The Indian Media Business
Publication Year: 2010
This book presents an in-depth study of the Indian media business. It provides detailed analysis, fresh perspectives, and critical information on how the business operates in the nine segments of the media industry—print, television, film, radio, music, internet, telecom, out-of-home media, and events. The author provides insights into not just the history of the business but also its present dynamics by discussing technology, regulations, economics, valuations, and industry trends.
- Front Matter
- Back Matter
- Subject Index
Copyright © Vanita Kohli-Khandekar, 2010
Copyright © Vanita Kohli-Khandekar, 2006
Copyright © Vanita Kohli, 2003
All rights reserved. No part of this book may be reproduced or utilised in any form or by any means, electronic or mechanical, including photocopying, recording or by any information storage or retrieval system, without permission in writing from the publisher.
First published in 2003
This revised third edition published in 2010 by
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Library of Congress Cataloging-in-Publication Data
The Indian media business / Vanita Kohli-Khandekar.—3rd ed.
Includes bibliographical references and index.
1. Mass media—India. I. Title.
P92.I7K64 302.23′0954—dc22 2009 2009047619
ISBN: 978-81-321-0235-9 (PB)
The SAGE Team: Reema Singhal, Meena Chakravorty, Sanjeev Kumar Sharma, Vijay Sah and Trinankur Banerjee
To Suman Kohli and Sreekant Khandekar[Page vi]
Over two decades back our only sources of entertainment were some specific programmes on the national TV network and All India Radio (AIR). From the 1950s to the early 1980s, cinema theatres managed to pack audiences all through this film-crazy country. Then, somewhere, the ‘formula’ plots got outdated. Film revenues stagnated at about US$ 1 billion annually which was less than one-third the box office of a single major Hollywood studio. Cable TV's advent happened in 1981 and that did not really go well. If it had, India would have been a totally different country for TV.
The limited choice and its king-size audience appeal was what attracted me to this sector and my first brush with the industry happened in the early 1990s when we produced India's first daily soap.
Today, the scenario is different. Indians are getting wealthier and spending much more on entertainment. Media options are aplenty with everything from television, mobiles, films, music, publishing, Internet and radio. Today, the consumer is paying for content. People are now spending around 12 per cent of their disposable income on leisure and entertainment. This should go up to 20 per cent in the next two to three years.
The Indian entertainment and media (E&M) industry has been growing at a fast pace over the last few years and the trend is likely to continue. The growth of traditional segments and that of new ones has opened up a whole lot of opportunities. With convergence at the forefront of the E&M industry we are now addressing a global audience. Despite the sector being highly unorganised, Indian companies are looking to broaden their horizon in terms of offerings and geographic presence.
The economic slowdown which is currently harassing the world is one of the best things that could have happened to the E&M industry in India. That is because during the boom, there was too much free equity flowing into the industry. It was not making any business sense to work in. The correction that the slowdown brought has allowed people with strong business models to get back to business. Second, the correction which would normally have happened in two to three years has happened in six months which is good news for everybody.
[Page x]You can now sense the global undertones and see the transformation of this prolific yet anarchic entertainment industry. There is a strong recognition about brand India in the global markets today. Various industries have contributed to this international image, the entertainment sector being a significant one. Today, not only does our content have international takers, but India is also well represented on most international forums.
However, for the next big leap to happen and for Indian industry to gain its rightful share in the global entertainment sweepstakes, there is need for funding to bring in the scale and the infrastructure backbone, which would help India attain its rightful status. This industry transformation is a slow process and the lead will have to be taken by some of the large media conglomerates.
In the global media and entertainment market, India stands at the cusp of witnessing its big moment. Will the world witness a blockbuster?
CEO, UTV Software Communications Ltd
This edition has taken longer than any of the earlier ones. Why I wondered? Is it because the business is larger and a lot is happening. Yes, that is one part of the reason this edition took a year to put together. The other part is the expectations that most people seem to have of this book—of being a ready reckoner on the Indian media business. The challenge for me, therefore, was to work hard to retain the essential nature of the book as a guide/reference tool and yet bring in more meat.
It is a difficult balance—there had to be enough facts, history and analysis, but also enough insights. There is so much I know about the business, but only so much that an observer of the business who has just got into it would need to know. So, while I have tackled contentious issues like the selling of editorial content or broadcasters' apathy to regulation, there is a lot that is left unsaid. To go beyond that, into the inner workings of companies and segments, you either need to hire me as a consultant or I need to write another book!
This book, therefore, tries and sticks to its basic promise of providing a quick and reasonably deep understanding of the Indian media business. There are two additional chapters on outdoor and events (in addition to Internet and telecom from the last edition). That takes the total tally to nine chapters. Plus, there are a lot of caselets and one major case study, on Bennett, Coleman & Co., the media firm everyone in India seems to be fascinated by. Then there are lots of changes in the tables, data and the break-up of the book; much of it is based on the feedback and reviews on the second edition.
Hope this version provides a richer, more nuanced look at the Indian media business.
As usual, feel free to revert to me with feedback at firstname.lastname@example.org.
My heartfelt thanks to the following people for sharing their time and insights with me. Without them this book would not have been possible:
Anish Dayal—Advocate, Supreme Court of India • Ameen Sayani—radio professional • Ashni Parekh—media lawyer • A.S. Raghunath—media consultant • Amit Khanna—Reliance Entertainment • Ajay Sekhri—chartered accountant • Ajay Shanghavi—Metalight Productions • Arpita Menon— Nine dot Nine Mediaworx • Apurva Purohit—Radiocity • Amrit Shah—film industry veteran • Ashok Mansukhani—Hinduja TMT • Ajit Balakrishnan— http://Rediff.com • Ashok Desai—ABP Private Ltd • Ajay Gupta—ABP Private Ltd • Ajay Upadhayay—MediaGuru • Basant Rathore—Jagran Prakashan • Bhaskar Ghose—former I&B secretary • Bala Deshpande—ICICI Venture • Bharat Kapadia—Lokmat Group • Brian Tellis—Fountainhead Promotions • Cyriac Mathew—Mid-Day • Chandan Mitra—The Pioneer • Dinyar Contractor—Satellite & Cable TV Magazine • Deepak Choudhary—EMDI • Deepak Nanda—investment banker • G.S. Randhawa—Press Information Bureau • G.K. Krishnan—Aaj Tak • Gita Ram—Synovate • G.P. Sippy—Sippy Films • Hemant Mehta—IMRB • Harish Bhimani—radio professional • Hormuzd Masani—Audit Bureau of Circulations • Indrajit Sen—Laqshya Media • Ishan Raina—OOH Media • Jagjit Kohli—Digicable • Jaideep Chakraborty— BCCL • Katy Merchant—ex-IMRB • Kalpesh Vora—Creation Publicity • Kanchan Sinha—Amarchand Mangaldas • L.V. Krishnan—TAM Media Research • N. Murali—The Hindu • Nitin Gupta—Ernst & Young • Namrata Datt—Ernst & Young • Mohan Nair—Maharaja TV • Roop Sharma—Cable Operators Federation of India • Mr Saxena—Press Institute of India • Mammen Mathew—Malayala Manorama • Mangesh Borse—Symbiosis • Maneck Davar—Spenta Multimedia • Mohan Mahapatra—ex-Virgin Music • Meenakshi Madhvani—Spatial Access • Mahendra Swarup—Smile Technologies • Michael Menezes—Showtime Events • Mohit Hira—NIIT • Mohammed Morani—Cineyug • Mandar Thakur—Soundbuzz • Pankaj Wadhwa—Kidstuff Promos • Pradeep Guha—Culture Company • Pratap Pawar—Sakal • Pradeep Chanda—consultant • Prashant Powar—Powe Scanad • Prem Panicker—http://Rediff.com • Prashant Maheshwari—ABP Private Ltd • Punitha Armugham—Madison Media • Prashant Panday—ENIL • Prakash Chafalkar—Multiplex Association of India • R.S. Narayan—ex-Star [Page xiii]India • Radha Namboodri—AIR Mumbai • Ramesh Lakshman—RLC • Raj Singh—Activemedia • Rajesh Jain—http://emergic.org • Rajesh Tahil—Hillroad Media • Rajesh Kanwal—afaqs! • Roshan Abbas—Encompass • Sreekant Khandekar—afaqs! • Sanjay Gupta—Jagran Prakashan • Sankara Pillai—ex-ORG—MARG • Shyam Malhotra—Cybermedia • Satish Shenoy—formerly with IL&FS Bank • Sameer Kale—CMCG consultant • Sreedhar Pillai— film expert • Shobha Subramanyan—ex-ABP Private Limited • Sanjay Chakraverti—WPP Media • Sevanti Ninan—media columnist • Shravan Shroff—Shringar Cinemas • S. Keerthivasan—Fever FM • Suresh Thomas—Crescendo Music • Sunil Lulla—Alva Brothers Entertainment • Shashi Gopal—ex-Magnasound • Shaju Ignatius—entertainment consultant • Supran Sen—Film Federation of India • Siddharta Dasgupta—PVR Cinemas • Sanjeev Sharma—ex-Nokia • S.C. Khanna—AUSPI • Sunil Rajshekhar—BCCL • Sanjiv Agrawal—Ernst & Young • Siddhartha Mukherjee— TAM Media Research • Sunaman Sood—Acendo Capital • Siddharth Jain—iRock Media • Sumantra Dutta—Star Group • Sweta Agnihotri—Big Music and Home Entertainment • Sajith Pai—BCCL • Sumeet Chatterjee—Pickle • Tariq Ansari—Mid-Day Multimedia • Tarun Katial—Big FM • Tushar Dhingra—Adlabs Cinemas • Uday Singh—Sony Pictures • Viney Kumar—IDBI • Vinod Mehta— Outlook • Vijay Dixit—AIR Mumbai • Vikas Joshi—Dainik Jagran • Vikash Mantri—ICICI Securities • Vandana Borse— Symbiosis • Yash Khanna—Star India • Yogesh Radhakrishnan—ETC Networks • Yogesh Shah—ETC Networks
My special thanks to the following people for giving me the professional and logistical support to research and write this book:
• Aveek Sarkar, Niranjan Rajadhyaksha, Prosenjit Datta, Avinash Celestine, Sheril Dias • Mangesh Borse, Vandana Borse—Symbiosis Advertising
• Yogendra and Namita Arora • Vijaya Khandekar, New Delhi.
