Do readers even care about editors' dirty underwears hung out in public?

A celebrity editor’s newly created blog-site carries a post in his inimitable signature style – “When it comes to lingerie, do men even notice?” (Click here to read)

So far I have religiously stayed clear of discussing editorial questions, assiduously sticking to issues on the management of publications. But, the 2 perhaps are not so unrelated after all – especially when we say that media brands are ultimately made or unmade by their content.

Recently a salacious spat has come out into the open (click here to read) – following the enigma wrapped departure of a marquee editor and another journalistic icon’s guest column getting axed from the same paper (also read by clicking here).

In my mind, I have no doubt whatsoever that, the ordinary lay readers don’t give a fig for such dirty laundry hanging in public. For the few who do notice - usually people from the industry – it simply makes gossip around the coffee machine on editorial floors or at the Press Club. But, sometimes – without realizing – it can be the first symptoms of a deeper malaise – which, in the humble opinion of this blog-keeper should be a matter of concern for the ‘management’ – as, if left unattended, it can affect the ‘brand’ in the longer term.

Debates accha hai

Debates are healthy in any form. When a publication gives space for differing points of view – I believe it does raise the credibility of the paper as a whole, which readers come to appreciate over time and that builds loyalty.

Respected publications do this in the normal course – routinely publishing – columns by writers of differing ideological leanings or viewpoints. Television channels do it all the time in their news-hour and talk shows. Even The Times of India has made a virtue of this with its ‘Point and Counter-point’ (or is it the “Times View” and “Other View” – or something to that effect), which has become a regular feature. Its Sunday edit page often carries diametrically opposing opinions on the same issue.

(not-so) Cozy Bed-fellows

But – when the feud of egos (or “principles” – any which way you chose to look at it) spill over from the edit pages into the blogosphere or find their way into other publications and that too either making the management cozy bed-fellows or objects of pot-shots, it’s something else and calls for serious analysis.

It is here that the church begins to yield its sacred ground to the plebeian state – and once the territorial boundaries are blurred it is difficult to redraw the LoC even by a UN decree. And, when the borders change – so does the character of the “Brand”. This is something good marketers (which, the modern day newspaper honchos rightfully claim to be) can ignore only at their own peril – because just like the Consumer, a Reader too is not a fool at the end of the day.

Can a (mini) Satyam happen in the Indian Media Industry ?

Stumbled upon a great blog on the Management of Print Media in the US. Called : Reflections of a Newsosaur billed at “Musings of a veteran media executive, who fears our news-gathering companies are stumbling to extinction”. It’s author Alan. D. Mutter introduces himself as “perhaps the only CEO in Silicon Valley who knows how to set type one letter at a time”.

If one reads about the blood-bath that’s happening in the newspaper industry of the US – life still looks like a party back home in India. Probably – like our banking system – our newspaper industry has also remainded partially insulated to international trends. (This probably explains the unfading smugness of some of our newspaper honchos. A journo friend told me - how she was subjected to an elevator speech by her CEO - on the poor quality of newspaper managers in the West. And how well we've done in comparison. I saw the same CEO with his 'kitchen cabinet' dining on a celebratory mood at The Westview in the ITC Maurya last week!!) But for how long is the question.

The frequency and regularity of Mutter’s posts gives puts me to shame (notwithstanding – like me, he too holds another job and writes this blog as an incorrigible moonlighter who hasn’t been able to get over his love-affair with the industry). But, obviously there’s lot more happening in the playing fields of Uncle Sam’s country than in India which gives him more grist for the mill.

In his recent posts, Mutter writes about many such developments – which he says makes newspapers look like the auto-industry in Denver, with its routine lay-offs and across the board cost cuts. It seems that, Gannet has asked its employees on a week’s compulsory “leave without pay” in March this year (Click here to read). The alternative to this “shared pain”, he reckons would have been the loss of 600 jobs. He talks about the major restructuring that’s going to happen in SF Chronicle – where the newsroom is being cut-down to a bare-bone structure – with the skeletal staffers producing a “modest ration of local stories” with generic content filling the pages. (Read SFO Chronicle Story)

Lee's Pulitzer Prize

Among these, one story – in particular - caught my attention. It is the plight of Lee Enterprises. In 2005, Lee acquired the Pulitzer group, which made it the fourth largest newspaper publisher in the US in terms of dailies (with 58 titles) and seventh largest in terms of aggregate daily circulation (of over 1.5 million). The group encompasses over 300 weekly newspapers, shoppers and specialty publications with over 10,000 employees.

The stock of Lee Enterprises was then worth about $1.5 billion and the company borrowed almost an identical amount of money to fund the acquisition. Today, Lee’s stockes are trading at the below $ 1 mark at 30 cents a piece and its valuation is worth only $13.5 million. Its auditors have issued a ‘going concern’ warning – which means there is “substantial doubt about its ability to continue as a going concern.” Lee Enterprises unlikely to have the cash required to make a $142.5 million debt payment due this quarter. (Read: What's next for Lee)

Lee is not alone. It is but one of several publishers who are, more or less, in the same wobbly boat - loaded up on debt to fund acquisitions in the expectation that it could repay the loans though ever-rising sales and profits. “The deep, secular decline in the newspaper industry – exacerbated by the worst economic downturn in several generations – has dashed those hopes” writes Mutt.

