N Murali, joint managing director of the Hindu Group, is a busy man these days. Arch-rival Deccan Chronicle from neighbouring Andhra Pradesh has stormed The Hindu’s bastion Chennai, while The Times of India will set foot in the city later this year. The Hindu has taken the challenge head-on by introducing a new look and feel of the paper. In conversation with Viveat Susan Pinto of agencyfaqs!, Murali sheds some light on the scenario in Chennai. apart from spelling out his strategy to deal with competition. Excerpts.

Q. After six years, The Hindu went for a redesign in April. Was that in response to competition? How has been the response to the change in looks?

A. The response to our redesign has been overwhelmingly positive. This is possibly the most comprehensive change in look that The Hindu has undergone in its history. Let me categorically state that it was not prompted by the competitive environment in Chennai as you suggest. The work on the process of redesign started in August '04 and has taken about eight months to complete. It was done by Dr. Mario Garcia, one of the foremost newspaper designers in the world, whose company Garcia Media has redesigned around 500 newspapers in different countries. Therefore, to attempt to get such a busy and renowned designer as a knee-jerk response or do a quick-fix is out of question. It was in 1998 when The Hindu was redesigned by journalist-turned-designer Edwin Taylor for the last time. In my opinion, every newspaper needs to periodically refurbish or renew itself. That is what The Hindu has done now.

Q. Do you feel that Deccan Chronicle (DC) is a threat to The Hindu? The group has priced the edition in a manner where readers get almost 36-40 pages everyday at just an incremental cost of Re 1. Does that worry you that DC could be directly targeting Hindu homes?

A. As far as Deccan Chronicle is concerned, it is largely an unknown entity outside its original territory of Hyderabad. It has moved to the rest of Andhra Pradesh in the last five years, and has essentially been a regional paper from Andhra Pradesh.

In recent months, Deccan Chronicle floated an IPO and raised a significant amount of monies. Armed with the funds, it has made a foray into Chennai. Presumably, it's the new money rather than economic viability or market potential that has prompted Deccan Chronicle's entry into Chennai.

The throwaway cover price of Re 1 must be making a huge dent to the overall profits of Deccan Chronicle. It also results in 'raddi economics' or 'artificial economics'. It is simple to understand how this works. DC pays a commission of 50 per cent or 50 paise to the hawker. It pays another 10 paise to the news agent. Thus, the total commission to the distribution trade is a hefty and an unsustainable 60 per cent. The hawker is billed at 50 paise per copy and earns 50 paise, if he sells the copy. In the eventuality of him not selling, he makes a clean 20 paise per copy as resale value since 'raddi' fetches him 70 paise per copy.

Take the case of the news agent. He pays 40 paise as the cost of a copy. If he sells it to the hawker, he gets only 10 paise as the hawker's commission is 50 paise. On selling it as ‘raddi’, however, the hawker earns a cool 30 paise per copy. This is how the whole 'raddi' economics works presently for DC.

The continuity of this process will depend on how deep its pockets are, and how much cash it is prepared to burn from the IPO.

Q. How do you react to the claim made by Deccan Chronicle that it is selling over 1.5 lakh copies in Chennai?

A. It is early days yet, but I can tell you that DC has not made much of an impact on-ground over the last two months. Our sales have not been affected at all. In fact, it is growing. Our estimate is that the New Indian Express, which is the number two player in Chennai, is selling far more than Deccan Chronicle is.

Our independent and objective assessment of Deccan Chronicle's sales shows that DC is selling not more than 15,000 copies on weekdays and 20,000 copies on Sundays. Please mark my word ‘selling’ as I am not referring to ‘print order’ or printing. Even the introductory special offer of paying a ridiculous amount of Rs.99 for a year's subscription of DC to the holders of ICICI credit cards has not found the expected number of takers.

It may be noted that The Hindu’s cover price in Chennai continues to be unchanged at Rs 3.25 on weekdays and Rs 4.50 on Sundays, despite the New Indian Express having reduced its cover price to Rs 1.50 in August '04. This was obviously done in anticipation of the entry of new players in Chennai.

It is also significant that The Hindu’s net paid circulation crossed the one million-mark recently with its ABC certified figure for July-December 2004 standing at 10,47,121 copies.

Q. The Hindu’s price may remain unchanged in Chennai, but in Hyderabad, the same paper sells at Re 1. How do you account for that?

A. That is due to a price war that The Times of India started three years ago, when it launched in Hyderabad. We simply responded to it. Let me add here that our cover price is not Re 1 on all seven days of the week. We hawk at Rs 2 on Mondays, Tuesdays and Thursdays, and Rs 4.50 on Sundays. It’s Re 1 only on Wednesdays, Fridays and Saturdays.

Q. So you are implying that the price war in Hyderabad is on since the last three years?

A. Yes, it is. In Bangalore too, there have been two or three rounds of price wars since The Times of India launched about 7-8 years ago. But subsequently, there has been a roll-back by all players in the Garden City. At the moment, we hawk at Rs 3 on weekdays in Bangalore and Rs 4.50 on Sundays. In Kerala, our cover price is Rs 3.20 on weekdays and Rs 4.50 on Sundays; while in Delhi we are priced at Rs 2.50 on weekdays and Rs 3.50 on Sundays, respectively.

Q. Coming back to Chennai, your price may be unchanged for the moment, but will it remain the same when The Times of India sets foot later this year?

