Print Media Industry Analysis

Submitted by ArnabPaul(29007) CharuBatra(29068) Prakash.P(29121)

In this document we discussed about Print Media sector. Its history, present status, market penetration, growth potential (both national and global context), revenue and distribution model, threats.

BIM Trichy ) [Type the phone number] [Type the fax number] 3/14/2013

A BRIEF HISTORY OF PRINT MEDIA

The Chinese were the first to invent the art of printing. They made wooden blocks to print letters. This was started during the period of the Tang Dynasty in 600 AD. The oldest known surviving printed work in a woodblock is a Buddhist scripture of 684 AD. It is now exhibited in a calligraphy museum in Tokyo, the capital of Japan. The first paper mill in Europe was set up in Spain in 1120. Block printing came to Europe by 1300. It is believed that Johannes Gutenberg of Germany had developed printing technology around 1439. Printing technology came to India in 1556. It was the Jesuit priests who brought this technology to our country. The first book printed in India was in Portuguese language in Old Goa. It was Doctrina Christa by St. Francis Xavi. It was a British who started the first newspaper in our country. On January 29, 1780 James Augustus Hickey launched the Bengal Gazette. It has another title Calcutta Advertiser. It was popularly known as Hickeys Gazette. The first issue of the paper had two pages and later it was increased to four pages. Its size was 35 cms x 24 cms. Following in Hickeys footsteps in 1780, the second newspaper was launched from Calcutta The Indian Gazette. The Calcutta Gazette which started publication in 1784 and the Bengal Journal which was launched in 1785 were the third and fourth newspapers to come out from Calcutta. All these four earlier papers were published in the English language. The first language newspaper in India was started in Kannada language, the Kannada Samachar. Towards the end of the 19th century, many social reformers began actively campaigning for radical changes in Indian society. The reformation of Hinduism, the move for abolition of sati and efforts to encourage widow re- marriage were some of the major reforms. Inspired by these great leaders, many newspapers were started in different parts of the country. All this led to a boom in the newspaper industry in India. Now Total number of newspaper registered as on 31sMarch 2012 is 86754[Source: Registrar of Newspaper of India]

DIFFERENT CATEGORIES OF PRINT MEDIA AND MAJOR PLAYERS in INDIA Print media is one of the form of mass media. The contribution of print media in providing information and transfer of knowledge is remarkable. Even after the advent of electronic media, the print media has not lost its charm or relevance. Print media has the advantage of making a longer impact on the minds of the reader, with more in-depth reporting and analysis. . It includes newspapers, weeklies, magazines, monthlies and other forms of printed journals. But, Print media generally refers to newspapers. In the below table different categories of print media and major players in those categories are listed.

Categories Dailies(National) Dailies(Regional) Business Dailies Weeklies and fortnightly and monthlies Entertainment Technology related Others

Players TOI, The Hindu, DainikJagran etc Deccan Chronicle(AP),AnandabazarPatrika(WB) Business Line,The Economic Times, Financial Express etc Vanitha, Karmakshetra, Outlook etc Filmfare Magazine IT Voice Femina(Women),Frontline(News) , Outlook,Hard News(Pol),Tehelka(Pol),PratiyogitaDarpan(competition)

PRODUCT LINES AND COMPLIMENTARY AND SUBSTITUTES PRODUCTS Complimentary good for print media is advertisements as it gives high revenues. Substitutes for print media are radio, television, e-papers, online newspaper, door to door campaigns, exhibition, and pamphlet distribution. Product description and range of products Newspapers uses column of varying width. Some have six columns per page, while others have eight or nine which affects the size, shape, and costs of an ad. Newspaper space rates vary with an advertisers special requests, such as preferred position or colour.

