If the ongoing slowdown, which began in the second half of the past fiscal, had left the print industry in its throes since the third quarter of 2008, speculations were rife that 2009 would be a tougher yearâ€”a thought seconded by the Pitch-Madison Media Advertising Outlook 2009 released in January, which had predicted a flat growth for the industry. However, there are more surprises for the big brother of the media industry in store, as we enter the second half of the year.
However, first the good news. There are clear indications that the economy is slowly getting out of the woods with a stable government in place at the Centre and an improved global economic outlook, coupled with the forthcoming festive season, which traditionally sees the maxim media spends.
According to the numbers from the Pitch-Madison Media Advertising Out- look 2009: Mid-term Review, the print industry is set to see one of its worst times ever in as many years in 2009 with a negative growth of 8 percent.
The advertising revenue of the industry is projected to decline by a massive Rs 786 crore to Rs 9,039 crore, from the high Rs 9,825 crore it grossed up in 2008. This is a negative 8 percent decline from the flat growth we predicted in the January 2009 Survey.
However, it seems that the worst is over for the industry as it enters the second half on a positive note and is projected to improve on its bad showing in the first half (January-June period) when it could mop up only Rs 3,207
crore, which is a 32 percent decline in revenue mop-up. The Mid-term Review projects that the industry would grow by 14 percent to corner Rs 5,832 crore in H2, taking its overall ad pie share to Rs Rs 9,039 crore for the full year.
The Survey is divided into two parts: a review of H1 and an outlook for H2. H1 proved tough for print industry as it witnessed a massive deceleration of 32 percent. Though here too, the regional and vernacular players werenâ€™t as badly hit as the English media that bore the major brunt of the slump.
H1: An Inadvertent Hit
First the numbers. In fact, the industry fared much worse than what we projected in the beginning of the year. Instead of a flat growth that we had projected early this year, the industry in fact de-grew by a hefty 32 percent during the January-June period of 2009, just cornering Rs 3,207 crore in ad revenues, against Rs 4,009 crore we had projected.Â Â During H1, our January survey projected a dip of only 15 percent from the 2008 figures.
Admitting that the slowdown has really hit the print industry, the Hindu group managing director N Murali says that â€œthe downturn in advertising, which started in November 2008, continued unabated into the January-June 2009 period. February was the only near-normal month due to a spate of government advertising just before the elections. The decline was particularly sharp, around 25 percent from the previous period January-June 2008, which clocked a very high growth.â€
Murali goes on to add that â€œH1 was very challenging with the twin problem of high newsprint costs and declining advertising revenues. Topping it all was the fact that newspapers were forced to offer heavy discounts without increase in volumes. As a result, we were pushed to massively reduce page numbers to tide over the newsprint cost.â€
Taking stock of H1, India Today group publisher Ashish Bagga admits that the period gone by was bad.Â â€œWhen compared to last year, revenue accumulation has been challenging so far.â€ Explaining the reasons for this decline, he notes that a lot of advertisers have moved away from the print media recently. â€œAdvertisers are still spending but on those media vehicles that help them deliver their marketing objectives better, which is being done through innovations and customised solutions being offered by media firms.â€
Talking about the magazine space, which claims to have found the slowdown an opportune time, Outlook group president and publisher Maheshwar Peri also admits that the year started off far below expectations. â€œThis year we started at the bottom and things remained more or less same till June, although it is getting better now,â€ PeriÂ elaborates.
Echoing similar sentiment is Bombay Samachar director and INS president Hormusji Cama, who states, â€œbusiness was down in H1. Now itâ€™s picking up but nobodyâ€™s come to the previous levels.â€
Blaming the poor showing by the print media to the slowdown and the irrational rebates that media companies gave to advertisers, Malayala Manorama senior general manager for marketing Verghese Chandy points out that the problem began when large publishers started offering irrationally high discounts to clients. In fact, Madison Media chairman Sam Balsara too cites discounted card rates as one of the reasons for the plight of the industry.
â€œThe ad rates came down by 20 percent, but still advertisers remained ultra-cautious. Unfortun-ately, the industry is un able to compete effectively with television to attract FMCG spends. Print needs to find new advertisers,â€ says Balara.
Regional Press Bucks Trend
However, the regional media is a happy lot as it has been mostly insulated from the perils of the slowdown which hit the English biggies badly. For instance, the largest Hindi daily Dainik Jagran, has been a shining star in the gloomy days. Dainik Jagran chief executive officer Sanjay Gupta says though certain traditional advertisers spent less, the higher spend by the education sector has made up for the losses from the former. â€œOverall, the year has been good for us so far,â€ Gupta beams.
On similar lines, Nai Dunia chief executive Vijay Chhajlani too says, â€œNai Dunia is doing better on a YoY basis. We might not look exactly like the industry as we are on the growth path and have been expanding.â€
Likewise, Amar Ujala marketing president Sunil Mutreja too says that in fact the past six months proved to be good for regional publications. â€œThe Q1 was very good for us, while the January-March quarter was reasonably good compared to the quarter before that,â€ he explains.
