Of Peaches and Potatoes

MINT’s - perhaps - the only paper (business or mainstream), which has been consistently covering the print-media and issues related to it. In my earlier posts, I have referred to some of the articles it has published. This Saturday (December 27th) edition carries a piece by Ashish Bagga (CEO, Living Media) – as a part of its series on ‘2009 Trends Predictions’ (click here to read article).

It is sort of a ‘laundry list’ of several possible fall-outs – some obvious (lower pagination, falling ad revenue, lower ad-edit ratio, ‘right-sizing’ of manpower etc) but others not so apparent and hence more interesting.

First, Bagga talks of consolidation across businesses that were so far working in silos to exploit synergies. He rightly points out that both systems have their merits but under revenue pressure there is a greater urge to unify structures.

Focus vs.Scale

Obviously the reference is primarily to the Media Marketing teams and the Circulation Sales force. This is a classic conundrum I have seen in many organizations. While having a common sales organization is probably simpler (and most companies have it anyway), the real dilemma arises when it comes to ad marketing. This is more so – when you have separate “Business Heads” for different publications or ‘divisions’ within the group or ‘house’, as some prefer to call themselves. The debate always centers round “focus” vs. scale or synergy – and, tends to heat up when ‘accountability’ for ‘bottom-line’ rests with the so-called Business Head – and the responsibility for ‘ad-revenues’ is with someone else, who usually reports directly to the CEO. Under such a system – the Business Head feels naturally dis-empowered and accusations of the smaller / niche publications or divisions being ‘short-sold’ begin to fly. In reality, however – it’s often the other way around. When the smaller or weaker publications are sold on the back of the flagship brand – it is usually at the expense of the bigger or mother brand / edition which end up subsidizing its smaller (or younger) siblings. In a game of accounting “allocations” - the revenue apportionment goes in favour of the brands or editions, which are being supported (especially – say, if it’s a new Brand or a new city Edition which has just been launched).

Tonnage vs Grammage

Parallels are often drawn with the FMCG industry – where the same Sales system is used to market brands and products across divisions or profit-centres. While the comparison may hold somewhat true – as far as Circulation Sales is concerned it could be fallacious to extend it beyond that to ad-marketing. Even in FMCG – the debate has raged on for years. The comparison is not just between the proverbial ‘apples and oranges’, but as a legendary Marketing ‘Guru’ of Hindustan Lever had once put it very pithily – it’s very often between “peaches and potatoes” – tonnage vs. grammage ( read niche publications). This would apply particularly to new fledgling brands, which have to be nurtured with care. But then, as Bagga says – in the current market scenario very few companies would have the luxury of launching new publications or editions. And, for that matter nurture the un-profitable ones.

It would be interesting, however, to see if the same logic of consolidation and exploiting synergies would now get extended even to other areas of operation such as the newsrooms and news-gathering.

(in the next post I intend discussing some of the other very relevant issues raised in the article)

Say cheese !!

I generally tread clear of the Capital’s lecture and talk-show circuit. But, yesterday I accidentally gate-crashed into one. The occasion was the launch of the Business Standard India 2009 – a collection of essays on contemporary economic issues facing the country.

In a gathering of very distinguished economists and policy makers, as a part of the panel chaired Montek Singh Ahluwalia and T N Ninan as moderator - Bimal Jalan, the former RBI Governor, was at his provocative best. He was reveling in baiting the media, who he accused of over-selling the India Inc Rising story. He argued that, it wasn’t that the Indian economy that was running too fast but the Indian Stock Market that was being driven recklessly. When the real economic growth was at 13% - fuelled by tax arbitrage, the stock market was giving returns of 80% - but no one questioned the disconnect. We can excuse a Sarah Palin – who had never seen India on the map – wanting to invest in India because she saw India all over the media but we should have known better, he joked. He also had a dig at the “entrepreneur” (no prizes for guessing) known to run a half-marathon every morning, who had raised Rs 20,000 crores from the market even before he finished his morning jog. When you run that fast there is always a risk of tripping and a correction was just waiting to happen. He chided the media for, having created euphoria earlier, now going to the other extreme predicting a dismal doomsday scenario.

