A mid-year economic recovery has seen some of the gloom abate and the festive season may have imparted an added buoyancy. But the mood in the Indian media industry as it heads into the new year, remains sombre.
The industry faces serious questions today about the sustainability of the current upturn. Does it really have the momentum to overcome multiple adversities -- a global economy mired in debt, currencies prone to violent gyrations, a possible surge of inflation and a real erosion of living standards? Or will a recovery that has rather too hastily been proclaimed, prove all too illusory?
Early-2009, market forecasters were prepared to bet on a growth of advertising spending in the Indian economy of no more than 7.2 percent. This was well below half the growth rate registered through 2008 and considerably less than the trend figure of the last decade or so, which has been over 20 percent. Bottomline concerns were also sharpened by prices of newsprint, which were at historic highs till about September 2008.
This was the context in which the chief executive of Bennett Coleman and Co Ltd – India’s largest media group with interests in print, TV, radio, online and outdoor advertising – wrote to his staff in March 2009, indicating that the crisis was unlike anything he had “seen in his working life”. The chief editor and chief executive officer of the Indian Express, in a similar moment of revelation, described the slowdown as a crisis with no end in sight. Around the same time, HT Media, publishers of the second largest circulated English newspaper, the Hindustan Times, informed staffers that salaries would remain “unchanged” into the foreseeable future.
By mid-year, forecasts were even more downbeat. An international market research agency put the growth of advertising spending in the Indian economy at a fairly dismal 4.7 percent for the year. And as the harsh summer of 2009 wore on and the storied Indian monsoon remained elusive, drought conditions were declared in much of the country, engendering still more anxiety. The expected shrinkage of demand in the rural sector, it was rather dolefully said, could hit ad spending by consumer goods majors.
There is for the first time now, a prospect that ad revenue accruing to the print media could actually shrink. The print media has for long held its share in total ad spending, defying predictions that its fortunes would plummet as a consequence of the growth of cable and satellite TV and the internet. But now, perhaps for the first time since the boom in broadcasting began in the early-1990s, the print media faces an actual prospect that the bleakest of predictions about its future will come true.
The situation today indicates that the share of print in total ad-spending could fall below the 47 percent level it has been at for almost two decades. Print could soon be getting a steadily smaller share of a pie that is growing much slower than before.
Salary cuts and austerity have become the norm in the media industry. And most seriously for an industry that has always prided itself on a public appearance of fierce independence, four of the country’s most prominent newspaper editors and publishers in February went hat in hand to the Ministry of Information and Broadcasting, to plead for a special dispensation to avert the crisis they were facing. It did not pass notice that this happened just days before national elections were notified. And once that threshold was crossed, a model code of conduct would have become operative, prohibiting any policy change that could be construed as an undue favour to any particular lobby or business, particularly one such as the media, with the power to influence electoral outcomes.
The newspaper industry beat that deadline and secured concessions ranging from a waiver of import duties on newsprint and an increase in the rates paid for government ad placements.
Earlier petitions from the newspaper industry for elimination of the customs duty on newsprint had been partially met in April 2008, when the rate was cut from 5 to 3 percent. This was followed in September by an upward revision of 24 percent in the rates paid by the Government for its advertisements. The bargaining between the print media and the government had in other words, been going on for quite a while. But following the softening of newsprint prices that began in September 2008, the Ministry had been resisting further demands for an upward revision of ad rates, on the grounds that the softening of newsprint prices had taken a great deal of pressure off the newspaper industry.
Though devoid of immediate practical consequence or profit, it may be time to revisit some of the strategic choices the news industry made over the last two decades. For starters, the industry needs to ask whether it did the right thing by itself and its customers from about the mid-1990s, by increasingly tying its commercial success to advertising rather than circulation. To have bet on circulation as the growth option would have meant making a commitment to quality news and content. Attention spans were becoming shorter, in part because the growth of the fiercely competitive electronic media sector was creating a clutter of information that most news consumers did not have the patience to sort their way through.
The print media lost its status as primary news source for the majority of consumers, once 24-hour news channels began sprouting all over the country from about 1997. But circulation levels still kept increasing, because of rising literacy and social mobility. Again, the print media retained relevance as a source of information in depth. The 24-hour news channel, with its bite-sized coverage, only whetted the appetite. It took the unhurried study of the print media to fully satisfy the need to know.
In its rush to rake in the advertising by emulating the TV news-bite, the print media disregarded this inherent strength. The trend was set in 1994 by the country’s largest media group, Bennett Coleman – publishers of the Times of India (ToI) – when it slashed the price of its flagship paper in Delhi, forcing market leader Hindustan Times (HT) to follow suit.
