How will the revision of ad rates affect the print industry?

Recently, the Ministry of Information & Broadcasting (I&B) announced a hike of 25 per cent in advertisement rates for a period of three years. This comes in over and above the existing rate structure for print media by the Bureau of Outreach and Communication (BOC) - erstwhile Directorate of Advertising and Visual Publicity (DAVP).

The last such revision occurred in 2013 with an increase of 19 per cent from 2010's rates. There were long-pending demands from several small and medium-sized newspapers to hike advertisement rates.

The print industry has been reeling under severe financial strain in recent times due to the abnormal increase in the cost of newsprint and dollar fluctuations. More so since global newsprint prices went up significantly after China stopped producing it.

According to a report published by CARE Ratings last year, the circulation of print media reached 62 million copies a day in 2016, implying a 10-year CAGR (Compound Annual Growth Rate) of nearly 5 per cent. Indian language newspapers primarily contributed to this growth with Hindi, Telugu and Kannada language publications growing at a CAGR of 8.76, 8.28 and 6.40 per cent respectively. On the other hand, English publications grew at a CAGR of 2.87 per cent in the same period. The report further states that improving literacy rates, rising circulation and an increasing number of newspapers and magazines is expected to support growth in newsprint demand, which is expected to reach 2.7 million tonnes in FY19.

ALSO READ: When a newspaper brand repositioned Sunday...

It is said that the revision of rates will be beneficial for small and medium-sized newspapers, including several dailies published in regional and vernacular languages. Interestingly, General Elections are just a few months away and newspapers are expected to witness a spike in advertising, especially from the Central Government.

afaqs! spoke with industry experts to find out how the 25 per cent rate increase is likely to benefit the print industry and if it would be enough to tide over the huge cost inflation that the print industry has been through over the last few years.

Shailesh Gupta

Karun Gera

According to Shailesh Gupta, director - marketing, Jagran Prakashan, while everyone is celebrating the hike in ad rates, it really doesn't create too much of a business impact. This is because the volume of government advertising has shrunk significantly and even this hike is not enough to mitigate the shortfall.

He says, "A rate hike is only good when it comes with increased volumes of advertising. Over the last few years, tender advertising has seen a steep drop and regular government advertising volumes are down too. Therefore, to create a real impact on business, the government must think of stepping up the volume along with the rates."

Karun Gera, president - Lokmat Media, welcomes the DAVP's decision to improve the rates after a gap of five years and is of the opinion that if the overall budgetary outlay for print is enhanced, then the developments will have a positive impact for the industry.

He says, "In an industry environment, challenged by high newsprint costs, this move by the Government is surely going a bring respite to the overall industry. The 25 per cent rate increase will essentially help improve yields and that should help small and mid-size newspapers which don't have a high commercial client penetration."

Gera, however, maintains that the 25 per cent rate increase's benefit will remain till such time as the volumes are protected. In case the budgets don't increase, then the rate gains will be offset by the loss of volume of advertising.

He explains, "The Government rates are still around 30-40 per cent of the commercial rates that newspapers operate upon. Hence, the Government still has a lot of catching up to do."

Gera continues, stating that it would be interesting to see whether the Government increases the budget outlays for print. If an increase in budgets does not accompany these rate increases, then the gain in yields will be offset by drops in volume and the industry will continue to suffer.

KRP Reddy

Sridhar Lakshminarasimhan

KRP Reddy, director - advertising and marketing, Sakshi (a Telugu newspaper), shares his opinion that the industry will uniformly benefit from this decision only when the spend budgets also increase simultaneously and by the same value or more. If that is not done, the leading publications will stand to gain a better share of the budget and it will have a negative impact on the smaller publications.

He states, "In spite of the increase in the tariff, unless the BOC develops a policy on the release of advertisements by a scientific method and a uniform policy of reaching small and medium publications as well, the benefits will not be distributed evenly. The Central Government has to make a conscious decision of increasing the budgets and evolving a uniform policy of releases."

According to Sridhar Lakshminarasimhan - national vertical head, advt (industrial and government) at The Hindu, this is definitely good news for small and medium-sized newspapers, especially those in regional and vernacular languages which depend heavily on Government business as they do not get huge volumes from commercial advertisers.

He adds, "For the current fiscal, i.e. the remaining two months, the advertisement budget of the Government will remain the same. This implies that while the rates will go up by 25 per cent, the number of editions and the size of the advertisements may reduce as the spends outlay will remain the same, as budgeted. We may see a small benefit due to this rate hike in these two months."

"The rate hike will benefit all the publication houses next year while they allocate an increased budget for 2019-20, as this rate revision would already be in force," Lakshminarasimhan adds.

Dinesh Singh Rathore

Dinesh Singh Rathore - chief operating officer, Madison Media, gives a pragmatic view saying that the Government always gets a subsidised rate compared to other corporates. So, a comparison needs to be made and only then can we tell if it has come to par or not.

He explains, "In terms of cost per thousand (CPT), vernacular language newspapers are much cheaper than English dailies. Also, in terms of cost per square centimetre, English is much more expensive than vernacular newspapers. So, when you say that they (English dailies) are getting a larger share, that might be in terms of volume, but may not be in terms of value."

As far as how the decision will be beneficial for the regional newspapers is concerned, Rathore says that it solely depends upon the quantum of readership they (regional newspapers) have and the share that they get from the government in terms of advertising investment.

"But that will vary. Of course, newspapers are under immense pressure as their pie is shrinking," says Rathore.