptible as the US market.
There are, however, some obvious and some not-so-obvious differences. The obvious ones: India, like other developing markets, is on a growth trajectory. As the economy, literacy and population grow, the circulation and readership of newspapers are growing. At more than 156 million copies sold every day (against 46 million in the US), India is one of the largest and fastest-growing newspaper markets in the world by volume. There are 330 million newspaper readers in India against 92.5 million in the US.
However, the ad revenue size in India is very small — just over $2.5 billion against $42 billion in the US. However, India, Egypt and Lebanon were the only three countries that saw a rise in newspaper advertising revenues from 2008 to 2009, says the World Press Trends Report for 2010.
Newspapers in India have phenomenal aspirational value, especially in small towns and non-metros, from where the maximum growth in newspaper readership and circulation is coming. The biggest difference between India and the US is net penetration — at 83 million surfers, we are way behind the 239 million American figure. Then there are the infrastructure constraints — electricity, lack of language content and poor PC penetration.
These obvious differences simply mean that it will be a long time before the net truly threatens newspapers in India.
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There are two not-so-obvious differences. First, Indian newspaper groups are leaner and more productive. Their fixed costs (of content and people) are spread over a larger number of copies sold.
The second is the sheer energy of Indian newspaper groups, thanks to competition. DB Corporation, Jagran Prakashan, Hindustan Media, Malayala Manorama or Loksatta, among others, work hard at wooing advertisers and readers. There are reader workshops, house-to-house-surveys of readers, special campaigns on local issues and so on. On the advertising side, workshops are organised for local advertisers, dealers and others to educate them on the benefits of advertising. In fact, most newspaper groups actually do the creative bit for small, local advertisers. In most international conferences, Indian newspaper groups inevitably win awards for innovation. In comparison, most American and European groups look bloated, lazy and out of touch with their readers.
You could argue that such operational efficiency and innovation still don’t produce world-class content — in the same league as, say, The New York Times. That is a matter of market evolution. As the market demands better content, Indian newspapers will deliver it.
What the not-so-obvious differences mean is that the Indian newspaper groups are nimbler. Does that give them a better chance to survive?
Perhaps it does, but for one thing. For all their “innovative nimbleness” most haven’t done much about the one big advantage they have vis-à-vis mature markets — the luxury of time. They have at least 10 years or so before growing net penetration starts battering topline and bottomline numbers. In mature markets, most of the brands that are managing to gain a toehold in cyberspace have been at it for more than ten years.
So, Indian newspaper groups have to start now if they want to go through the whole trial-and-error thing of what works on the Net. Most haven’t even had a serious stab at it. That could be fatal in the long run. And no amount of “uniqueness” can then undo the havoc that the Net would have unleashed on balance sheets.