Special Credits[Page xiv]
Research assistants—Sinduja Rangarajan and Nithya Ravi
Regulation section authored by Anish Dayal, Advocate, Supreme Court of India
Growing up[Page xv]
It is very quiet.
As you sit back to think about what has been happening in the Indian media and entertainment (M&E) industry in the last year or so, that is the first thing that hits you. There is very little talk these days. Nobody discusses potential, valuations or investors. Everybody is so busy dealing with the daily, operational issues of scaling businesses, reaching profitability, fighting regulators or just meeting targets.
The only talk there is, is very specific to the issues that each industry segment faces in its quest for growth. So, television broadcasters worry about dropping margins as a price freeze and rising content and carriage costs hit them. The film industry is focussed on growing within and beyond India and raising average ticket prices. The radio industry is worrying itself silly on royalties and still struggling to scale up. Out-of-home (OOH) media, which was basking in the glow of increased investor interest, is now struggling with empty hoardings as the slowdown hits business plans. The print industry is worried about the creeping rise in newsprint prices. Much of this is covered in detail in the relevant chapters on each segment.
The talk, when there is any, has moved beyond growth in ad rates, the rise of middle class India, the time spent on media and other such things (see Tables 0.1 and 0.2 and Figure 0.1) They were critical when the Indian potential had to be displayed. It has now been proven, investors poured money into the sector right through 2006 to 2008 (see Table 0.3). Now, media companies are doing what any company in a growth sector, with funds at its disposal does—getting on with business. That explains the silence.Table 0.1: The Indian Media and Entertainment LandscapeTable 0.2: Advertising Spend on MediaTable 0.3: The Investment into the Media and Entertainment BusinessFigure 0.1: The Time Spent on Media and the Reach of Media
The silence, however, is mixed with a lot of pain. There is the pain of falling margins and of the slowdown and its impact on fledgling businesses. But most of all there is the pain of transition. This industry is going through a wringer as it tries to meet investor expectations, grow and remain profitable in a market without enough talent, with uneven regulation, changing technologies and with rising costs. As the industry evolves, matures and discovers its own level, the pain will recede.
The good part of it is that in the process, several changes are happening— some good and others bad. For instance, salaries have risen a little too fast [Page xvi]for an industry of this size. There are however a few changes that stand out for their long term impact on the Rs 776 billion (roughly US$ 16 billion) business. These are the doubling in size of Indian M&E companies, the growth in the spread of the business and the rise in pay revenues.Growing up in Size
In the five years since 2003 almost every one of the top 10 media companies has grown twice if not three to four times in size (see Table 0.4). India's largest media firm Bennett, Coleman & Company (BCCL) grew from Rs 19.91 billion to an estimated Rs 42.82 billion in its financial year ending June 2008 [see ‘Case Study: Bennett, Coleman & Company Limited (BCCL)—A Look at India's Largest Media Company’]. Arch rival HT-Media has grown to roughly three times its size in March 2004 to over Rs 13.5 billion in the financial year ending March 2009. Almost every firm in the top 20 has gone from being in one segment to having a presence across a mix of segments—television, print, online, radio, outdoor and so on.Table 0.4: The leading Indian media companies and their presence
[Page xvii]This is a clear indicator of the growth in the market and the ability of Indian media firms to cash in on it. For years and years media companies in India fell in set clusters. The first was the Rs 0.5–20 billion revenue cluster, the second, Rs 20–50 billion and the third, Rs 50–80 billion. Most firms had settled comfortably in their clusters. Mid-Day Multimedia, for [Page xviii]example, held steady at the same revenue level (around Rs 1 billion) for as long as five years. It seemed difficult if not impossible for most companies [Page xix]to move out of the bracket they operated in. It was even rarer for a company to make it past the Rs 10 billion mark.
The entrants into this club has now grown—HT Media, Network18 (going by claimed group figures), Sun (the group) and Deccan Chronicle Holdings have just got into the Rs 10 billion revenue bracket, joining veterans such as BCCL, Zee Group and Star India.
There are two things common to the firms that have breasted the Rs 10 billion tape—appetite and aggression. Network18 wanted to become a media conglomerate so badly that it went on an acquisition spree that many [Page xx][Page xxi][Page xxii]analysts dubbed as ‘overleveraging.’ The result was that it grew from a miniscule Rs 440 million in March 2004 to a claimed Rs 19 billion in group revenues in March 2009. BCCL could easily rest on its legendary cash reserves for several years. But it set itself crazy targets every year and usually beats them.Growing up in Spread
This growth in size is accompanied by growth in spread as well. Look at the right-hand side of Table 0.4. Across the board, Indian media companies are attempting other media. This time more seriously than the tentative stabs they took at say television or the Internet earlier. It is already showing some results. In the film business where retail companies have got into production and distribution and vice versa, the ability of the industry to weather months of bad films is much better. In print, many of the large players have made serious forays into outdoor media as well as radio. The topline impact of this is not yet very evident, except perhaps for BCCL and Jagran.
The segment that has done the least to spread itself is television. It has been one of the most somnolent on growth possibilities outside, primarily because of the troubles inside the business.
Where television has contributed is in the rise of pay revenues. The spread of direct-to-home (DTH) has meant the rise of the first robust addressable television system. It means that just like multiplexes in films, a chunk of the pay revenues collected on the ground should start coming into the industry's kitty (see Chapter two—Television—for more details).Therefore
What do these changes mean? A larger, more consolidated business will, in the long run, mean more power to the media owner and a more even negotiating hand. This signifies a huge power shift in this business. For years, the bane of the Indian media business has been its highly fragmented nature. Even if you hang on to your rate, the next guy, with a circulation or viewership close to yours will happily cut rates. So, unless you are the largest company by far in a segment—like BCCL in print or Sun in TV—it is next to impossible to charge a fair price for the audience you offer to advertisers.
Even while selling remained fragmented, most of the media buying in India got consolidated more than eight years back. About six large firms such as Madison, Group M or Starcom now buy over 60 per cent of all national media. The dice has always been loaded in favour of buyers. Now, [Page xxiii]the sellers are consolidating. As they get bigger and have a better spread of brands, the whole negotiating equation should change.
It will change also because pay revenues are on the rise. As they become a larger proportion for say magazines or television, pay revenues will give these media the freedom to negotiate harder and get better rates.
It will also mean more experimentation with content, something that you already see in the film business where pay (meaning the theatricals) drives revenues. Typically, as a market matures, ad-supported media becomes a smaller proportion of the total M&E business, like in the US. In India traditional ad-supported media—newspapers, magazines, television—has had very little revenue flexibility, therefore content experimentation has been limited. Note, that the slew of specialised consumer titles such as Vogue or Digit that charge a higher cover price. This gives them tremendous leeway to experiment—with retail, marketing and with content.
The other beacon of hope comes from broadband numbers—at 7.21million subscribers or about 36 million users in September 2009. That is roughly half of the 70-odd million Internet users in India. It finally means that entertainment products could see a lot more traction within India and outside too.
The full impact of these changes has not yet been felt on the industry's topline. When that starts happening, expect another huge round of both investment and consolidation.
Till then things will remain quiet.The Past
The Times of India (TOI) was founded on 3 November 1838 as The Bombay Times and Journal of Commerce. It was a bi-weekly edition with news from Europe, America and the subcontinent. It was shipped between India and Europe via regular steamships. The daily editions of the paper were started from 1850 and by 1861, The Bombay Times was renamed The Times of India. BCCL was established in 1913. To begin with, it was British-owned and controlled. The last British editor resigned in 1950, about two-and-a-half years after India became independent. Later, the ownership of the paper passed onto the Dalmias, one of the largest industrial families in India and later to the Sahu Jain group.
When Samir Jain took over in 1986, turning it around was an imperative since the other family businesses—New Central Jute and Rohtas Industries—were in decline. Jain tried to look at a newspaper as any other consumer product and played around with almost every element in the product mix. It started with hiring people from a fast moving consumer goods (FMCG) background, fixing value and not volume targets for his sales people and trying almost everything possible. From colour supplements, to differential pricing, to cross-brand advertising packages and price-cutting, he did everything to maximise [Page xxv]the return from each of BCCL's brands. He tried to work around and eventually shut down a host of brands like The Illustrated Weekly, Dharmayug, Dinman and Vama: magazines that were not great money-spinners, but were well-respected editorial products. It was during this time that the first advertising encroachments into editorial space started. One of the first few brands to do it, remembers one media planner, was Rasna. It ran an advertisement bang in the middle of editorial space in The Saturday Times, a colour supplement from TOI.
