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In the third week of January, Dainik Bhaskar will launch its 67th edition in Bihar. This will be the Rs 1,592-crore DB Corporation's flagship Hindi daily's 14th state. Girish Agarwal, director, says the firm aims to reach the number one position in the capital, Patna, before moving to the rest of the state. The largest selling paper in Bihar, the Rs 665-crore Hindustan Media Ventures' Hindustan, sells around 350,000 copies in the city and 648,000 throughout the state.
Like other newspaper launches, this one too has been preceded by price cuts from the three major players in the Rs 350-crore market. The Usha Martin group's Prabhat Khabar has pushed down its price to Rs 2.50 from Rs 3 and Hindustan and Jagran Prakashan's Dainik Jagran to Rs 2.50 from Rs 4 each. These cuts are only in the city, the first battleground. As a fourth player muscles in, the incumbents are girding up for a rise in people and printing costs and skirmishes on the ground between distributors and sales agents.
Is Bihar headed the Jharkhand way? In 2010, when Dainik Bhaskar launched in Jharkhand, the bets were that its aggressive entry would expand the market. In the three years since, circulation of Hindi newspapers has grown 77 per cent and readership 18 per cent. But the Rs 100-crore ad market has risen slowly to reach Rs 125 crore. The higher circulation meanwhile has pushed up printing costs. Since the selling prices of most newspapers don't recover the printing costs, the cuts in cover prices have only led to a cash burn of crores without any return.
Kamal Kumar Goenka, managing director, Neutral Publishing House (which brings out Prabhat Khabar), admits Jharkhand has seen ad rates go down across the board as the big four slug it out. "Though we are close to break even we have not grown as envisaged in Jharkhand because of the problems in the state and the national economic slowdown," says Agarwal.
A similar cash burn, without growth, looks set to happen in Bihar as well. The Rs 350 crore a year that it gets in advertising looks insignificant in proportion to the Rs 22,400 crore (ad plus pay) print industry. Why bother with the market? Both Agarwal and Goenka disagree.
"Bihar is important for two reasons. One, it is a big market by itself. Two, on the ground things have improved in the state and the economy is growing. From a newspaper perspective, it is an untapped market,," says Agarwal. Goenka points out that newspaper reach is barely seven per cent in a state with a population of around 103 million, about 64 per cent of whom are literate. So, there is a lot of room for growth.
Maybe. But there are no firm bets yet on how much growth advertising with deliver. Without that, papers such as Hindustan, which gets a large chunk of its top line and profits from Bihar, could end up burning close to Rs 19 crore or upwards in the first year alone, going by back-of-the-envelope estimates. The bets are both Prabhat Khabar and Hindustan will be the worst hit in the skirmishes in Bihar after Dainik Bhaskar comes in.
Goenka agrees things could get tough. But he points to one essential difference between Bihar and Jharkhand. "About 40 per cent of the local ad revenues which are at Rs 175 crore come from the government. This figure is closer to 20 per cent in other markets. These revenues go to registered players and are at DAVP (Directorate of Advertising and Publicity) rates, which do not change," says he. With an election coming up in 2014, this spending will increase. And, the benefit will go only to the incumbents since it takes at least one to one-and-a-half years to get registered and become eligible for DAVP advertising. Prabhat Khabar was born in the region and is totally focused on Jharkhand and Bihar. It is the only paper of the four without any presence outside of these states. And, in these two, eventually, says Goenka, the battle will be fought on editorial quality.
May the best paper win.