INDIAN ENTERTAINMENT & MEDIA INDUSTRY AND PRINT MEDIA The Indian M&E industry grew from INR 728 billion in 2011 to INR 820 billion in 2012, registering an overall growth of 12.6 percent. While, 2012 was a challenging year for the industry, with some improvement likely in the global economy in 2013 and Indias real GDP expected to be in the region of 6.1% to 6.7%, the prognosis for the Industry looks much better going forward. Given the impetus introduced by digitization, continued growth of regional media, upcoming elections, continued strength in the film sector and fast increasing new media businesses, the industry is estimated to achieve a growth of 11.8 percent in 2013 to touch INR 917 billion. Going forward, the sector is projected to grow at a healthy CAGR of 15.2 percent to reach INR 1661 billion by 2017. Television continues to be the dominant segment; however, the report records strong growth posted by new media sectors, animation/ VFX and a comeback in the Films and Music sectors on the back of strong content and the benefits of digitization. Currently, India is only the 14th largest E&M market in the world with industry revenues contributing about 1% of its GDP. On the other hand, China is already the third-largest market in the world and is likely to surpass Japan over the next decade to become the second-largest market worldwide, after the US. Print is expected to post a moderate combined annualized

growth rate (CAGR) of 8.7% to touch Rs 34,020 crores from the 2012 level of Rs 22,410 crores.
Revenue2010 (billion INR) 294 178 74 88 14 13 10 8 Revenue2011 (billion INR) 340 190 116 96 16 14 12 11 10 Y-o-y growth (%) 15.7% 7.2% 57.2% 9.4% 10.7% 10.8% 25.0% 32.6% 30.9% Contribution to the industry (%) 42% 24% 14% 12% 1.9% 1.7% 1.5% 1.4% 1.3%

Segment Television Print Internet access Film OOH Radio Music Gaming Internet advertising 8 Source: CII, E&M outlook 2011

At an overall level, driven by increasing subscription revenues and advertising, the television segment is expected to retain its position as the largest E&M segment in the country, with an estimated CAGR of 15% till 2016. The robust growth projected in internet access till 2016 (given the current under-penetration) will enable it to overtake the print sector by 2013, in terms of industry revenues, and become the second-largest segment in the Indian E&M industry. However, unlike many mature markets, the print segment is expected to grow at a healthy CAGR of 9%, over the next five years, and reach a market share of 17% in 2016 to touch Rs 34,020 crores from the 2012 level of Rs 22,410 crores. . The importance of the E&M industry in the global arena is expected to rise further, with India being the fastest growing in the top 15 E&M countries. However, the potential for growth in this sector is significantly higher, and will require the industry to focus on collaboration and innovation to achieve this vision, by driving improvements in advertising and consumer spend, infrastructure and policies. Similarly, the size of the advertising industry in India is estimated to be Rs 36,200 crores. Print media continues to account for a larger share at 44.7% followed by TV at 38.2%. By 2017, it is estimated that the size of the Indian advertising industry would be Rs 63,000 crores with both print and TV having a share of 38-40% each. Digital advertising is estimated to post a robust 32.1% growth to reach Rs 8,720 crores from the current level of Rs 2,170 crores. Last year, the Indian print industry witnessed moderate growth. Newspaper advertising witnessed higher growth than subscription, though it was tempered by the moderate economic climate. The magazine industry saw a marginal growth in 2011(subscription). The industry has been slowing down for the past few years and the economic slowdown affected it further. Its market size is estimated to be 20.4 billion INR in 2011 as compared to 19.6 billion INR in

2010. This sluggish growth can be attributed to the loss in readership of regional magazines as per readership survey. Traditionally, the vernacular publications have been widely read. The print advertising was also affected by the unfavourable macroeconomic conditions such as rise in oil prices, rupee depreciation, high volatility in stock market, rise in inflation and the overall global economic slowdown. Drop in spends on advertisement was witnessed in most major categories in 2011 & 2012. MARKET PENETRATION:
All India 2009 R2 2010 Q1 2011 Q2 Est. Individuals ('000s) 861922 867025 889070 Press(%) 38.6 38.4 39.1 Urban 2009 R2 2010 Q1 2011 Q2 Est. Individuals ('000s) 272032 274053 283795 Press(%) 56.7 56.5 57 Rural 2009 R2 2010 Q1 2011 Q2 Est. Individuals ('000s) 589890 592972 605275 Press(%) 30.2 30.1 30.7 Source: IRS sample size of 2.56 Lakh HH (1406 towns and 3352 villages)