Many of the things Jain tried, such as differential pricing, come more naturally to the brand manager of a soft drink company than to an intellectual product such as a newspaper. The difference is that Jain did these things at a time when nobody thought that the ‘commercial’ function in a newspaper was important. Today, TOI Mumbai brings in an estimated 60–70 per cent of BCCL's revenues. It remained unchallenged for decades. No other business house—the Singhanias with The Indian Post or the Ambanis with The Business and Political Observer—has have been able to take on TOI in Mumbai. Even rivals like HT put off a Mumbai edition for over a decade before entering the market in 2005. Others like The Indian Express or The Asian Age have been reduced to mere sideshows in the city.The Big Changes
Till about 2005, the group believed in what is known as a BEDUM policy—broadsheet, English, daily, urban and metro newspapers only. However, for the last 10-odd years, small towns had prospered and advertisers wanting to reach them had been spending more on language newspapers. This, in turn, was being reflected in the valuation multiples that companies such as Jagran Prakashan were attracting (see Appendix I). That is when BCCL changed course and decided that it had to go across India for growth.
It then started acquiring language brands. In 2006, it acquired Bangalore-based publishing house, Vijayanand Printers to tap the southern market. It signed a joint venture agreement with rival HT Media to launch Metro Now and allied with Rajasthan Patrika for the Rajasthan market.
While there are no estimates, its print business remains its biggest contributor to both revenues and profits. There are three other media businesses that BCCL has found some level of success with— radio, Internet and outdoor. Radio, outdoor and the events business which operates under its listed subsidiary Entertainment Networks India Limited or ENIL brought in Rs 2.29 billion or about 5 per cent [Page xxvi]of BCCL's revenues in the financial year 2007–08. The Internet, by one estimate, brought in Rs 2.5 billion or about 6 per cent of its revenues in the same year.The Big Miss
In the summer of 1992, Li Ka Shing of Hong Kong-based Hutchison Whampoa, was trying to hawk a transponder on a satellite called ASIASAT 1. Among the people who made a bid for it were Vineet Jain, the Dalmias of the Sunday Mail, Subhash Chandra of Essel-world and Nusli Wadia of Bombay Dyeing. The satellite was already beaming Shing's Star TV into India. The magnate reckoned that if he could get somebody in India interested in buying a slot it would offset some of the costs of buying the decrepit old Chinese satellite and refurbishing it. India was the most logical choice because ASIASAT 1 was the only geo-stationary (and therefore stable) satellite broadcasting into Asia at that time. So, he sent his son Richard Li to talk to Indian companies and get the best price he could. Chandra bid the highest at US$ 5 million at that time, got the transponder and went on to launch the hugely successful Zee TV in October 1992.
The Jains lost out to Chandra because the latter's bid was reportedly five times higher than theirs. Though they had the money they chose to walk out. One former Times TV official remembers that broadcasting was viewed as a risky business at that time. Times TV used to market television shows and had also made the odd show for Doordarshan. For BCCL that was more than enough. Newspapers and news is what it understood. There was no need to dabble in this new-fangled Chinese satellite. In hindsight, it seems that BCCL should have taken the risk.
More than 15 years later television broadcasting is about one-and-a-half times the size of the print industry. And The Times Group still doesn't have a firm foothold in that business. More importantly companies born long after BCCL—such as Zee are now close to its size. At one point given Star's growth rate, it was estimated that it would overtake BCCL as India's largest media company. It did not (Kohli 2003). Times Global Broadcasting a joint venture with Reuters did finally launch Times Now (an English news channel) and Zoom, but largely the group is not yet seen as a force to reckon with in television, the way it is in radio or the Internet.1
BCCL also made a small foray in the overseas market with the purchase of Virgin Radio, a UK-based station in 2008.[Page xxvii]The Future
There has been talk of The Times Group listing or raising money through private equity, but much of it has not amounted to anything. As and when various arms of its businesses have needed money the group has had little difficulty in getting the best private equity firms to back it. It has raised money for ENIL, for its outdoor, Internet and other businesses at various points in time (see chapter on Outdoor, Events and Radio for more details).
So far, BCCL has only been tested in Indian waters. Its subbillion dollar revenue seems like a drop in the ocean compared to the sizes of other global companies. Rupert Murdoch's News Corporation alone is about US$ 30 billion dollars. That is just short of two times the size of the entire Indian media and entertainment industry. You could say that the comparison is not fair because we are talking about two different markets and companies, but it gives you a sense of how far behind we are as an industry. Much of BCCL's growth will depend on how much it can grow across media.
For now, then, the inner workings of this sub-billion dollar media giant remain a closely guarded secret.Note
1. In 2008, Reuters exited the venture by selling back its stake in Times Global to BCCL.[Page xxviii]
I Appendix[Page 335]
Note: ‘Media Junction : The Brand Reporter’ by Vanita Kohli-Khandekar, 1–15 August, 2008. This story also appeared as ‘Is Regional the New National?’ Part I and 2-Vanita Kohli-Khandekar, 4 September 2008. Available online on http://afaqs.com.
Meet Swapnil Jain. He is the average small-time businessman from Aligarh in Uttar Pradesh (UP). Jain, 23, is a director of the Rs 70-crore Pavna Group. It owns a university (Manglatayan) and also runs the local Delhi Public School. So far Jain had been using billboards and local editions of newspapers to reach out to his core target audience of young students. Last year, he started advertising on Mumbai-based Big FM, among other FM stations. The 40 per cent rise in response (compared to print) surprised Jain. He plans to take his PC brand national, doubling his ad budget from Rs 5 crore to Rs 10 crore.
A sleeper Bhojpuri hit, Kab Aibu Anganwa Hamaar, proved to be one of Hindustan Unilever's best marketing gambits in 2007. Initially, it scrounged around to reach out to consumers in SEC C, D and E categories in UP and Bihar using TV, but without much success. That is when it decided that the massive popularity of Bhojpuri cinema made it the ideal vehicle to ride into this market.
In the movie, the female lead Naina—played by Shweta Tiwari who, along with Manoj Tiwari, is a major draw in Bhojpuri films—is the strength behind the hero Tiwari's metamorphosis from a village bumpkin to a famous singer. She is referred to as Wheel Smart Shrimati in the movie. One of the songs in the movie, “mil gayili humka ek Smart Shrimati” (I have got my smart Shrimati), was carried on all audio CDs and cassettes of the movie. An in-film sequence featured Active Wheel. In typical HUL fashion, the company refused to share numbers but, “In terms of business results, UP and Bihar clocked impressive growths and are still continuing the momentum,” says Dnyanada Chaudhari, head, media services, Hindustan Unilever Limited.
[Page 336]In June 2007 the Noida-based B.A.G. films Dhamaal radio launched in 10 cities. Big deal? Yes, if you consider that Muzaffarpur, Dhule, Ahmadnagar, Jalgaon, Jabalpur, Hissar, Shimla, Patiala and Karnal are the towns in question. These are some names you may be tempted to look up in the map. Most analysts dismissed the station in Tier 2 and 3 towns such as Karnal. These hardly made for hot advertising sources, was the logic. Detractors were in for a surprise. Total ad billings for Dhamaal rose from Rs 4 lakh a month to Rs 30 lakh. Anurradha Prasad, managing director B.A.G Films and Media, expects the figure to go up to Rs 50 lakh a month this year and expects to break even in three years. “It is easier to get an audience in these towns,” says Prasad.
Small-town India is rocking. One estimate puts the value of sales from
small towns at 30–50 per cent of the total for some of the leading durables, financial services and FMCG majors. Bajaj Auto's Pulsar, Discover and Platina are brands that are meant for small towns and do exceedingly well there. Mobile phone makers too are happy. “The last two years have seen a greater drive in tier 2 and 3 cities,” says Lloyd Mathias, director, marketing, India and South-West Asia for Motorola. Before proceeding further, an important distinction has to be pointed out. This story is not about rural India. It is about non-metro India. There are 382 towns with populations ranging from one lakh to under 40 lakh. Some marketers include towns with a population of 50,000. If you consider them, there are 779 towns.
According to Hansa Research, the HPI or Household Premiumness Index (introduced three years ago) for many of these towns is higher than the national average. The HPI calculates the affluence levels after studying the demographics, ownership and consumption of products and services. It makes up for the shortcomings of using SECs to segment the consumers.
