INMA: Managing costs in an inflationary environment

Globally, newspaper companies are facing the stresses of shrinking top lines and pressured bottom lines. While costs have become global, revenues have remained local. It is “turbulent times” ahead, said Ashok Rajgopal, partner, Media and Entertainment Practice, Ernst & Young, at the International Newsmedia Marketing Association's (INMA) second annual South Asia Conference He gave the audience a few mantras to manage costs and run their businesses efficiently.

He said that Indian newspapers were sensitive to two factors—high reliance on revenue from advertisers and large contribution of newsprint to costs. Looking at the Indian context, he said a three-pronged approach could be employed: first, undertaking a re-design of the product; second, seeking avenues of growth and third, optimizing resources.

He gave examples of a few global media companies which implemented changes in their product designs, made the organization lean and maximized synergies. The Wall Street Journal, he said, was able to cut costs by reducing the width and making it slimmer.

“Changing the format of the broadsheet by making it slimmer and increasing the cover price of the newspaper are some of the ways that can help reduce costs,” Rajgopal explained. Newspapers must create layouts and supplements that are relevant to the advertiser and offer value to the reader. One could also prune sections and discontinue supplements or local editions that are not profitable.

The preferred approach, according to him, combines a lower cost base with a strong focus on opportunities. Maximizing circulation revenue and having a revenue model based on circulation is viable. He said that raising the cover price, after gauging markets’ willingness to pay, can also help at such times.

Over the next 12-18 months, Rajgopal said, media companies will need to evaluate the business, break down the financials and adopt a ‘zero base’ approach. Instead of owning a resource, media companies could look at striking an alliance or outsourcing it. He said that however dire the situation might be, rather than looking at it as a remedy to the illness, media companies should look at it as an opportunity to introspect.

Cyriac Mathew, COO, Mid-Day Multimedia said that Mid-Day has been on a cost-saving spree for the last six months, from having a budget session, arriving at a number to increase revenue and deciding on ways to optimize resources. The tabloid set up a task force comprising the distribution team, readership development executives and the circulation team, and then arrived at a matrix called the ‘cost per lakh square centimeter’ and kept monitoring it, to keep the cost under check.

For instance, issues such as the uncertainty of unsold copies were monitored. “On account of some high profile visits in the city or a cleanup drive by the BMC, on-stand sales would be affected. So, we would print only a certain number of copies, and not have excess copies,” he said. This was a cost-saver. The company also reduced the number of coloured pages in its tabloid in Pune and Bengaluru. With such initiatives and more, Mid-Day was able to save 6 per cent costs in the last six months.