Lokmat director Bharat Kapadia too echoes the same sentiment when he says he doesnâ€™t believe H1 was a worse phase for regional media. â€œThe slowdown affected our growth percentage but it isnâ€™t that weâ€™re going down. There has been growth and weâ€™ve to seek newer ways to get the revenues up.â€
Why the Steep Fall
A fleeting look at the last six months shows that there have been numerous factors which have led to this shocking negative growth. Though the print media still holds the lionâ€™s share of the ad pie, the pie itself has shrunk considerably. The global meltdown has major advertisers spending considerably less. Consequently, many newspapers struggled to fill the space and also the advertisers turned hard to please. On the cost side, there was a massive jump in newsprint price since the past two years, and following the boom years, media companies went on a hiring spree which led to a big leap in their wage bills. But as revenue streams began to dry up, they were forced to take drastic steps like hugely slashing the number of pages, increasing cover prices and also going for pay cuts/layoffs etc. For instance, early February, media was awash with reports that the Times group was busy issuing diktats on not just freezes on any kind of costs but also a rigorous exercise of â€œrightsizingâ€ or downsizing. Not just the Times group, many media houses took the path of retrenchment and cost-cutting to tide over the crisis. It appeared as if the print media is struggling to fill the space even after offering discounts to the advertisers.
Some of the key players jacking up the print industry were the new entrants like realty, modern trade, financial services, airlines et al. But when the global economy, led by the collapse of the Wall Street titans, went into a tailspin, these sectors were hit badly, forcing them to severely cut back on their marketing budgets.
The case of the airlines is special as they were afflicted with a double whammyâ€”the exorbitantly high fuel pricesâ€”oilÂ Â touched $147 a barrel last Julyâ€”on one side and falling bookings on the other.
The realty sector, one of the biggest spenders on print till the global recession started to take its toll in the country by October last, caused a steep fall in ad revenues of the print industry.
Airline advertising, which were one of the reasons for a surge in advertising revenues, showed a dip of 17 percent during the January-April period over the same period previous year. Likewise, tourism, which pushed the ad volumes up last year, proved a decelerator this year as it showed a hefty downward spiral of 38 percent vis-Ã -vis 2008. And this made the January-May 09 phase harsher for the print industry than what itâ€™s already witnessing since Q4 of 2008.
Surprisingly, the confectionery sector saw pumping huge amount of money into advertising by as much as aÂ massive 107 percent in Q4 of 08 from the year-ago period. Similar was the case with the beverages sector which spent 19 percent more during the period. All these changed the outlook of many advertisers, forcing them to cut down on their ad budgets and this ended with the print industry growth index slipping downwards.
Thus a cursory look at the past six months shows that almost all the publications saw their revenues declining barring regional players who boast of being the least hit by the slump.
H2: Likely Resurgence
Going by the Survey projection for H2, it seems that the worst is over for print, as the revised Survey forecasts a 14 percent growth over H1. The industry is likely to gross Rs 5,832 croreâ€”a tad higher than our January projection for H2 at Rs 5,817 croreâ€”driven largely by the higher likely spend during the forthcoming festive season. Also, it can be noted that on the marco economic front there has been good news flowing in with almost all the industrial sectors reporting better than expected net profits in Q1 of this current fiscal. Similarly, the global outlook too looks improving faster than expected. Topping all these is the stable Union government which has been announcing a slew of stimulus measures to boost consumption and this the economy in general.
However, this doesnâ€™t imply that the industry will ride out of the storm and will end up 09 in the green.Â According to Balsara, print isnâ€™t showing any serious sign of revival, which is dependent on the revival of BFSIs, realty, retail and travel and tourism. But I am optimistic that these sectors would soon come out of the troubles.â€
However, industry leaders are bullish about H2. For instance, the just concluded hustings, which saw tens of hundreds of crores being spent on media campaigns, has seen the industryâ€™s bottomlines improving. Bagga of India Today notes that â€œH2 is already underway and there is a definite upswing in revenues.â€ Supporting positive outlook, he says, â€œmore advertisers are realising that staying away from the media is a short term saving but a loss in the long term for the health of their brands.â€
Hinduâ€™s Murali is also optimistic but a bit cautious. He observes that â€œI am guardedly optimistic that advertising is likely to pick up by Septem- ber-October though modestly from the ensuing festival season.Â However, it will take at least a year for advertising volumes to reach close to earlier levels. The only silver lining is the sharp fall in newsprint prices since April, the benefits of which will accrue to newspaper houses only after a lag of a few months.â€
Manoramaâ€™s Chandy too says the same. â€œFor us at Manorama group, the situation has improved from April mainly due to the festivals in Kerala. From June, it has even started showing a clear positive trend. The second half has to be much better, especially with the forthcoming festival seasons,â€ he points out.
Referring to the growth trends in 2009 as the year approaches H2, Bagga says, â€œsince April thereâ€™s been a smart recovery, with June recording the smartest recovery.â€ And he attributes this to the elections which brought in aÂ majority government. â€œSince then we seem to be on a firm path of recovery.â€ He goes on to add that while the election provided the first impetus, the festive season will definitely prove to be the turning point for the industry.
When it comes to regional players, who have not been impacted by the downturn, are very bullish about H2. Dainik Jagranâ€™s Gupta hopes that â€œthe coming six months will be even better. The budget has also given a lot of spending power to the common man. We budgeted ourselves at 15 percent last year and we will be able to reach the same this year as well.â€ Amar Ujalaâ€™s Mutreja sounds extremely positive when he states that â€œthe next six months will be very good and there will be no problem of ad revenues for us.â€ He adds that â€œin regional publications, I see a growth in both volumes and in ad rates. I am confident of clocking over 20 percent growth this year.â€
Outlookâ€™s Peri too sounds positive about H2: â€œif we are to plot both the years on a graph, it was a falling line last year. But this year, it is a rising line.â€ Confident of staying positive in H2 he adds, â€œas far as H2 is concerned, it would definitely be better than the first half in terms of ad revenue.â€
It looks as if the major players in the media industry have put their acts together to recover from the worst. Media players, national or regional have been focusing on the efficiency as the advertisers have become demanding. Though the scenario seems to have picked up as per the Survey the reality is yet to be faced by the industry. We hope there are more reasons to cheer for the industry in the coming months.