Affluence levels in towns such as Kanpur, Indore or Surat are three-fourths or more than that in Mumbai. Not only do residents of these cities buy durables, financial services and telecom products at roughly the same pace as metro buyers, they also consume media in more or less the same quantities. Internet penetration, DTH sales and C&S offtake is growing faster in small towns. This is an attractive market in terms of purchasing power, time spent on media and product consumption says a recent report (The Dhoni Effect) by Ernst & Young. All this has led to a boom in mass media options. For long, “the perception of (mass) media was limited to the seven metros,” says Tushar Dhingra, CEO, Adlabs Cinemas. Now, 1,700 digital screens, hundreds of multiplexes, over 225 radio stations, the rise of Bhojpuri, Bangla and Marathi cinema, the surge in language television and hundreds of language editions in print offer a undreamt-of range of mass media options.[Page 337]Boom, Boom
The fact that mass media is finally reaching out to these towns in various forms is helping unlock their potential. “Industry has been pushing growth in small towns but advertising had lagged. That has changed and advertising is following,” says Vikash Mantri, assistant VP, ICICI Securities. Take Future Media, which is a part of Kishore Biyani's Future Group. It offers everything from TV screens, radio stations, physical space and even a magazine to marketers wanting to reach out to the 200 million-plus consumers—claims the company—who walk into its 500-odd stores daily. In January 2007, when Future Media began selling space in these outlets, there wasn't much interest. “Six months later they started walking in asking to be shown the options,” says Partho Dasgupta, CEO, Future Media.
Over 300 brands such as ICICI Bank, Vodafone, Mitsubishi Pajero and Club Mahindra now use Future Media's TV and activation options in Big Bazaar and Pantaloon among other stores. More than 60 per cent of these brands came because they wanted to target small towns and their rising rupee power. The average deal size? Rs 30–40 lakh. Almost every media company is now plugging into this growth story. Sanjay Trehan, CEO, NDTV Convergence says that more than one-third of traffic on http://NDTV.com comes from small towns. To cash in, it recently launched http://NDTVKhabar.Com.
UFO Moviez, the country's largest digital theatre chain, has 1,080 screens across India. Of these, 80 per cent are in tier 2 and 3 cities. Since 2005, when UFO rolled out its offering, “each of these witnessed a 150 per cent jump in audiences walking in,” says Rajesh Mishra, CEO, UFO Moviez. Viewership trends on TV too reveal the non-metro pull. According to Nikhil Rangnekar, executive director, India (West), Starcom Worldwide, the viewership for news in English, Hindi and other languages has grown faster in non-metros. It is the same for cricket and reality shows.
As the acceleration sets in, several things are bound to happen across the value chain—from marketers to agencies. The metro bias within corporate India is reducing. So media and ad agencies will go where the money is.
Secondly, marketers will need to rethink everything from the idea of value for money to premium for small towns. Mathias reckons that, in the last three years, the average value for most of the phones sold in these towns went up from Rs 3,000 to Rs 5,000. Popular features are extendable memory cards and MP3 players, something only metro buyers would be interested in earlier.
Big spending in retail is now more visible. Earlier this year, the biggest bill in a Big Bazaar outlet—for Rs 2.25 lakh—came from Sangli, a town in Maharashtra with a population of 6.5 lakh. The fact that it is in a district that is one of the highest sugar-producing ones in the country is really not the point. Bill sizes are increasing. “The number of items on the bill may be [Page 338]lower in Baroda than in the metros, but the per-unit value is higher,” says Vishakha Singh, director, MaRCom, Future Media. The volumes too are bigger. Compared to 4,000 footfalls a day in Mumbai's upmarket Phoenix mills area, the Lucknow Big Bazaar gets 16,000 people in the store.The Media Platform
As the prosperity of smaller towns draws in media, it has to learn to localise more. Radio, probably, has the biggest opportunity. Bundeli music in Jhansi, Dogri in Jammu and Bhojpuri in Ranchi is what gets audiences to switch to FM. Tarun Katial, CEO, BIG FM points out that in many cases it has revived the local music industry. In Orissa, for example, ringtones and downloads have made Oriya music viable. Media agencies have to stop looking for spikes. For instance, the listening pattern on radio in small-towns is flatter, since there is little commute time which means stations can use all time bands, not just morning and evening,” says Katial.
Marketers and media buyers will admit, albeit off the record, that there is an English and Metro bias among agencies and advertisers. More than half the marketing spend decisions nationally are taken by people based in Mumbai. In essence, the ad spend directed at Mumbai is B2B (business to business) rather than B2C (business to consumer). An internal study done by a national media company shows that in 2006 over Rs 6,600 crore—an overwhelming 30 per cent—of the Rs 20,000 odd crore national ad spend was blown up on Mumbai-centric media. One marketer puts the spends on the six metros at over 60 per cent of the national spend. Even in a metro, on a really local level, this bias shows up. The cable trade is full of stories about the premium on carriage fees in Worli and Bandra in Mumbai where media buyers and agency guys work and stay. Then there are other biases. Take English. Seven per cent of the readership of Indian newspapers comes from English, 53 per cent of the ad spend goes to English, as per the statistics available. Or take the fetish for TV. “Most planners are TV babies, they don't read. They probably wouldn't even know what towns fall in the list of 50 towns,” says Sulina Menon, consultant, Brand and Media. It is to the credit of groups like Bhaskar and Jagran that the gap in the ad rates between regional languages and English has been narrowing. They have managed to repeatedly prove that reading in an Indian language does not translate into a downmarket consumer. “The problem is media buyers only decide through SEC cuts,” says Vishakha Singh, director MaRCom, Future Media. These are now beginning to tell on the business. The whole process is rate-oriented and the resulting fall in rates has meant increasingly smaller amounts for the two per cent odd that media agencies get. In a bid to become relevant they are starting to offer 360 degree solutions—direct [Page 339]marketing, digital, outdoor. That is exactly what creative agencies did sometime back, but eventually specialists grabbed that piece of the pie. And that is what is happening to media agencies too. More than 40 per cent of marketing spends now does not necessarily go through an agency, because marketers spend it directly on media that they think is relevant. Maybe it is time for media agencies to find another weapon in their fight for relevance.
What is pushing mass media into these markets? It arises from the confluence of three factors. The first is the rapid increase in purchasing power in small towns that almost coincided with the saturation in metros. Secondly, the rising below-the-line spends are going to small-town India. The third is the growth of local SMEs. In several categories such as telecom, financial services, durables, the growth in the metros has been slower than in the rest of urban India, points out the Ernst & Young Report. In telecom, for instance, subscriber growth in the four metros is growing at 57 per cent compared to 92 odd per cent in the rest of urban India. Till even a few years ago, communicating to this growing pool was a problem. Compared to a Mumbai, Delhi or Bangalore mass media options in Karnal, Surat, Sangli or Madurai were limited. The options would invariably be a local cable channel, the local DD station, the local newspaper and All India Radio. As marketers started getting desperate to reach small towns, they began using (out of home) OOH and events. Of the $6 billion that was spent on advertising in 2006, more than 30 per cent went to non-mainline (below the-line) options. Much of this was spent to reach small towns. Rising BTL spends boosted local advertising in the early part of this decade. Combined with the growth of regional brands, it triggered the growth of hundreds of local dailies and catapulted local cable stations into a Rs 800-crore ad vehicle. Media companies are yet discovering gold. “The trend of BTL going to small towns will increase,” thinks Atul Phadnis, CEO, MediaE2E, a media services firm that has done work on media in small town and rural India. There is an interesting twist to the tale. “Advertiser interest in small-towns is driven not just from Mumbai and Delhi but from regional SMEs wanting to go national,” says Katial. One of BIG FM's largest advertisers is Aligarhbased Pavna Computers. Katial points out to local brands like the Rs 250-crore Wagh Bakri Tea (it has a brand ambassador in Smriti Irani and is popular in Gujarat) or the Punjab State Cooperative Milk Producers' Federation's Verka cheese. Each spends a few crores on advertising every year. Katial reckons he gets one third of his revenues from national brands, one-third from purely local SMEs and the rest from regional (across the state). And there is the strong retail push. “Thirty per cent of our business comes from retailers. For many marketers, the decision-making has shifted to regional,” says Prashant Panday, CEO, Radio Mirchi, a part of Entertainment Network India (ENIL). Sanjay Gupta, editor and CEO, of Jagran [Page 340]Prakashan concurs. He points out that there has been a lot of decentralisation of national budgets over the last few years with dealers and local offices deciding how to spend the money. Many companies do not release ads through national agencies. His flagship daily, Dainik Jagran, taps into this trend with 32 editions and 230 sub-editions across the country.Party Poopers
It is not all rosy. There are thorns too. Two of the biggest ones are infrastructure and the rates that a media owner can charge. “Electricity is the main issue. The switchover to consumption will happen when there is infrastructure feeding into that consumption,” says L.V. Krishnan, CEO TAM Media Research. TAM's biggest challenge in large audience markets such as UP is the lack of electricity which make it difficult to capture viewership patterns (the upside is that this makes UP and Bihar great markets for radio). The second problem is getting better yields. Radio Mirchi has 32 radio stations. When it sells them as a network, the bulk rate is, say, Rs 15,000 for 10 seconds. This works out to roughly Rs 500 for a station. But when it tries to sell space on individual stations—say just Jabalpur, advertisers expect the same rate. This makes it less lucrative to sell local media to national advertisers. This is where the growth of regional and local advertising is a god send. Gupta reckons that local advertising offers better margins. A regular 100 cc ad, for example, in a regional daily would bring in 50 per cent more from a local advertiser because there is no discounting on the card rate. Earlier, even if the local advertiser paid the card rate, it was not as tempting as the national advertiser because volumes were not enough to justify a separate brand. Now they are. “The local advertiser is more demanding because he wants to see walk-ins. Once you succeed locally, you succeed nationally,” says Gupta. Remember Aaj Tak? It began as a beacon of hope for small and local advertisers. Today, it commands more than half its viewership from outside of Delhi and Mumbai, but 70 per cent of its ad revenues come from advertisers in these two cities. TV Today's CEO G. Krishnan points out that most of this ad spend is aimed at small towns. Is regional proving to be the ace in the pack for mediaowners? Some certainly do believe that it is. The biggest money spinner in Zee's stable—after its flagship Hindi channel—is Zee Marathi. Nitin Vaidya, director, regional channels, Zee Network, says that Zee Marathi delivers not just in non-metros but has been ahead of Star Plus in Mumbai (till May 2008). Many ‘small-town’ media brands have a higher audience share than national brands. It is when these brands start becoming bigger than ‘national brands’ in revenues that the fun will begin.