With its near monopoly in the commercial metropolis of Mumbai, the ToI by 1994 was estimated to have an ad ratio, measured as the proportion of total printed area devoted to ads, of 55 percent. In comparison, the HT in Delhi and The Hindu in Chennai enjoyed much more modest ratios in the lower 40s. This was the initial advantage that endowed the ToI with the confidence that it could launch a price war and stay the course better than the competition.
In the event, HT was driven to the wall, suffering steadily dropping profits and going into a loss for two successive years, before it sued for peace. The ToI also took its price warfare strategy to the cities of Hyderabad and Bangalore, forcing the established newspapers in these cities into reluctant emulation. And the final frontier in the ToI’s assault on the English-language market was breached when it launched in Chennai in April 2008, again with an aggressively priced product that shook market-leader The Hindu out of its glacial, other-worldly attitude.
The newspaper industry would almost certainly not have embarked upon this trajectory if sales and imports of the most vital of its material inputs, newsprint, had not been totally decontrolled in 1995. Till then burdened by the requirement that they buy a fixed quota of their newsprint demand from domestic sources, newspapers after 1995 were at liberty to source their supplies from any vendor of choice. This allowed the bigger enterprises to build up inventories when prices were low to hedge against future uncertainties. It also permitted them greater leeway in pricing their final product, so that any price that was close enough to the resale value – as measured in the market for waste-paper – would be good commercial sense.
Content became a side-issue in other words, since there was no value on it from the point of view of the publisher. Expenditure in news gathering and quality content could be dispensed with. Competition, that much vaunted process of striving that is supposed in the free-market theology to ensure consumer sovereignty, would pivot around the sole parameter of selling price. For the rest, the challenge for the editorial content producers was nothing more or less than providing the best environment for advertisers to sell their wares.
Media content meanwhile has mutated to accommodate the concerns of the upper demographic strata, the prime segment for advertisers. TV news channels according to a recent survey, devoted close to a third of their air-time (exclusive of ads) to stories on crime. Sports was a distant second with just over 13 percent of total air-time, followed closely by politics and entertainment news. Bringing up the tail-end, though with a significant share, is astrology, with over 3 percent.
A roughly similar order priorities is evident in the print media, which in the days before the TV news channel, devoted perhaps 40 percent of front-page space to politics. That has come down to just under a quarter of the total for the English-language press. A close second is crime with 21 percent of front-page space. The economy, sports and entertainment, all figure in the middle-single digit range in terms of the proportion of front-page space claimed in the English language press.
With advertising spending now in recession, the media and in particular – the newspaper industry – faces the prospect of having to rethink its comfortable belief that the race to the bottom is the surest pathway to profit. Charging for content is an option that is talked about though few have ventured down that road yet. Objective circumstances indicate that consumers would perhaps pay for news content, if the quality of information obtained can bear the burden. Surveys in the west have shown -- and the situation in India is likely similar – that internet users are increasingly spending their time online browsing through news sites. Typically, the first site that this traffic passes through would be the news aggregators, such as Google. But they finally come to roost on the website of an old media company.
That would be an opportunity for any media company that chooses to prioritise quality of content. Unfortunately, that variety of thinking does not seem to have yet dawned.
An issue that has emerged in the foreground of discussions on media policy in the context of the recession, is that of foreign investment. After long having resisted the entry of the foreign investor on lofty grounds such as national sovereignty, the print media effected a dramatic switch in 2004. This was in part because the Hindustan Times, after standing firm in opposing foreign investment along with two other majors – ToI and The Hindu – switched loyalties after the beating it received in the price wars. But foreign investment was still confined to less than a 25 percent stake in news and current affairs publications.
Today there is a buzz in policy circles over raising the foreign ownership ceiling to 50 percent. And unlike in earlier junctures, when they were quick to mobilise and shoot down any hint of a change in policy, the industry lobbies seem strange quiescent. This is not surprising, since all the holdouts have in recent months shown greater receptivity towards foreign investment. Once the change of policy was effected in 2004, ToI was quick to spin off its magazines into a separate company and tie up a minority share sale with a major global media company. Even The Hindu, which had been the most obdurate in its resistance, has of late been in talks with foreign media groups for perhaps selling an equity stake of upto 24 percent.