Listening to Dr Jalan’s, I wondered if the media itself had fallen prey to the tales of its own creation. Over the last few days – everyone I have met from the print industry – be it from editorial or marketing - have been complaining how bad things are. And till the other day, media houses – new and old – were going about their business like there was no tomorrow.

This adventurism was not just restricted to starting new editions or jacking up circulation. There was actually serious money being put on the block in the form of investments in Fixed Assets (expensive high-speed printing presses) most of it funded by borrowings (except perhaps ToI who have always been known to sit on a mountain of cash reserves).

Add to that, the increase in pagination, internecine circulation wars (my ‘pet peeve’ of deep discounted - gift subscription offers), rampant under-cutting of ad-rates, over-the-top salaries of the new ‘whiz-kids’ on the block, across the board salary hikes and increased over-heads – you have the perfect story of cost-structure and business model going awry. And, if all this was being done with an eye on increasing company valuations for potential PE investors – someone got the math wrong – just as Dr Jalan said last evening.

The crash of the ad markets have really turned the screws on (even with softening of news-print prices), especially for the newbies and also some of the oldies who had taken a quick shot of viagra to feel young. By one account two of the new entrants in the Mumbai market were losing anything between Rs 50 to 100 crores per annum (depending on whose estimate you chose to believe). Despite drop in pagination and cutting down on print-order, thru’ non renewal of subscriptions etc they would find it difficult to sustain such high levels of “investments” (read ‘losses’) without big-time value-destruction, if the mother ship itself is under pressure. While those in it for the long-haul would definitely weather the storm – it’s those who were in the short term “valuation” game who would face the real heat.

So what’s the way forward? On the flight back from Delhi, I was reading in the TIME magazine how the Italian government has thrown a bail-out package for the cheese industry in the country. The government is buying 200,000 wheels of Parmigiano – Reggiano Grana Padano to be donated to charity. Possibly Mr Ahluwalia can take a leaf out of that book and devise a similar scheme for the Indian newspaper industry. It might make perfect economic sense – giving away free newspapers with free ads – to boost consumer demand. But, there’s just one glitch – thanks to the freebie offers very few people in India pay for newspapers anyway!!

Post-Script: Hopefully, after this crisis the Indian newspaper companies would find renewed merit in the age-old wisdom of having a more 'balanced' adverisement to circultion revenues ratio, which had historically helped them cushion the effects of cyclical downturns in advertisement. Till then, of course, the big consulting firms (Mckinsey, E & Y, PwC, Accenture etc) would make their pile doing 'cost-restructuring' exercises for the industry. Some I'm told are already on the job.

Flight of fancy !!

This morning on the flight from Calcutta – I was almost startled out of my seat, even before I had a chance to put my seat belt on, to see an announcement in The Telegraph. In a box item on the front page they informed readers that “to partially off-set” rising cost of news prints they were constrained to increase the cover-price by 50 paise (they went on to assure how TT is committed to delivering the best value to its readers etc, etc. On picking the ToI from the next seat – I found they had a similar notification ( but more simply worded – without any of TT’s almost apologetic note). One remembers that, such announcements were common in the 70s and 80s. But, in today’s day and age – when publishers have been tripping over each other in a game of “invitation pricing”, discounted subscription and freebies ( the latest I read was Nike shoe free with an annual subscription of a Delhi tabloid - read the Romantic Realist's piece by clicking here) – who could have imagined even a few months back that this was even possible.

Considering that a very high proportion of the circulation for most papers in metro towns are already locked up in one or two year subscriptions and ‘jodi’ offers, I am not sure how much this would yield in terms of additional revenues in the short-term. But, that such a move was undertaken (obviously, in unison by all the major players) considering that newsprint prices have actually come down from the peaks that it had reached a couple of quarters back, is indicative of the revenue pressures the industry must be experiencing at the moment. Paginations had already been cut-down over the last few weeks. In Calcutta I found The Telegraph had brought there Metro supplement inside the main-paper. The other day – someone traveling to Chandigarh told me that he was surprised to see the city edition of the paper down to only 12 pages. According to a totally unconfirmed (and, probably unreliable too ) source – the ‘old lady’ had posted a cash-loss for the first time in a zillion years last month. While this can well be malicious gossip – it is indicative of how ‘desperate’ the situation must be.