II Appendix[Page 341]
Note: ‘The Future of News. A Special Report’, Vanita Kohli-Khandekar. The Brand Reporter, July 2008. This report also appeared as ‘The News Business’, Parts 1,2,3 and 4-Vanita Kohli-Khandekar, July 28–31, 2008. Available online at http://afaqs.com.The Future of News
From serious headlines to analytical ones, from the sensational to serious business news, Indians are being bombarded with an almost minute-by-minute update through various media platforms. As newspapers, televison channels, websites and mobile providers proliferate, what does the future hold? Presenting an in-depth analysis of the news market. Vanita Kohli-Khandekar is an independent media consultant and writer who has worked with Ernst & Young and Businessworld, among other brands. She is the author of The Indian Media Business and teaches regularly at the Mudra Institute of Communication, Ahmedabad (MICA).The Battle for Time
If you are over 35, stretch your mind to your teenage years. Do you remember thinking that Russia and India were the best of friends; that the non-aligned movement was the biggest summit in the world? Many of those beliefs and ideas seem foolish now. Yet they came to our head and we lived by them. We accepted an ideology, a government and decades of economic inactivity since we believed that our mixed-economy, non-aligned, left-way of life was the best option. If you think India should have snapped out of the Russian bearhug faster and switched affections to Uncle Sam, [Page 342]you're doing it again. You are reacting to what you read, hear and watch on news.
News is to the mind what infrastructure is to the economy—a crucial network of information, analysis, opinions, discussions, arguments and visuals. These ostensibly form the backdrop of our lives but are actually active ingredients in everything we do. If the network of roads, railways or electric supply is weak, it will hamper your ability to work efficiently. If it is good, you will hardly have an opinion on it.
Similarly if a democracy does not have a free news market with lots of debate and discussion the state of everything from institutions to government suffers. The way we think, live, work, the choices we make, could destroy us. All it takes is a look at our past or that of the former communist countries or current dictatorial regimes to realise that.
That is why a free news market is important. It is a non-negotiable fact of a working democracy. Coming as we do from a controlled news environment, a free news market is a concept alien to us. More often than not, it is equated with the freedom of expression. But there is more to a free news market than that. It is also about the freedom to do business—without capital, technology or other constraints. In a sense, the Indian news media has been freed only over the last three to five years, though technically, it has been ‘free’ since Independence.
Partial Press freedom came in 2002 when FDI was allowed. It became completely open in 2005 when foreign institutional investment was permitted. Though TV was given a free hand in 1992, capital and other controls meant that we did not really see a free news market till 2003. The internet is largely free and so is the mobile phone. Radio is still hamstrung by regulations that forbid news broadcasting but if a pending Telecom Regulatory Authority of India (TRAI) paper becomes policy, that should change soon.
The effect of this freedom is resonating across the country as news media options go through the roof—67 news channels in 11 languages, 99 million copies of newspapers sold daily and hundreds of websites vie just for the privilege of giving us news. (See We Are Loving It!) And they are battling for a scarce commodity—our time.
This, in turn, has made information, opinion and analysis available to everybody, not just a few English-speaking people. More importantly, it has given a voice to large tracts of India. Notice the ease with which Indians face TV cameras now, whether to show their anger at something or to take part in reality shows. As the prime accused in the murder of his daughter, Dr Talwar and his family have been using the news outlets to tell their side of the story. That is exactly what his compounder Krishna's family did when he was arrested. Ten years ago, we would never have seen or heard of them after they had been arrested. “What you are seeing is years of [Page 343]repression coming out in aggression,” says Anuradha Prasad, managing director, B.A.G Films and Media (the company's first 24-hour news channel was launched last year).Eyeballs and Mindspace
Sixty seven news channels in 11 languages, 99 million copies of newspapers sold and hundreds of websites vie just for the privilege of giving news. This chart shows the time the target audience spends on news. Ad revenues are directly dependent on that.
This freedom has come with its own set of problems—that of tabloidisation, sensationalism, of selling out to advertisers and the blurring of ethical boundaries long held sacrosanct in the media business. (See The Dumb Blonde is Here to Stay) Does that mean that it should be regulated? That we need a content code with committees and sub-committees? No, we don't. What we see is a phase in the evolution of a free news market and reacting to it at one point in time and locking ourselves into regulation will be disastrous. “Right now, the situation is chaotic, this will eventually balance out, maturity will come,” says Prasad.
“I don't think that any punitive action is needed against news channels. The government would like to control them because they show government shortcomings,” says Sanjay Gupta, editor and CEO, Jagran Prakashan (it is part owner of IBN7, a Hindi news channel). Jawaharlal Nehru had once famously remarked that even a bad press was acceptable but that it should be free and self-regulated. The UK is a great example of a country where the tabloid and the serious survive and make money and each operates within the same regulatory framework. In India, there is already a good programming code in place; all the news media industry needs to do is apply it well.
The thing is, the industry is too busy coping, enjoying, moping or freaking out on the growth and so are consumers. This, then, is the perfect time to ask where is it all headed. This is the right time to look at the future of news.
After more than a month of research, about 40 interviews and reading tomes on the news business worldwide, one thing is clear. The biggest debates in the Indian news market currently are about the amount of news, its ability to bring in fair returns for investors and the quality of it.
Two facts need to be hardwired into our minds before we begin the discussion. One, mass media dominates in India, a high volume market. The focus of this survey will, largely, be mass media vehicles for news. The online world is limited to 55 million people, even if it is the world you and I occupy. TV reaches 575 million people whereas newspapers are read by over 300 million. So, for those looking for buzzwords like user-generated content or WAP and VAS, this survey will disappoint. It sticks to India's [Page 344]reality. Two, for too long, the dialogue in policy matters has been limited to the middle-class English speaking population. The Centre for Media Studies (CMS) data shows that in August 2007, a whopping 57 per cent of the stories in national newspapers originated from Delhi. Some of top newspapers and channels are based in New Delhi, so the city is the de facto lens through which any event is viewed. There is a joke among most analysts that there is a Delhi-Mumbai corridor of English speakers beyond which any discussion on India barely matters. The fact is that only 100 million Indians speak English, while 500 million speak Hindi and its various dialects. The other 500 million-odd are split between several languages. Just as a free news market is a democratic axiom, so too is a heterogeneous one that reflects the pulls and pushes of all interest groups is one as well. The news market now evolving is pushing the business of news to a point where the debate on national issues is truly national. If it manages to do that, the free news market we see now, would have achieved something that decades of control could not—involve all Indians in any discussion of their future.We are Loving it!
Can you hear the babble?
It is the sound of an entire country going jabber jabber. India has over 575 million TV watchers, about 302 million newspaper readers, 55 million surfers and 1.2 million bloggers. Look at it another way—as a country we buy 99 million copies of newspapers everyday, making it the second-largest newspaper market in the world, after the US. At 115 million TV sets and 275 million mobile phones we are among the top five TV and cellphone markets in the world. We have 67 news channels, arguably more than any other country in the world. If you total up the average across newspapers, news TV and online, Indians spend an average of 50 minutes a day consuming news.
Last year, advertisers spent Rs 12,000-odd crore to reach them in those 50 minutes, according to data put together by Starcom Worldwide. Add in subscription and news is a roughly Rs 16,000 crore market. That makes it the second largest media business in India after entertainment—in audience share, topline and now investor interest too.Why Do We Have so Much News?
“There is an influx of funds because news is elastic; there has been no fatigue factor yet. Have you seen any channel close down?” asks Arnab Goswami, editor-in-chief, Times Now. “The growth in ad spends on news genre has outpaced the growth of the TV advertising pie,” adds Raj Nayak, CEO, NDTV Media. Newspaper advertising has grown below industry average, but on a base that is ten times that of TV news. Size, democracy and innocence make for a seductive cocktail of reasons why the Indian [Page 346]news market rocks. Now stir in a lot of investment (Rs 1,500 crore since January 2007 and still counting), low entry costs, a declining global market for news and you know why we are hot. However, as the rush into news increases, almost everybody has seen a jump in operating costs, though margins haven't declined yet. The level of competition and the state of the economy (oil prices rising, inflation and the threat of GDP growth slowing down) suggests that consolidation is about to happen. There is usually a strong positive correlation between GDP and advertising growth; if one slips, the other will, too. A bulk of the news media in India is advertiser funded, so if GDP slips, expect advertising growth to decline.A Lot of Fun
For now though, the fundamentals of the news business on both the supply and the demand side, seem strong. According to IRS data there are 359 million literate Indians who do not read a publication. Television as yet penetrates only half of India and at 55 million surfers websites haven't even scratched the surface. The possibilities for growth in unheard of markets, with say a Bhojpuri news channel or a Bengali lifestyle one, are as yet unexplored. (See chart, The Entry Points, in The Prediction.) To these building blocks add a couple of qualifiers.