Readership survey indicates that the vernacular dailies did not fare too well in 2011. The top 10 language dailies have witnessed a cumulative drop of more than 5 lakh readers in the first quarter of 2012 as compared to quarter four of 2011. Most of the top 10 dailies saw a drop in readership. However, these markets continue to hold potential. The coverage ratio (average percentage consumers reading more than one newspaper) of southern markets is significantly lower than the Hindi speaking states, indicating potential to increase reader base. E.g., in states such as Tamil Nadu, Karnataka, Andhra Pradesh and Kerala,on an average only 20% to 30% of consumers read more than one newspaper whereas in Hindi speaking states of Bihar and Jharkhand, this number is as high as about 40%. This indicates that print players can target existing readers in these states to expand their reader base. In addition, many regional markets have low penetration among their literate population, highlighting the potential to capture new readers in these areas.
State West Bengal Maharashtra Karnataka Andhra Pradesh Tamil Nadu Source: PWC Report 2011 (%)Penetration among literate population 15 20 20 25 25

FRAGMENTED INDUSTRY The regionalism aspect is clearly visible in the newspaper sector. The print media is further divided on the basis of the languages. Of the daily newspapers, about 46% are vernacular, 44% are in Hindi and 10% are English. Hindi and vernacular language newspapers offer a local and regional flavour to their readers. The content and circulation of English-language newspapers, on the other hand, are largely focused on the primary urban centres. Approximately 10% of the population in urban areas read English-language newspapers, compared to a readership of only 1% of the population in the rural areas.(Source: IRS 2011) In contrast to this, Hindi-language newspapers have a proportionately larger readership in rural areas, in addition to their strong presence in urban areas, with a readership of approximately 15% and 5% of persons in urban and rural areas, respectively. The newspaper industry is regionally divided, with existing players enjoying strong brand loyalty. For e.g. Times of India follows strong brand loyalty in Mumbai and it was difficult for Hindustan Times to enter Mumbai. The newspaper industry has relatively high entry barriers due to the strong brand equity of existing players. Also, existing players have strong control over the distribution network, making it difficult for new players to enter.

DETAILED INDUSTRY ANALYSIS (Based on IRS Data, ABC Report, PWC Report and FICCI-KPMG Report)

GLOBAL TREND Over all global trend is declining for newspaper.(ABC report analysis in the excel sheet) In developed countries like Japan, USA, UK, China etc this trend is prevailing. This is because of the shift towards online for information. But in developing countries like India people still depends on print media like newspaper. This is the reason most of the top 10 newspapers showing steady growth in terms of circulation and moderate growth in readership. The global print industry is suffering from lower circulation and is seeking digital revenue to sustain existing business. This is more prominent in countries with high broadband penetration, where readers have easy access to information on the internet. Popular news websites are drawing traffic and boosting digital revenue. Key trends in the global market are as follows: i. Newspaper advertising moving from print to digital

In the western world, with growing availability of free online news content, many newspaper readers have switched to reading news on the internet. Newspaper websites are among the most widely visited on the internet. Also, online newspaper readers are younger and more affluent than their print counterparts, offering advertisers a more attractive demographic profile than in print. As a result, newspaper advertising is going digital. In North America (USA and Canada), newspaper print advertising declined by 9% in 2011 while newspaper digital advertising grew by 8%.

Date Jun-10 Sep-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12

No. Of users(in mn) 1966 1971 2095 2110 2180 2336

%growth 0.2543235 6.2912227 0.7159905 3.3175355 3.04367

2267 3.9908257 2405 2.9537671

Jun-12 Source: Internet World Stats

India perspective: Most newspapers today have digital presence in the form of websites and e-papers. Major players have also rolled out mobile applications and apps for tablets (e.g., The Times of India and HT Media). They have started digital archiving of their content. However, newspaper advertising is still dominated by print. As digital editions gain popularity, they are expected to get a larger share of newspaper advertising.