I am sure that the industry will tide out of this crisis – as the economy recovers (at least the industry ‘old timers’ – unlike the brave new ‘cow-boys’ –who invaded the industry lately – know newspapers were always a ‘cyclical’ business and they have seen many a down-turn in the past). But, for me there can be some silver lining in all this. First, it’ll put to test certain hypothesis on which many players have been punting in recent years: 1)Readers perceive greater value in higher pagination; 2)Selling it cheap means higher circulation and readership (put in simple marketing lingo – what’s the ‘price-elasticity’ of the product). And, most importantly – this should, hopefully, separate the men from the boys.

Well, I guess – like everything else – only time will tell. And, to know the outcome, you and I will have to keep reading newspapers!!

Cholesterol levels and Readership Surveys

I have really missed the bus on this one. I had meant to write on the IRS 2008 (Round 2) soon after it was released – but got caught up in my travels. Meanwhile, the ‘Romantic Realist’ and many others have literally beaten me to the post (Read RR’s Blog Post "I am No 1. No, I am No 1" in the MINT by clicking here). I had written much of my thoughts on Readership Surveys in India in 2 of my earlier Blogs Is it only about Eye-balls? and When adults act as kids. At a broader level, my views remain largely the same as I have also noted in my comments on RR’s piece (Read Comments at the bottom of RR's Blog by Clicking here).

Co-incidentally just the day before its release (on the 4th of Nov), I was chatting up a friend who has been on the Technical Committee of the IRS (MRUC) for many years. He made several very pertinent and interesting points. Here is a gist of our discussions.

Since the MRUC started as an initiative of Advertisers and Media Agencies (Brahm Vasudeva and Roda Mehta were the prime movers) – the IRS was conceived primarily as a Media Planning Tool. Therefore, the emphasis was not so much on the absolute “results” but more on the quality of the “research” – and, therefore, the underlying data, which would provide users insights for their media planning.

However, publishers has come to see it more like marks scored in a school or college examination – therefore, go to extra-ordinary lengths to ensure better “results” – especially after the NRS went into hibernation and IRS became the primary currency for print-media.

It’s common knowledge in the industry that, most organizations have their own “experts” ( read ‘fixers’) – who claim to be ‘specialists’ or past-masters at obtaining better results for their respective publications. Apart from using – old tricks of the trade such as distributing free copies around the time when the field work is conducted (this was developed to the level of a fine art with the level of sophistication that was applied to specially target areas where the survey was known to be happening - with information gathered thru’ moles in the data collection agencies), over time this was carried to a higher level with more blatant tampering of data. Industry insiders tell tales of instances – when field researchers have been apprehended ‘selling’ survey forms or caught in fisticuffs with goons engaged by publishers trying to obtain . While that could well be malicious gossip, it is widely believed that large media houses have a substantial ‘budget’ allocated for ‘managing’ – Readership Results – just as they were known to do for ABC numbers. (Click here to read Pramath Sinha’s piece published sometime ago in the MINT)


However, MRUC officials and the Research Agencies will vouch for the overall validity of the data. They claim to have built in a system of checks and balances that easily throw up aberrations during the process of data validation. In every survey – there are cases where a ‘back-check’ has been ordered or the data for certain publications have been withheld for publication – until the verification was carried out.

But in their over anxiety to obtain higher numbers, publishers often lose sight of more important underlying data. Moreover, in the process they also end up undermining the credibility of the survey – forcing Media planners and buyers to resort to developing their own customized metrics – which, with very small sample sizes, have their own set of limitations, claims of “proprietary” methodology notwithstanding.

It’s another typical case of shooting the messenger. So, what’s the way forward? The industry is already clamouring for the revival of their abandoned child the NRS. But, is there any reason to believe that- the NRS would produce results that are dramatically different from the IRS. Past experience doesn’t say so. It’s like me going to a different ‘Path Lab’ each time to check my Lipid Profile. It still doesn’t solve my problem of high Cholesterol and elevated hepato-bilary markers.

More later…..