The first and biggest is a functioning democracy. Indians love to debate, argue and generally drive each other crazy. And as they move from having one newspaper and one TV channel they are discovering the fun of arguing across the country on scores of television channels, newspapers and on the internet, in about 20 odd languages.
The second is a complete lack of cynicism, so far. We are just discovering what it means to be media rich. Unlike the west, we are not a sated or bored audience but a credulous and avid one. Literacy is prized and the ‘buddhijeevi’ or ‘intellectual’ is a man who can debate or discuss anything. For decades the debating was limited to coffee houses, dhabas, schools, colleges or at village panchayats. “News is information, even village gossip is news,” says Sanjay Gupta, editor and CEO, Jagran Prakashan.
For long, our thirst for information and for an outlet to voice our opinion remained just that—a thirst. Till as recently as 1990 a few newspapers defined both the news agenda and the texture of the news market along with the state-owned Doordarshan and All India Radio. When satellite television first hit India in 1991, CNN brought a whiff of what independent news could be, and then came BBC. By 1995 websites such as http://IndiaWorld.com, Rediff and, later, Indiatimes came into play. India's first private news channel, the Hindi/English Star News was launched in 1998. With economic liberalisation, the opening up of news and information too had begun.
[Page 347]The big news event however happened in 2000 with the coming of Aaj Tak. This spunky little Hindi news channel from Aroon Purie's Living Media, changed the rules of the game. Its 24 hour news anchors made news accessible and available to more than 500 million people who understand Hindi or its various forms.Life after Aaj Tak
Aaj Tak's success (it is still the leading news channel in India) made one very important point. It showed that the language of news, just like the language of entertainment, had to be as local as possible. This coincided with several things.
The first was the loosening of controls over foreign capital in the newspaper business. Two, technology had made it easier to launch more editions in print or more channels with less bandwidth on TV. The third was the growth of several new categories of advertisers who found news suitable for their products. These are advertisers whose products have a higher male skew or need their involvement in the purchase decision. Automobiles, telecom, financial services were (and are) the fastest growing categories of advertising on newspapers, television and on websites too. “News is very important for us. A lot of our products, such as LCDs, PCs and mobile phones are targeted at males,” says L.K. Gupta, chief marketing officer, LG India. About three-fourths of LG's ad spend goes to “media vehicles that are news disseminators,” says Gupta.
Advertisers like LG and Tata Motors, led to the doubling of the overall ad pie from just under Rs 10,000 crore in 2003 to Rs 22,000 crore in 2007. This in turn has meant a tripling of the TV news ad spend and a 60 per cent growth in spends on newspapers during this period.The Money Argument
The youngest newspaper on the block, Sakshi, a Telugu newspaper that launched with 23 editions earlier this year, has had a great beginning. Designed by Mario Garcia, the man who designed Mint—among other newspapers—Sakshi aims to be more contemporary and younger than leader Eenadu. It has, for instance, three pages of business against Eenadu's one, everyday. This means 32 pages for Sakshi against Eenadu's 30 on most days, says K R P Reddy director, advertising and marketing, Sakshi.
It takes roughly Rs 100–150 crore to launch a newspaper. The rapidity of launches, (Sakshi is one of about a dozen this year) raises the obvious questions on the viability of these ventures. “Today most newspaper investment [Page 348]happens for valuation, I doubt whether they are serious about the business,” thinks Shravan Garg, group editor, Bhaskar Group of Publications.
Besides advertising, there is very little that news media can get from other revenue streams. Except for the Rs 4,000 odd crore that newspapers are estimated to make from circulation revenues, there isn't much coming by way of pay revenues. Internet, mobile, or overseas—any of the other sources of revenues-are not yet significant for most companies (except for Bennett, Coleman & Co Ltd or BCCL). Then there is the threat of rising newsprint prices slated to touch $1,000 per tonne by end of the year, up from just under $800 a tonne currently.
Yet, it is newspaper companies that most analysts and investors are comfortable with. Most of the listed and unlisted newspapers make operating margins of close to 25 per cent or more. So in spite of the expansion, the bottomlines from existing businesses are still healthy. Also the fit with online and mobile is clearer and more direct for newspaper companies, so investors like them.
It is in television news that investors should start getting concerned. The way the business is structured, there is complete dependence on advertising. “I wonder why new players are coming, what is their proposition, do they have a bottomline or only a topline,” quips G. Krishnan, executive director and CEO, TV Today Network. “In TV news right now people are just taking advantage of the availability of capital,” answers Vivek Couto, executive director, Media Partners Asia, a Hong-Kong-based media consulting firm. The fact is that operating costs for television news have gone through the roof. Just the cost of distributing a channel went up from Rs 15 crore in 2006 to Rs 30 crore in 2007 because the largest form of distribution, cable, is log jammed with new channels. The only figures available are for the three listed broadcasters, of which two, NDTV and Network18, are now diversified media companies not pure news broadcasters. “No one is making money from TV news in India,” says Couto. (His firm recently did some analysis in this area, though he did not share the figures with us.)
A shakeout therefore is imminent, especially if the market slows down. However, unlike many other countries which are homogenous markets, in India within each genre and each language 2–3 channels will survive. The ones to survive will be the ones who enter the maximum number of small Rs 50–100 crore niches the market offers, from city channels to lifestyle or education news.
The immediate issue however is not the growth potential of the market, but the threat of regulation. Thanks to news television's wild jump into tabloid news and newspapers' into money for editorial deals, there is a real possibility that a nasty content code will hit the business soon.
That, as the next piece argues, will be more dangerous that a fall in ad spend growth.[Page 349]The Dumb Blonde is Here to Stay
Try this. When you are at a particularly dull dinner party next, just mention the words ‘news channels.’ Then sit back and watch the conversation that erupts across the room. You will hear words like ‘Sensationalist, trivialisation, tabloidisation, invasion of privacy… .’
Welcome to the party. The abundance of news outlets in India (See previous story) comes with its own set of social, ethical and moral issues that any serious analysis of the business cannot ignore. How much is too much? In the name of accessibility and relevance are we really destroying the news ethic? Why does ‘dumbing down’ happen in the first place? Will the tabloidisation of news fall to levels where advertisers will start walking out to avoid being associated with a negative content genre. Will investors get put off? What about the viewer—the fact is, he is lapping it up. Every time Rakhi Sawant, a celebrity whose only talent is the one she has for hogging publicity, is on air, the show beats everything else on viewership. It is the worst pieces of programming that the public most wants to watch, so why blame the media?
Alternatively, the question to ask is this—are we getting blinded by television news channels and ignoring the good things that an abundance of news across all media has done. It has helped bring to the forefront issues which would have never made it on to the news agenda. News outlets have become the new haven for people who don't have a voice. From activist Binayak Sen's arrest to farmer suicides to Aarushi's murder, the news-media not just TV news channels—has forced authorities to sit up and do things. As viewers flock to TV news, it has forced newspapers and magazines to focus on real issues and real people, not just intellectual babble about V.S. Naipaul or Paul Theroux (the English print media's obsession with Naipaul is something!). For the first time in years the whole issue of editorial being sold in newspapers, the unhealthy dependence on advertising in both print and TV that leads to unethical practices, and the blurring lines between editorial and business are being discussed openly.
The question is how far news media should be pushing. Can the now very public ridicule for television news help the government to force through changes such as the content code that could harm both the news business and democracy in the long run? If the future is the internet or mobile, (which is as mass as TV), should these also be subject to the same controls? One of the foundations that make this business robust in India is democracy. Does the freedom of expression come without responsibility? Does it translate into the freedom to do bad reportage, lousy analysis and post whatever you want to on the net in the name of user-generated-content?
No it doesn't. Just like other freedoms, the one to express yourself has to be earned and it is a freedom that not all news outlets have earned, yet. At [Page 350]the heart of a profitable (and free) news business lie credible brands that people trust and go to again and again. The BBC, The Economist, CNN, Guardian, The New York Times are all profitable, yet trusted brands. They don't sell editorial, they don't sensationalise news. It is their content and that from good mainstream news brands that drives the traffic on most aggregators and search engine sites, says research from Poynter's The State of the News Media. Of the top 20 news sites in the US, 17 are from old mass media brands. So whether the future is more digital, less print, more mobile less TV, being able to trust a headline blindly, is a real imperative in this business. That doesn't go away with a change in media vehicle.
You could argue that The Sun is still the most popular newspaper in the UK, not The Guardian or that people prefer ITV and Channel 4 not BBC for their entertainment. That is exactly what will happen in India. So the Mumbai Mirror will survive along with Hindustan Times and.India TV along with CNN-IBN. The tabloid (as in popular) and the serious both have a place because there are people who want them. In any market in the world, the tabloid is the more popular form and by definition has a larger audience and ad spend. The serious news media usually has a lower audience share but commands a higher rate.
