Indian Press: The Price Problem

Here is the Indian newspapers price problem: at the kiosk, you face a multitude of titles (roughly 4700 dailies across the country) including about 60 in English. Prices range from 1 to 3 rupees ($0.02 to $0.06). Even by Indian standards those are untenable rates: they cover only about 10% of variable costs. Finnish newsprint and German printing presses come at Western prices. Just for comparison, based on the Economist Big Mac Index, an Indian newspaper is roughly seven times cheaper than an American one; it is twenty times cheaper than a French daily.
Now, how do you significantly raise prices in a country where a decent meal costs about $2 ?

That question led to a heated debate at the last INMA South Asia Conference, in New Delhi. (INMA is the International News media Marketing Association). I was invited to talk about the migration from print to digital  — which, let’s face it, is not on the top of the publisher’s mind in a country where internet penetration is about 7% of the total population (details here) –  but India media moguls are keen to prepare their industry’s future.

The Indian press is staring at a difficult question. A few years ago, when we met for the first time in Chicago, Times of India’s CEO Ravi Dhariwal explained its newspaper was virtually free, with a price (3 rupees, $0.06) carefully adjusted to be slightly above the price of the scrap paper collected by poor people in the street of Delhi or Mumbai. Things have changed. As one of the publishers explained last Friday in Delhi: “We have built a bubble which is about to burst. Against all fundamentals, we have been pursuing circulation figures at any cost. Our model no longer works”. Around the table, the consensus was the price of papers had to go up significantly, probably by a factor of 2 to 5.

Well… Let’s consider a few impressive fundamentals. Circulation numbers are commensurate to India’s 1.2 billion population.  According to the Indian Readership Survey, Dainak Jangran, a newspaper unknown to Western radars as it is published in Hindi, has 55 million readers in 19 editions. The Times of India is the world’s biggest English speaking newspaper, with a circulation of 4 million and a readership of 14 million. More

Outsourcing’s next wave: media

Ever heard of companies like Mindworks Global Media, Express KCS, or Affinity Express? Well, in due course, millions of English speaking newspapers will do. Now, this concerns “only” readers of newspapers such as the San Jose Mercury News, The Miami Herald, or the Orange Country Register, to name just a few. In these newspapers, significant editorial jobs, tasks that once belonged to US newsrooms are now outsourced to a cluster of companies in India.

This is the next effect of globalization: off-shored editorial jobs. Highly specialized sweatshops, hundreds of workers on night shifts — Indian time zone — line up in the outskirts of Delhi or Mumbai. Journalists are no longer only reporting or analyzing job migration to cheaper Asia, they are now about to experience it. Take the Orange County Register for instance. Typical big regional American newspaper: strong power in its own terrotory (the greater South of Los Angeles), several Pulitzer Prizes, and recently about a hundred layoffs in its newsroom. Last month, it became the latest to offshore not only secondary jobs such as laying out ads, but also core competencies such as copyediting. It relies on Mindworks Global Media, a two-year-old company headquartered in Noida, 15 miles from New Delhi where ninety qualified Indians are performing the task (see story in Business Week ). The OC Register features the most advanced example of outsourcing jobs in the print media. Other newspapers such as the San Jose Mercury News (Silicon Valley’s daily), or the Oakland Tribune are testing the waters: they assign advertising layouts to Express KCS a two hundred people startup based in Gurgaon, India, also close to New Delhi. Express KSC provides a wide range of print related services, ranging from pre-press to magazine production or ad design work (story in the Columbia Journalism Review )

Three factors accelerate the trend. The first one is the newspaper sector’s global crisis. English speaking ones are motivated to outsource to India (or Thailand which is eyeing the pie) as much work as they reasonably can: most of the of day-to-day layout jobs will soon be gone, as well as a greater number of sub-editing, copy-proofing positions. When the cost ratio is 2:1 or even 3:1 as it is between US (or UK) and India, the incentive is impossible to resist.

Increasing skills in India and other Asian countries is the second factor. This is the payoff of global knowledge and education. The level of local universities is rising fast, so does cooperation with Western universities. And many formers students from American universities are returning to their homeland, they become clever entrepreneurs and eventually suction up jobs from abroad. Judging by the number of editorial jobs posted on MonsterIndia, this is a heavy trend.

The third factor is the cost of telecommunication that is now asymptotically driving to zero. [Don't tell YouTube's parent, Google...] Speaking with or sending a page layout to a sub-editor costs the same, whether the individual is on another floor in the building or in Mumbai.

This explains the sequence of events we witnessed in recent years. Intellectual (non-engineering) off-shoring has evolved from human-based data-mining, to number-crunching, to basic-design, and now to news content. Reuters (now Thomson-Reuters) was the first to jump in 2004 when its financial service opened an office in Bangalore with 340 people. They where writing about quarterly results of Western companies and compiling analyst research. Since then, this facility has grown to approximately 1,600 jobs, with 100 journalists working on U.S. stories.

Non-English papers will be shielded from this transfer. In theory this will save jobs in Germany, France, Spain or Scandinavia. But in more realistic terms, events might take a different course: unloading selected non-core jobs will help US and UK newspapers to respond more swiftly to the market’s downsizing and, we hope, to do better than just survive. —FF

Times of India: let’s grow the market together

Talk with India media executives is always instructive and fascinating. Few weeks ago at the INMA Congress in Beverly Hills, I sat down with Bhaskar Das executive president of the Times of India in charge of marketing.

The Times of India is the largest English language newspaper in the world: 4m copies for 16 editions. Revenue of Times Group is about $1bn, 85% from print, mostly the TOI. The company is extremely profitable with a net margin above 30%. The Times of India serves a huge market: 1.2 billion people, approximately 220m literate in Hindi, and only 28m English readers. Of the latter fast growing segment, the TOI manages to capture 4m readers. Combined with the vitality of the Indian economy (around 8% GDP growth), the Times Group is adding a nice 25% to its core business each year. Times Group is also the publishers of the main business broadsheet, the Economic Times.

Unsurprisingly, advertising provides most of the revenue. In fact, the price of the Times of India is set just above the value of scrap paper, it ranges from 1 to 3 rupees (1.2 to 4 cents). Therefore, increasing the revenue by raising street price doesn’t make sense. Instead, the real upside lies in expanding the pool of advertisers. A few years ago, the executives of the family-controlled TOI came up with an original idea: “the private treaties”.

The principle is simple and clear: the TOI spots good and growing businesses, and delivers the following pitch: “You need to grow your business, to impose your brand, to expand your reach. Here we are, the Times Group, with our huge newspaper, TV and radio stations, internet sites, outdoors display. Here is the deal: we take a 1% to 15% equity stake in your company, in exchange, we sign an advertising deal at a discounted rate, and you have access to our media system”. As we say in French, it is “fromage et dessert” for Bennett Coleman & Company Ltd, the family owned mothership of the Times Group. Not only it increases its advertising revenue with a predictable stream of money (competitors of enrolled advertisers are also prompt to react), but also it is building quite a portfolio of roughly 200 small to medium size companies. The amount invested and the current values are not exactly known. The Indian business paper Mint (a JV with the Wall Street Journal) is estimating the value of BCCL’s private treaties assets to about $1bn for an initial investment of about $300m. That would make the Times of India one of the largest private investor of the country. As if this was not enough, Times Group announced this Saturday the acquisition of Virgin Radio UK for GBP 53m. In a way, the revenge of the former colony.