Apart from the stories of competition in the media, there is a parallel narrative of collusion too. In March 2005, HT and the ToI entered into a compact, raising cover prices and ad rates. That was the formal truce and disengagement after the bitter price wars of the decade prior. Shortly afterwards, the two got into a phase of active engagement, launching a joint venture newspaper, Metro Now, targeted ostensibly at the youth demographic. The venture never reached anywhere near a viable level of circulation or ad support and was in 2009, converted into a weekly. As with other publications in the past, this is regarded as most likely, the precursor to imminent closure.
The Hindu’s decision to close down its freesheet, Ergo, launched in December 2007 and targeted at Chennai city’s large and growing community of information technology professionals, underlines yet again the fallibility of the of low-cost media model, driven by advertising rather than quality. It is also a measure of the depth of the crisis facing India’s media that a paper targeted towards a professional strata of high and growing purchasing power, failed to attract and hold advertiser interest in a major metropolitan centre such as Chennai.
What are the pathways that then lie open if the Indian media should choose to persist with its attitude of disregarding the quality imperative? Shifting the lines demarcating editorial and advertising is one possible option. In March 2003, the ToI announced a new initiative – “Medianet” -- that was professedly part of its effort to stay current with journalistic practices in rapidly changing times. “Medianet” was in the words of the ToI management, part of their “desire to drive the market, to constantly break new ground”.
The deficiency of traditional news-gathering, the ToI explained, was apparent especially in new areas of audience interest – such as “lifestyle, fashion, entertainment, events, product launches, social personalities and city happenings”. This was in part, because public relations agencies, which had a much more sensitive feel of the pulse in these areas, had always had a rather uneasy interface with journalism.
Subtlety aside, this was a reference to the pervasive journalistic practice of accepting and even actively soliciting, various forms of gratification for news and editorial coverage that might be of material benefit to particular individuals or entities. Through Medianet, the ToI professedly, was curbing this corruption of the trade by institutionalising it. Objectivity and integrity of editorial content would no longer be at risk from the susceptibility of individual journalists. The organisation itself would bear that onus of carrying content that was paid for, though only with explicit acknowledgment.
After making “infotainment” a staple of the media industry, the ToI now fostered a new hybrid entity called “advertorial”, which would allow sponsors to feature stories of special interest in its news columns. Needless to say, the early assurance that this new operational philosophy would respect traditional walls of distinction between advertisements and editorial, has not quite been fulfilled.
Two years later, the ToI introduced another innovation, called “private treaties”. And it involved the acquisition by the ToI group, of shares in enterprises in exchange for advertising space. When the concerned enterprise grew to a level where it could conceivably go public, the media company that had freely advertised its merits would cash in.
The ToI was the pathfinder and most media enterprises, including the broadcast companies, have eagerly followed. “Private treaties” is now accepted practice for numerous media groups.
Since the stock market boom of the 1980s, professional bodies have actively engaged themselves with the ethics of individual journalists reporting on corporate entities that they hold a stake in. That engagement has yielded much of value, including guidelines on disclosure and transparency, applicable on every journalist. The “private treaties” phenomenon again, displaces this ethical issue, taking it out of the domain of the individual journalist or his professional peer group. Conflicts of interest have now been institutionalised and the norms on corporate disclosure are even more lax. Peer pressure might have worked at the level of the individual journalist. But the shared complicity of media companies seemingly ensures that the public will remain in the dark about the many motivations that drive the tone and content of reporting on financial matters.
Part of the crisis of the media today is the severe loss of credibility of the readership and audience measurement process, which is in turn an outcome of the enormous pressures it has suffered from interested media groups. The National Readership Study (NRS), promoted by India’s main newspaper industry lobby, was discontinued in 2006 after serious discrepancies and inconsistencies in its findings. The Indian Readership Survey (IRS), a creation of the advertising industry, continues on an annual basis, though its findings leave ample room for interpretations of convenience.
A Broadcast Audience Research Council was set up late in 2007 as a joint venture of the industry and the advertising agencies. It is expected to begin its work soon, after a long and arduous process of negotiating appropriate methodologies. Few seem to have any regrets about the older system of TV ratings, always prone to erupt in unseemly controversies, fading away into history. But few again, have any hopes that the new venture will bring in a more accountable and transparent system.
With all these changes, the print media today faces a dearth of options. After the progressive devaluation of the editorial function and news gathering, quality of content does not justify charging a price for access. Paid content, which is the option currently being explored as a last-ditch survival bid by the global newspaper majors, does not seem a viable proposition for their Indian counterparts.
An alternative scenario, of a brutal bout of blood-letting and the survival only of the fittest, seems ever more likely. Diversity and consumer choice look the likely victims of the current downturn in media fortunes.