Literacy Press Internet Source: IRS

ii.

2010Q4 2011Q4 616807 639705 342703 350347 24329 34409

%growth 2012Q3 3.712344 656259 2.230503 353338 41.43204 42322

%growth 2.587755293 0.853725021 22.99689035

Social media encouraging readers to be active consumers of news

The global economy is already smitten by the phenomena of social media. As more time is being devoted by online users on social networking sites to connect with other users, express views and suggestions, readers have started playing the role of news contributors as against their traditional role of news consumers. India perspective: In line with the global scenario, social media and network are occupying more online time in the country. Facebook alone accounts for more than a fifth of the total time spent online by users in India. Many newspapers have content that can be shared by users on their social media pages, besides having interactive pages on different social media sites.
Findings from the analysis: (y-marginal growth, rve growth, g-steady growth, dgexceptional growth)

Key factors: DNA is fastest growing English Daily followed by The Hindu Prabhat Khabar is the fastest growing Hindi Daily Sakshi is the fastest growing local daily

 The Week is the fastest growing English magazine Samanyagan Darpan is the fastest growing Hindi magazine Karmasangasthaan is the fastest growing local magazine Overall dip or very slow growth (in circulation)both worldwide as well as in India. But, newspapers related to employment and current market are surging.( Karmakshetra, Karmasangasthaan) Gk related magazines like Samanya Gyan Darpan etc growing. Till 2011Q3 it was not listed with IRS. But, Pratiyogita Darpan showed a oscillatory movement. Throughout the 2010 it had a steady growth. Which continued till the 3rd quarter of 2011.After that it showed a negative growth i.e. less readership till 1st quarter of 2012.Then, it had a positive growth in 2nd quarter? And, finally again a negative growth in 3rd quarter of 2012. Contrary to the belief, magazines like India Today losing their reader base. Magazines like Cricket Samrat proves the adverse effect of television on print media. It constantly losing its reader base though cricket is the most popular sport in India. Because, television provides all the information. Only during the second quarter of 2011, it showed an exceptional growth which can be justified as the world cup effect. This also illustrates cyclicality in the industry. Women magazine Vanitha tops the magazine readership list. But, it losing its reader base regularly. Female empowerment might be the cause. Today, more women are coming outside and doing job. So, they dont have much leisure time as earlier. TOI is showing extraordinary circulation growth, but, readership data showing marginal growth tendency. The reason might be that people who take TOI are sophisticated (considering the price).Hence, they dont like sharing. So, individual purchase has gone up even though no. of readership remains almost constant or decreasing slightly. So, from here we can conclude that people in urban area dont like sharing of newspaper. But, reverse is the case with Dainik Jagran. It is reducing its circulation. But, still its readership data showing marginal increment. This means more people in rural area /small city share their newspapers. .

REVENUE MODEL There are two basic sources of revenue for the Print media 1. Advertising. 2. Circulation.

The circulation revenue recovers only a part of the cost of producing a newspaper(or other print media). The bonus of making a profit after all costs is on the advertising revenue. If circulation falls, advertisers shy away from using the medium. On the other hand increases in circulation to take reflect on ad revenue takes time. Newsprint account for about 70% of the cost of production, but any increase in circulation does not decrease per unit cost. Also any marginal increase in advertisement revenue due to increase in circulation is not apparent in the short run. Total advertising spend across media was INR 327.4 billion in 2012. In light of continued economic slowdown, advertising revenues saw a growth of 9 percent in 2012 as against 13 percent in 2011 and 17 percent in 2010. Print continues to be the largest beneficiary, accounting for 46 percent of the advertising pie at INR 150 billion.