“Shareholders, lenders, readers, employees, former employees and soon-to-be-former employees are paying the price for acquisitions between 2005 and 2007, taking advantage of the then-juicy profitability of newspapers and the once-easy access to abundant, relatively cheap debt – which they cannot handle today because industry sales have dropped by 25% since then and profits have dried up despite desperate efforts to throttle expenses.

“Had the newspaper industry continued to thrive in the last three years in the way it had for the decades since World War II, the executives who engineered these transactions would look like heroes today. But that’s not how things worked out. The first major newspaper bankruptcy already has occurred. Less than a year after it was taken private by Sam Zell, the Tribune Co. filed for protection from creditors owed a staggering $12 billion. Stock in the company, whose shares were worth $8.2 billion when Zell bought it 366 days ago, is worth nothing today.Beyond Lee and Tribune, publishers struggling with too much debt include Journal Register Co., GateHouse Media, McClatchy, MediaNews Group, Minneapolis Star Tribune, Morris, New York Times Co. and Philadelphia Media Holdings. The details in each case may be different. But the story is the same. (Click here to read)

That brings me to the question of how Indian Print Media Houses will fare in this crisis. In the absence of published data one doesn’t have a clear idea about the level of gearing in Indian newspaper companies – with the exception of a few such as HT Media, Deccan Chronicle – which are publicly listed. But, I do not wish to go into detailed Financial Analysis here. My worry lies elsewhere.

The Satyam Effect

Post Satyam – the auditors will now be doubly cautious in certifying Debtors and Receivables. As indeed, they would be in valuing investments – such as in Subsidiaries or companies in which they have taken stakes in ( call it Private Treatise, Ads for Equity or what you will). They should be equally strict about “capitalisation” of losses from new ventures or investments. While – the BCCLs of the world will be sitting on huge reserves to absorb any such shocks I am not so sure about some other companies which had aggressively geared up to fund new investments and production capacity ( in terms of new Presses etc).

In my lay financial judgement – I would think the more vulnerable of the lot are those companies – who put themselves under the pressure of byouyant quarterly results for the consumption of dala Stret to keep their stock prices afloat.

As one of the astute readers of Mutt ( a retired editor of a 3rd generation newspaper and not a Finacial Analyst) points out – in the absence of “large debt, newspapers still are more profitable than several other classes of industry.” But the, “powerful Wall Street law of the jungle” is more at work in publicly-traded companies … which require constant, aggressive growth to meet the expectations of the short-term bottom line”.

"The Hindu" rate of growth

I don’t travel to Chennai often. Otherwise there is one person I’d have loved to meet. That’s N Murali of The Hindu. Somehow I have a feeling, at a time when most publishers are reeling under the advertising slowdown, he must be chuckling at the plight of his competitors (and, for that matter, even of some his esteemed contemporaries across the country).

In some of the earlier posts we have tried to examine, how some publishers (new and old) in their quest for super-normal growth have erred on certain fundamentals when the good-times rolled. It is equally important, therefore, to analyze what others did right – even if it’s by the benefit of hindsight.

When competitors came knocking at their door – The Hindu remained steadfast in their strategy refusing to drop cover price or get into a mad race for higher circulation to stay ahead of the new entrants. By all accounts, they didn’t give into advertisement rate-cutting tactics either. Many called this old world arrogance, others attributed it to an overly conservative attitude – both unsuited to today’s age of nimble footed competition. Some rushed to prematurely write an elegy for it – predicting the same fate as what “The Statesman” had met with in Calcutta by refusing to react to new competition.

In the Mint Article referred to in the previous post (read post)– Bagga predicts 3 broad trends in these times of media recession: 1) increase in cover-price, decrease in pagination and curb on circulation; 2) ‘right-sizing’ of operations and 3) consolidation across businesses. By default or otherwise, The Hindu wouldn’t need to do any of the 3. It didn’t drop cover price, increase pagination or pumped up circulation. It was always a tightly run ship with a ‘conservative’ cost structure. So there is little fat to trim in the system. Finally, it has always run its businesses on a ‘consolidated’ model.

Sometime back, another article in MINT had quoted – Farokh Balsara, Head of the Media and Entertainment practice at Ernst and Young saying: “Six months back, it was growth for growth’s sake for publications. Now the focus is on profitable growth as we see companies compelled to take hard decisions due to the liquidity crunch.” (click here to read the piece)

I don’t think The Hindu would have any such problem as they were never afflicted by the malady of chasing “growth for growth’s sake” unlike many others – be it because of pragmatism or innate conservatism – call it what you want. To my mind, the only weak product in their stable, as on date, would be the Frontline (does it still exist ?). Even that – even if they are holding onto for some sentimental reasons – is unlikely to be bleeding heavily. HBL should - by now – also be able to largely fend for itself. And, The Hindu - the main paper - never went over-board on the circulation of their multi-city editions in Bangalore, Hyderabad etc.

And, being the undisputed market-leader they would continue to garner maximum share of advertisement even when the chips are down (literally !!) and not being wholly dependent on ad-revenues - they would be able to tide over the down-turn better than the others.

So, there may be some merit in following “The Hindu” rate of growth, after all.

(Of course, being a distant observer and not close to the scene of action, I could be widely off the mark. For that – I would look up to my friends in the “South of Vindhyas” for validation of the facts. I am sure there are enough detractors of The Hindu – or “Hindu baiters” if I may call them – to blow large holes into my analysis. So it’s E & OE – comments and corrections most welcome)