There are historical and structural reasons why news is tilting towards the sensational, especially on TV (more of this later). But most are just signs of an evolving industry.What's Happening?
There is no doubt that TV news channels lead the ‘tabloidisation’ brigade. An analysis of content on the top six national news channels by the New Delhi-based Centre for Media Studies (CMS) shows that entertainment programming increased almost three times the level in 2006 while politics plummeted from 23 per cent to 10 per cent. Sports and crime saw big jumps. Development and environment issues got a fraction of programming time across the three years of the study. TAM data backs that. Nonnews programming was 39 per cent of what news channels broadcast this year, up from 25 per cent in 2006.
“Everyone is trying to make a quick buck,” says Bhaskar Rao, chairman, CMS. “Hindi news channels have turned into cheap entertainment/reality channels dishing out content which is not fit for family viewing and can seriously disturb the social fabric of our country,” says Raj Nayak, CEO, NDTV Media.
Newspapers, it would seem are, less guilty of ignoring the ‘larger good’. So politics, for some reason seen as more serious news, remained at the top of the news agenda for the top four national English papers, according to [Page 351]CMS. The fact remains that newspapers are especially weak when it comes to advertiser pressure and deals that are not in the reader interest. So does another fact—it was newspapers that started the change.When Did it Start?
‘Prime minister visits Yugoslavia.’ Many years back this was the typical headline in Indian newspapers. This was the time when editors treated readers with contempt and readers treated editors with reverence.
That was till 1986 when a young man named Samir Jain took over an ailing Bennett, Coleman & Co Ltd (BCCL). In an era when no one questioned what editors did, Jain, now vice-chairman of BCCL, tried to look at his paper, The Times of India like he would have at a consumer product. He played around with everything-people, pricing, content and format—to maximise returns. In a few years BCCL became India's largest and most profitable media company. At Rs 2,789 crore in revenues and Rs 760 crore in operating profits (2005–06), it still is.
That is really when the notion of news started changing. Almost every major newspaper followed Jain's lead in some form or the other. The content started becoming more accessible, less ‘intellectually snooty,’ and cover prices fell, in some cases drastically. The movement picked up speed with liberalisation.
As entertainment channels took off in the early nineties, reading time went down. Newspapers struck back with more colour, more supplements and lower prices, and in much of this Jain took the lead.
Today, 10 years after the first private news channel was launched in India, the entire notion of news has been turned upside down. That raises questions about the definition of news.So What is News?
News is about relevance and “What is relevant has changed,” says Ravi Dhariwal, CEO, BCCL. Arnab Goswami, editor-in-chief, Times Now, points out to stories like Sunita Williams or the controversies around the recent India-Australia series. Earlier these would never have made headline news even if everyone was dying to know more. In the old days (let us call them the Yugoslavia days), consumers did not have a choice.
Between 1990 and now, four things changed—their numbers, patience, time and choice.
Of these, choice is the most critical to understand what is happening. All media is booming simultaneously in India. In the US, newspapers [Page 352]took off first, then radio, then television and later the internet. So each had time to evolve. Most of Indian media has been liberated only over the last ten years. This has meant over 200 TV channels, thousands of websites and dozens of newspapers and magazines all jostling for time and attention at the same time. As a result while the total time spent on media increased in this decade (it is now going down), it got split between more and more vehicles. (See charts on the time spend on media in opening essay). This coupled with liberalisation, rising purchasing power, stressed out lives and all the other accompaniments of a prosperous India changed everything—the notion of what, when, why, how and who, of news.
News now, “has to do with a greater degree of interconnectedness and
relevance in the world,” says Dhariwal. The biggest manifestation is the space that news outlets, even in regional languages ones, now give to international views, opinions, business and entertainment.
“People don't attach the same glamour to politicians that they do to sportspersons, entertainers or business people. The new generation is unwilling to accept people in authority, but are willing to accept successful people,” says G. Krishnan, executive director and CEO, TV Today Network. Sakshi, a Telugu paper launched in Andhra Pradesh this year with 23 editions, offers three pages of business, against the one page that leader Eenadu does. This would have been unheard of in a language paper till even ten years back.
Arpita Menon, vice president, Nine Dot Nine Mediaworx, puts it well. If you plot the centre of a concentric circle of issues that news vehicles carry then 15 years back politics was at the centre with lifestyle, crime or entertainment, the lurid stuff at the fringes. The target audience was one mass of Indians assumed to be interested in a common list of things that editors decided on.
Now, the target audience has splintered in dozens of clusters. And the centre of the concentric circle for each cluster, young middle-aged, old, is different. So young people want education and career guidance from newspapers, they want ‘time-pass’ from television and a social life on the internet. Older people want more politics and serious news and so on and so forth. Finally, the heterogeneity of the market is reflected in the way news is changing.Why News Standards are Falling
That news is becoming more accessible, more heterogeneous and relevant is wonderful. However, “A disproportionate amount of time is spent on things that can't be called news,” says Goswami. Many point out that it is Hindi channels that are more sensationalist. That, says Krishnan is not [Page 353]correct. “The viewership numbers in other languages are so small, that it doesn't show up,” says he. Even Tamil and Telugu news channels get a lot of viewership for dumbed down programming.
But really why is this happening on a scale where there seems to be a backlash in the making? Why are news channels showing fake godmen making predictions or MMS clips of a 14-year old murder victim? Why have things degenerated from accessibility to sleaze?
We came across several reasons, which work together or individually to make the Indian news business what it is.
One, is the “TRP trap,” says Rao of CMS. India is an avowed one-TV market. Indian families believe that TV watching is a family activity and getting a second TV will isolate younger members. (See The Brand Reporter May 16–31, 2008). So news television vies for the same audiences that entertainment or sports does. To this add the pressure of 24-hour news which stresses the best brands. In the US, cable channels which run 24 hour news are the ones accused of sensationalising while the quality of news on broadcast channels, which have intermittent news, rarely draws any flak. Now factor in sixty seven 24-hour news channels all fighting for every fractional increase in rating points. The result is what you see. Ditto for newspapers which try to get the largest mass of people possible with buckets or kettles as gifts. So what they get is gift junkies, not readers.
Two, even with low ratings it is possible to capture the high impact of the viewership of niche channels, but at 7,200 meters for 72 million cable and satellite homes, most analysts say the sample for measuring viewership is too small. Media buyers' obsession with numbers makes it an uphill battle for a niche brand to prove that the 30 minutes even 10 users spend on it, is high-quality time. Chandradeep Mitra, president, Mudra Max agrees that, “the buying community is to blame for what is happening.” Since advertisers, marketers or media owners, seem unwilling to pay higher fees for a bigger sample, metrics become a limiting factor.
The third factor, is the lack of revenue flexibility. In TV pay revenues remain a distant dream because pay TV platforms like digital cable or DTH are some way from reaching critical mass. On analogue cable, the widest mode of distribution, most news channels are afraid to go pay for fear of losing viewers and therefore ad revenues. In newspapers the debate on raising prices has been going on since Samir Jain came. A newspaper costs anywhere between Rs 15 and Rs 30 to produce but it sells for Rs 1–3. Therefore there is tremendous pressure on making money through advertising and the abject dependence on it. It is routine for advertisers to pull out campaigns from papers that critique them even a bit. “That explains,” says Tehelka's Tarun Tejpal, “why there has been no single corporate corruption story in newspapers in the last five years.”
Four, operating costs across the board are going up even while capital costs have fallen. In dailies, newsprint, marketing and content costs have [Page 354]gone up the highest. In TV it is distribution and content costs that have doubled over the last couple of years. As a result, “the depth of coverage has reduced,” says Krishnan of TV Today. Against every four hours earlier, TV news is now refreshed every half hour. That means more anchors, more reporters and a wider coverage so that the chances of getting a fresh story increase. In newspapers beats are becoming redundant; anybody is put onto any story creating a sea of people who know a little bit about everything.What Does it Mean?
“This massification would have happened earlier if controls had not existed, so this is a natural progression,” says Bala Deshpande, senior director, ICICI Venture. True. In entertainment TV, the demand for differentiated content has come now, after 15 years of free private television. Whether we like it or not, in spite of the freedom to do so Indian audiences are not switching off the Babajis and the lurid stories. Only when news audiences are sated and sick of the popular form of news will they look for news outlets that offer serious analysis or cutting edge talk shows. Even then a larger proportion of the audience will prefer the popular form of news.
What are the implications of this massification? It may mean that the advertiser who comes to news because there is a male skew and high involvement is going away. L.K. Gupta, chief marketing officer, LG India says that he hasn't decided because he can't see the evidence. “If news channels go more mass we will have to cherry pick what suits our TG (Target Group),” says Ambi Parameswaran, executive director and CEO, Mumbai, DraftFCB-Ulka. He illustrates his point with cricket. A brand has to choose the tournaments and the channels best suited to its needs.
Mitra of Mudra Max, reckons that the male skew is coming down in newspapers. This makes news more attractive to a larger set of advertisers. For instance, ever since Aaj Tak changed tracks three years back to become more mass, the Amba Sariya kind of advertiser has been replaced by the more premium Gili Diamonds type. FMCGs or Fast Moving Consumer Goods such as soaps and shampoos, which would have never touched news, are now regulars on news channels. For the serious news advertiser the options are limited—BBC, CNN-IBN, CNBC, NDTV 24×7, business newspapers and magazines.
