Why television will thrive and print media will struggle in 2013

“You know things are not okay if, on a New Year’s Day, The Economic Times  frontpage has negative news. This pink worthy runs on the belief system that optimism is good for the economy and the markets (and thus its own advertisers). It goes out of its way to tell people the good news, and buries the bad on the inside pages. But today was different. “New Year starts with a number of reasons to worry”, said the lead story in Mumbai,” writes Firstpost’s editor-in-chief R Jagannathan this morning.

Jagannathan’s prognosis is not good news for the media industry. A slowing economy (real growth at 5.4 percent) almost always sees corporates slashing their advertising and marketing budgets. With no silver lining in sight, the media business in India is set for a difficult year ahead.

In short, there will be less advertising budgets chasing the same advertising inventory, implying, immediately, pressure on margins. TV, though, is different – we might actually see inventory shrink, thanks to TRAI’s proposal to put a cap on commercial time.

Let’s take a look at how the year ahead will pan out for different media. To begin with, let’s take a look at the macro picture as measured by IRS (Q2 2012). Press has shown a CAGR (percent) of just 0.9 percent from Q4 2011 to Q2 2012 – the worst performing of all media. TV has grown by 5 percent, C&S by 11.7 percent, Radio by 1.9 percent, Cinema by 9.4 percent. And digital, the darling of consumers, continues the high-speed growth – showing CAGR of 34.8 percent for the period under consideration. Today, we discuss TV and newspapers.

Let’s begin with TV, the largest contributor to advertising expenditure.

TV

It’s going to be an interesting year for TV – and TV will have it much easier than print thanks to two developments. The first is the cap on commercial time, a policy decision which will see a shrinkage in available inventory. For genre leaders, this is a boon, as advertisers want to play ‘safe’ and park their money on channels and programs with a proven ability to deliver viewers. So, for example, in the Hindi general entertainment channel genre,  for Colors, STAR Plus and Sony, each of whom guarantees at least 200 GRPs per week, it could result in advertisers queuing up to buy time, which should result in higher yields on premium, big ticket programming. The flipside, though, is that stragglers in each genre might see their already low yields going down. The muscle that the leaders have will get multiplied by a successful roll-out of digitization, which could dramatically increase revenue from subscribers and automatically easing pressure on the need for advertising revenue. So 2013 will be a good year for the leaders in TV – and a tough one for the rest.

Pay channels, again, will be gainers. Digitisation will allow channels to charge significant premia on exclusive, premium content, as is being experimented by Kamalhasan with the pre-theatre release of his new film on DTH platforms at a premium price of Rs. 1,200. We will see such premium pricing for movie premieres, for big-ticket sports programming and for exclusive events. A significant increase in subscription revenue will allow TV airtime salespersons to play hardball with media buyers for the first time in over a decade. I’m going to watch this battle from the front row.

The biggest gain, interestingly, will accrue to high-quality special interest and niche channels. Thanks to the low number of people meters, channels with niche viewership end up being significantly under-measured – and digitization will change the picture significantly. First, it will allow all households subscribing to be reflected and measured and, second, as a consequence, to demand higher prices for their advertising time.

Print: Newspapers

This is a mixed bag. With the total print readership flat and the ad revenue shrinking, this was never going to be an easy year. Whatever readership growth is visible for the category as a whole comes from new markets, with the mature markets flat or negative. As a result, I see the industry operating different strategies for new and mature markets.

In the mature markets, pressure on both margins and volumes will force the newspapers, finally, into looking at cover price revenues to generate income. English, especially pink, newspaper cover prices in the metros will go up. Simultaneously, I see pagination in the main papers coming down, as it is in this section that the advertiser demand is most vulnerable. Supplements will increase across the country, as the low ad rates (justified by low print runs) will continue to attract smaller advertisers targeting niche geographies or readers. Leaders in mature market, thanks to their domination in respective markets, will be able to keep ad rates steady, but it is difficult to see any increase in 2013.

In the new markets, cover prices will stay low, as will the advertising rates, thanks to the competitive environment. This will continue to be a loss making segment of the trade. Examples will include Times of India’s new editions in Kerala and Vizag, and the new Bengali newspapers launched by ABP and BCCL. It’s win-win for reader and advertiser in these situations, and bleeding for the publisher.

We will also see the shrinking of the editorial teams in all small towns, with the bulk of the content coming from a central office, and only city pages being made in the city of publication. Technology allows smooth and low-cost transfer of data, making many in small towns working on ‘national’ pages, business pages, sports pages and entertainment stories redundant. This will also change the mathematics in the business, as people cost in these editions will come down. The papers will bleed, but not bleed badly.

What merits close watching is what the larger newspapers do on the digital front. All large newspapers have a mature digital presence, and consumption of content on the web is increasing exponentially. The problem is the monetization of this readership, which few in the world have managed to find a solution to. In 2013, I see at least BCCL making a big play in this area, perhaps creating a digital only, semi-paid offering. In the English market, as readers embrace (especially the new, young readers) consumption on digital devices, the paper, in a physical form, is under threat. The flat readership, as measured by IRS, is perhaps a proof of the migration to digital.

The explosion of tablets is a factor that will weigh on the minds of think-tanks at all media houses, but particularly in the print media houses.

“A recent study undertaken by Manufacturers Association of Information Technology (MAIT) said tablet sales in India were expected to cross 1.6 million units this year, a growth of 40 percent over last year, and way above the 16 percent growth registered by PCs and 26 percent by notebooks. Desktop sales grew by only 11 percent. MAIT estimated tablet market would grow to 7.3 million units by 2015 to 2016,” said ZDnet.

Each tablet owner is a likely migrant from newspaper in the printed form to newspaper in the digital format. If the reader migrates, publishers of current print products need to have an ecosystem which can deliver on the reader’s needs – and monetize him or her. Much has been achieved in successfully moving the loyal reader from paper to digital – but it is in the area of monetization that we will see some experimentation.