Revenue
28% 72% AD Circulation and others

4% 5%

AD Revenue 2011
6% Television Print Radio Internet OOH

41% 44%

Source: Pwc

Source: MOSL

Total print media industry revenues are estimated at ~USD4b, of which ~30% comes from circulation and the balance ~70% is based on advertising. During CY06-11, the industry posted revenue CAGR of ~9%.
250 200 150 100 50 0 CY05 CY06 CY07 CY08 CY09 CY10 CY11 54 48 85 100 108 110 126 139 60 67 69 Circulation revenue(INR b) Ad revenue(INR b)

64

65

69

Source: FICCI-KPMG

Historically, print companies have expanded by increasing penetration and keeping the cover prices affordable, thus resulting in relatively lower circulation revenue growth. However, over the past few quarters, the industry has been in a consolidation mode and circulation revenue growth for most print companies has been higher than the ad growth.
25 23 20 15 13 10 5 0 CY06 CY07 CY08 11 8 7 2 CY09 3 CY10 10 11 8 4 19 18 15 15 Circulation revenue Total Print revenue Ad revenue

CY11

Source: FICCI-KPMG

While English is the largest segment in terms of ad revenues and accounts for ~40% of print ad revenues with ~18m daily readers, Hindi is the most popular language with ~65m daily readers (but only ~30% of print ad spends). Vernacular markets account for the balance ~30% of ad revenues.
180 160 140 120 100 80 60 40 20 0 FY10 FY11 FY12E FY13E FY14E 48 53 39 34 28 34 38 40 44 45 50 Vernacular market 44 Hindi market English market 64

Language-wise breakup of print advertising revenues (INR b)

58

58

Source: FICCI-KPMG

Advertising growth remains highly correlated to the overall GDP growth, especially in national advertising. The slowdown in FY09 and recent slowdown in FY12/13 had a direct impact on

advertising growth for print companies. With the anticipated recovery in economic activity, we expect aggregate ad growth for print companies to claw back to FY12 level of 10-11%. Fig. GDP growth

GDP Growth
15 10 5 0 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13E 4 8.1 7 9.5 9.6 9.3 6.7 8.4 8.4 6.5 5.2

Fig. Ad & Circulation Revenue Growth

30 25 20 15 10 5 0 FY08 FY09 FY10 FY11 FY12 FY13E FY14E FY15E
9 11 7 7 11 6 3 11 11 12 11 9 11 8 23 25

Ad revenue growth(%) Circulation revenue growth(%)

Source: FICCI-KPMG

VALUE ADDITION Competitive advantage by identifying issues and providing fast resolutions or actions related to: Raw Paper Inventory. Real-time visibility of paper inventory in warehouses, track inventory cost and availability and evaluate of risks/what-if-analysis and their impact on inventory. Paper Procurement. Optimize planning, supplier short list, and price negotiation, with on-demand information about past performance, costs, and the current state of available paper and demand. Paper Quality and Faults. Alert and informed about faults such as tearing and miss- prints during set up and production. Match faults to paper type, grade, roll and supplier.

 Sell waste/defect paper. Identify opportunities and track metrics related to selling waste paper (e.g. for recycling). Production Performance Track printers production activity by facility, shift, printer and type of paper. Identify faulty paper, human errors, production quality and efficiency.

Key drivers for improved advertising revenue performance: 1) Stability in GDP growth: Advertising sentiment has been impacted by sharp correction in the overall GDP growth, leading to cost cutting across businesses. As the GDP growth stabilizes, the ad spends are expected to normalize, resulting in higher ad growth. 2) Expected easing in interest rate cycle: Expected decline in interest rates would be positive for print heavy categories like real estate, automobiles, consumer durables and BFSI, which together constitute >30% of ad revenues for the print media sector. 3) Continued growth traction in local advertising: Retail advertising continued to be strong even during the down-cycle, underscoring the resilience of growth in tier II/III cities. For DB Corp, which enjoys the leadership position in many regional markets, national advertising is estimated to have declined by more than 10%, while local has likely continued to grow in double digits. During 1HFY13, local advertisements contributed 67-68% of ad revenues, compared to 57% in FY10/11.