A. We will review the price when The Times of India steps in. Deccan Chronicle, as I mentioned earlier, is a regional player and unknown in Chennai. So, it does not affect us. With The Times of India, it will be different. So we will review our pricing when it comes in.

Q. How would you describe The Hindu reader? They are supposedly very loyal to The Hindu. But how are you dealing with competition in Chennai? For instance, how prepared is The Hindu's marketing/circulation team to face rivals in a non-monopolistic scenario?

A. I would describe The Hindu reader as extremely loyal, intelligent, smart and well informed. As for your other question, not only is our marketing team, but also the editorial team and the rest of the organisation are geared and fully prepared to face competition.

Q. Apart from the change in looks, are you taking a fresh approach in terms of editorial policy? Wouldn’t readers love it, if you did so?

A. The Hindu has always adhered to its core values of journalism – objectivity, telling the truth, comprehensive coverage, credibility and independence that has stood in good stead over the last 126 years.

While retaining its core values, The Hindu has been contemporary – whether in technology or design or width and depth of content. This extends to marketing and business practices as well. The Hindu will continue to do what it is best at doing – the pursuit of excellence in journalism and striving as ever to raise the bar of quality.

Q. Where do you see Hindu’s market share heading with the heightened activity in Chennai? Do you see it growing, or do you see fragmentation? What would be the impact on retail and national advertising in The Hindu?

A. The ratio of regional to national advertising in The Hindu is equal. Our share of advertising in Tamil Nadu and Chennai stands at 70 per cent. Market share of The Hindu alone in Chennai is a whopping 85 per cent. However, in a competitive milieu, it would be unrealistic to expect this kind of dominance to continue indefinitely in a market. At the same time, increased competition coupled with low cover prices of all players including the leader would see the market grow.

Q. The Hindu competes with DC and TOI in Hyderabad and Bangalore. What differences do you see between your product and them?

A. We do face The Times of India and Deccan Chronicle in Hyderabad and the TOI again and Deccan Herald in Bangalore. Each newspaper has its own characteristics. While Deccan Chronicle is a regional newspaper not known for its quality of journalism, The Times of India is the largest newspaper in the country with a strong national presence. It has a track record of attracting the youth through ‘infotainment’. The Hindu, on the other hand, has earned the respect of readers in South India for its pursuit of excellence in journalism.

Q. How do you see the print landscape in Chennai shaping up with DC and TOI around? Do you see a segmentation of the market with readers opting for one brand or the other, based on their tastes, interests etc? Considering that The Hindu has a loyal reader base in Chennai and in the South in general, do you believe that rivals would take a targeted approach and address consumer sets that see a fit with their product?

A. Every metro/mini metro in the country, leaving aside Chennai and Mumbai, has at least four English newspapers. With competition set to storm Mumbai shortly and Chennai already having seen the entry of a new player, I believe the winner is the reader. They will get more choice at affordable prices. However, the key differentiator will be content. Increased competition will spur all-round product development across all players including The Hindu.

Q. Considering that the 15-34 demographic is huge in India, how is The Hindu addressing this segment?

A. The Hindu, in its own unique and special way, is trying its best to be compelling and attractive to young readers. It is a myth that young people just want Page 3 stuff. Don’t forget that they are serious and intelligent too. They want to know about everything around them, including information about careers, lifestyles etc. The Hindu has been giving value additions to its readers through supplements such as Young World, Friday Review, Metro Plus and Education Plus, which are aimed at the youth in particular.

Q. What are your plans for The Hindu Business Line? Is some beefing up or makeover on the cards?

A. Business Line is the number two financial daily – both in terms of readership and circulation. Our audited ABC figures for the July-December 2004 period are 76,339 copies to Business Standard’s 69,782 copies. We have achieved this in just over ten years of existence. Readership of Business Line is 1.49 lakh copies to Business Standard’s 1.06 lakh copies, according to round one of the IRS 2005. Economic Times, if you ask me, is a general newspaper. We are not so. Plus, we are not playing the price game like the way ET does.

Business Line hawks at Rs 4 on weekdays and Rs 3 on Sundays to ET’s Rs 2.50 on weekdays and Rs 9 on Saturdays and Sundays. Despite this, we hope to touch the one-lakh mark in terms of circulation in the next six months, and are working out multiple strategies to take the paper to newer levels.

Q. One last question: Is the boom in the print medium – whether in Mumbai or Chennai – an indicator of good times for the industry? Will it permanently change the face of the industry?

A. I am always for healthy and sustainable competition in the print industry in different markets. It keeps players on their toes, and readers, of course, stand to gain from the exercise.

But I am concerned about the long term health of the newspaper industry as the dust settles. The economics of publishing newspapers has become highly distorted and will become unsustainable over the long term, if the present situation continues.

While advances in publishing technology and easier access to finance has driven this frenetic pace of growth, the long term viability of most players is a big question mark. The ridiculously low cover prices and over dependence on advertising will affect the newspaper industry as a whole in the long run. It is a bubble waiting to burst and once that happens, there will be a shakeout and consolidation. The financial health of newspapers will be severely impaired. It is time that good sense dawned on the industry – resulting in far more sound and fundamentally stronger principles and practices in the pursuit of journalism as a viable undertaking.

Chasing artificial numbers and touting them as a surrogate yardstick for true success in the market place should be abandoned. The sooner this is done the better.

May 30, 2005
Mumbai
You can write to N Murali at
nmurali@thehindu.co.in