In the long run, the players who diversify beyond news in other genres, geographies and media are the ones that will emerge healthier, more credible and profitable. They are also the ones investors lust after. The few broadcasters that are refusing to massify such as NDTV and Network 18 are the ones with a diversified portfolio. NDTV Hindi is seen as losing [Page 355]share because it is the only channel that does not have a crime show. In newspapers, though, this is not necessarily true. The most serious and credible papers like The Hindu or Business Standard are the ones whose record on diversification is not as good.
There are other ways of bringing credibility back. One is reduce the dependence on advertising. “The reader is reluctant to pay Rs 3 for a paper, but pays Rs 3 for a one line SMS,” wonders A.S Raghunath, a media consultant. His point is that media owners have to move towards charging a fairer price for their product and improving the advertisers' perception of the audience that they offer.
The other is better metrics and research. Since most research agencies come from markets where newspaper circulation is declining, they have very little incentive to invest in newspaper research and measurement and make it more real-time. That would apply to TV research too. Media owners need to get together to invest in measurement tools that make the sample more robust and reduce the ‘TAM town’ bias or the ‘readership’ bias.
As the money that rides on news keeps increasing, news outlets will have to get their act on both the quality of content and metrics in order. That is the only way to avoid attracting the regulators' eye, losing advertisers and putting off investors. It will also safeguard the future of a free news market.The Prediction
MyToday offers a bouquet of services on mobile phones. These include news, stock markets, cricket and health among several others. The user has to opt for this free service and he gets headlines with a text ad at the bottom of the screen. Since it was launched in 2006, MyToday has hooked 3.5 million subscribers.
News is the second most popular service at MyToday after cricket with more than one million subscribers and is one of the highest revenue earners. More than 75 advertisers such as Akai, Birla Sunlife and Shopper's Stop have used MyToday which is on its way to becoming a very profitable service. At a rate of 300,000 new subscribers every month it will hit 10 million in a year, says Abhijit Saxena, CEO, Netcore.
The Mumbai-based company is the brainchild of Rajesh Jain. The man who launched one of India's first portals, http://IndiaWorld.com in 1995 (later sold to Sify) has been an evangelist of sorts for the online medium. Why then did he choose the mobile for his next big venture?
“Internet growth in India has been somewhat stymied because of penetration,” says Jain. The mobile he reckons is a much more versatile device, with a large penetration. Before you splutter that mobile internet is just [Page 356]a fraction of the total mobile population of 275 million, rest easy. Jain is keen on exploiting a service that is low on bandwidth consumption (a huge limitation in India) and is easily available—SMS. “So far all usage of the mobile media has been around ringtones, wallpapers, things that you create pull for,” says Jain. The result has been an industry where the content creators have no connect with the consumers they serve. “All the VAS (value-added services) operators sit behind the mobile operators,” says Jain. His idea was to speak direct-to-consumer.
Jain's insight on what can and cannot work in India is crucial to understanding where the news business is headed. If there is any lesson to be learnt from the tabloidisation of news, especially on television, it is that the imperatives of doing business in India will finally get you. The business plan that your consultants draw up could be grand. However, all news media will have to operate within the limitations of India-electricity being the biggest one. Assuming that this will not change drastically in the near-term, the question we asked ourselves was which media vehicle has the hardiness to survive, penetrate and get big numbers—the mobile and radio stood out. (See Is growth limited by).Who Will Lead?
Radio is out for now. Even if the government allows radio operators to offer news, most don't see themselves becoming full-fledged 24-hour news broadcasters. They will at best offer an hourly or daily bulletin on their stations. In large tracts of India, newspapers and television will continue to analyse what the mobile phone alerts you on. This could be through SMS or if bandwidth permits, through clips. In the metros and top 20 towns, the internet will play in combination with the mobile phone. It is not as if the mobile and radio will take over all news dissemination. They will probably have an increasing share of news consumption and therefore revenues, especially pay.
That is the media vehicle part, what about the content? From whatever one has read so far, it is clear that there are two distinct needs from news. One is the demand for commodity news on what happened, when etc. This is the bread and butter of the news business and across media the pressure on this will keep increasing. This will by definition be a high-volume, low-margin, tabloidish game.
It could mean more sting operations on TV, more user generated ‘content’ on the net or reams on Saif Ali Khan's affair with Kareena Kapoor in print. This is a market that can be dominated by any media that can reach faster, quicker and has a fun take on anything that happens. This kind of news will largely be ad-supported and subscription will have a smaller role to play.
[Page 357]The other is the demand for an editorially led product that makes sense of the babble. The kind that consumers are willing to pay for to read or watch its sharp analysis and viewpoint, a bit like The Economist. This will be a smaller, very profitable market. It will by definition be a somewhat verbose product, so this market will be dominated by newspapers, magazines and websites. The odd BBC or CNN-IBN could be part of this market, but TV will have a limited role to play here. This could be a blend of ad plus pay revenues, though considering the texture of the Indian market.The Specialised News Market
Bala Deshpande is a news veteran in a special way. In 2000, long before this genre was under scrutiny, ICICI Venture, where she is senior director, picked up a stake in TV Today Network (Aaj Tak). When it exited after three years, it had made a fivefold return on the investment. She thinks that “news is becoming a commodity especially on the electronic front.” L.K. Gupta, chief marketing officer LG India, one of the biggest advertisers on the news genre agrees: “Two years back 75 per cent of our spends went to newspapers, now less than 60 per cent goes to them because we can't target sharply enough.”
The answer, says Deshpande, is sharper target definition that gets into psychographics, reading/watching behaviour, time spent et al. From that perspective, “Mint has done a good job,” she thinks. The business paper launched by HT Media in 2007 has the texture of a daily news magazine and a deliciously non-businesslike design. In spite of being the fifth English business paper in a market of barely 100 million English speaking people, it has certainly created a lot of buzz.
This is change number one. In markets that are well-penetrated by all media vehicles, where a lot of news brands compete for the time of a jaded audience, say the seven metros or the top 20 towns, it is more specialisation and segmentation that will work. Some of this is already evident in both print and television. Chandradeep Mitra of Mudra Max points out to gadget shows, education supplements, foreign news supplements, auto [Page 359]shows and so on. Since single television homes could limit segmenting, one way of doing it is by looking at day parts more innovatively. Mitra says that, “In prime time, news is becoming entertainment; off prime time it is sharply segmented.”
The commodity news will exist here but perhaps will grow faster on newer vehicles, say the mobile phone or in car radios. But from an ad spend perspective it will be a falling yield game, unless the numbers are massive. To really make money from commodity news, a brand will have to be among the top two in terms of reach.
News, the commodity
The second trend—of deeper penetration by geography, language and by being more local-will see more action. “News channels' viewership seems to be moving away from metros to non-metros,” says Nikhil Rangnekar, executive director, India (West), Starcom Worldwide. He points out that in Hindi news viewership (prime time 9 pm) the growth was 16 per cent in non-metros, as against only a 10 per cent growth in metros. In the same time band, English news channels have grown by 20 per cent in viewership in non-metros and stagnated in the metros. The same is true for regional news channels that have shown a higher growth rate of over 30 per cent in non-metros, against 20 per cent for metros.
Media owners know this. Of the 67 news channels in India 23 are in Hindi, 13 in English, while other major languages have anything between 2–5 channels each. Many were launched in 2007. Earlier this year Business Standard, The Economic Times and Dainik Bhaskar launched business dailies in Hindi. Business Standard launched one in Gujarati too. Then there is a Hindi business daily due from the tie-up between Dainik Jagran-Network18. These launches, more than anything else, finally acknowledge that India's economic growth is not limited to English speaking metros.
This is true for the Internet too. Sanjay Trehan, CEO, NDTV Convergence, says that more than one-third of traffic on http://NDTV.com comes from small towns. “The next level of growth is going to come from tier 2 and 3 cities,” says Trehan. To cash in on it, the company recently launched http://NDTVKhabar.com. “We very firmly believe that the future growth of India is through small-towns. That is why we have embarked on private treaties,” says Ravi Dhariwal, CEO, BCCL. Private treaties refers to the picking up of equity in small and medium scale enterprises (SMEs), the largest growing category of advertisers, in exchange for media. BCCL has signed on over 100 companies under private treaties.
SMEs in fact are the reason why ad spend growth has kept pace with the growth of regional editions of newspapers. The numbers and spend [Page 360]of SMEs has been rising. And it is to tap into this advertiser who wants to reach out to his audience in a local context that you will see the trend towards localisation increasing.
The free market for news will eventually connect up all of India and get everyone jabbering about issues, a feat a controlled news market could never achieve. That will make for a better functioning and robust democracy. That alone should be a good enough reason to cheer this babble along.
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About the Author[Page 374]
Vanita Kohli-Khandekar is an independent media consultant and writer. Currently she is a contributing editor and columnist for Business Standard. She has served as Manager in the media practice at Ernst & Young and as Associate Editor with Business World and Intelligent Investor (now Outlook Money) which she helped launch. She was a guest lecturer at Xavier Institute of Communications (XIC), Mumbai and also teaches at the Mudra Institute of Communication, Ahmedabad (MICA).