Advertising Spend: Advertising spend in the industry was estimated at 279 billion INR in 2011, contributing approximately 35% of total E&M revenues. However, advertising spend as a percentage of GDP is quite low when compared with other major economies, indicating a high potential for growth. For instance, these proportions are 1.1% and 0.9% in the US and UK respectively, visa-vis 0.3% in India. Even in China and Brazil, advertising spend as a percentage of GDP is higher than India, at 0.5% and 0.6%, respectively Consumer Spend on Print Media: Consumer spend on entertainment and media contributes a majority share in the total industry revenue, and has been increasing at a fast pace over the last few years. This growth has primarily been driven by rising disposable incomes and the propensity for households to spend

on entertainment activities. The key consumer spend segments include television subscription, film and print media, which together contribute 94% of the overall consumer spend category.

Consumer spend(2011)
3% 3% Television 19% Print Film Music 17% 58% Gaming

Source: PWC

DISTRIBUTION MODEL The newspaper sales involve distributing highly perishable products under severe time constraints. A delay may result in the wastage of enormous costs. Hence, newspaper printing press uses a highly time critical channel for the distribution where the risk of the delay is borne by each participant in the channel as and when the goods are transferred to him/her. Even a slip of a few minutes can create a cascading effect and the value of the newspaper diminishes (because the vendor/hawker will not pick up your newspaper and deliver it, if he is getting late by waiting for your newspaper to arrive).

PRESS

DEALERS/DISTRIBU TERS

DEPOTS

VENDORS/HAWKE RS/BOOK STALLS

AGENTS

The printed newspapers have to be dispatched to various distributors across the region. Transportation is normally through private contract carriers within local area, public transport in case of longer distances and through couriers in other cases.

The newspaper distributor has the rights to distribute the newspaper in his area. The revenue of the newspaper distributor is based on a commission on the sale of every newspaper. The circulation is normally through salesmen appointed and salaried by the distributors, who in turn pass it on to hawkers. Hawkers, vendors and book stall owners are the last link of the supply chain before newspaper reaches readers. The hawkers' remuneration is also normally based on the commission system and is generally the highest in the entire supply chain. Responsiveness and efficiency play an important role in newspaper distribution channel. Responsiveness includes supply chain's ability to respond to wide a range of quantity demanded (due to demand fluctuations) and meet short lead times. On the other hand efficiency is the cost of making and delivering the newspaper to the readers. Profit sharing throughout the distribution channel is also critical. Different newspaper agencies use different models for profit sharing, though they are bound by upper limit of commission at each level by the Audit Bureau of Circulations (ABC). The successful and efficient channel is the one where all the levels within the channel (namely, the printing press, transport, vendor, distributor, hawker) are committed to the timely delivery of the newspaper. For this, the newspaper agencies compete for the commission per copy absorbed at each level. Maintaining such competitive commission structures is one of the main issues faced by newspaper agencies in their respective distribution channel.

Operations of a Typical Newspaper Firm:

AD PRICING METHODS Linear Modular Pricing Linear modular pricing maintains a pricing format similar to that used with line rate pricing. Regardless of the ad size, the total amount owing is calculated by multiplying the line rate by the line count. The Difference with modular pricing, however, is that the advertiser has only a select number of adsize options from which to choose Line Rate and Module Rate combination At times, a modular newspaper may opt to continue offering linerate options if there is a strong resistance from advertisers to the transition to modular units. A modular/linerate combination (termed MALs, defined as Modular Agate Lines) uses module sizes while still pricing its general rate cards with standard line rates. This approach might encourage customers to use a fixedsize format while still using line rates as the reference price point. The

strength of this option is that it moves to modular while still allowing customers who want unique sizes to have access to them Optimization curve to generate module curves An exciting and unique approach, modular curves require a paradigm shift to think beyond standard line rates. Each module is now treated as if it were its own product, with its own price points that cater to specific advertiser segments and behaviours. The key to understanding which modular curves work best is to understand how your advertisers purchase today, and anticipate how they will purchase with the new modular formats. SWOT ANALYSIS:

This is the over all analysis of the industry. Though in the developed countries it is showing declining growth rate ,but, in developing countries like India it is still growing. At the same time, it has the threat of consistent rapid growth of e-media. Through the analysis it is clear that still there is a huge proportion of population that is untouched by print media. Hence, with proper infrastructure and planning there is a scope of growth in the coming future for this industry.