When I began visiting India five years ago, there was a curious disconnection from the rest of the world. Digital revolutions occurred outside of India's cocoon. Talks of faltering relationships between publishers and advertisers didn't happen in India. The “death of print” was negative talk by Americans or Europeans.
Then, the Great Recession hit.
Indian publishers today confess they had never seen revenue declines – not in their careers, not in their lifetimes. U.S. publishers staring at 29% advertising declines may laugh, but break-even growth can be tough if you're used to 15%-20% growth.
What the recession appears to have done is poke a small hole in the cocoon. It's poked a hole on that unbridled Indian confidence. Yesterday's strategies are being questioned today. In short, Indian publishers appear to be turning the hot fire of recession into a “learning moment.”
And that may be a good thing.
The Indian Way is to package the positive consumer trend lines associated with rising literacy, wealth, population, and education into proactive strategies. When you have that much natural momentum, why not move forward?
This positivity manifests itself in at least three ways:
- Market share strategies that have changed India from a collection of large regional newspapers to newspapers trying to become national players.
- A business model that aggressively attracts readers with low circulation prices in exchange for advertisers moving in a herd toward the sizzle of newspapers.
- An occasionally myopic focus on print and defending print to the exclusion of unique value propositions of content and audiences.
What's changed for India in the past year is a microcosm of what's happened on the world stage of newspaper publishing. While U.S. publishers ponder doubling of subscription prices for print newspapers and Western publishers noodle through the precise model to get consumers to pay for digital news, Indian publishers also are now drinking from the same water: We can't be so reliant on advertising in our business model, so the consumer has to pay more.
The universal message: consumers aren't paying enough.
In India, the growth spurts in audience have come from publishers charging Rs. 1-Rs. 3 (US$0.02-US$0.06) – just above the price of scrap paper. What started as promotional pricing for newspapers trying to grab share in a no-holds-barred marketplace has been locked in as the “new normal.”
Yet the era of print audience development at all costs is near an end. Said one publisher: “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.”
Like this publisher's counterpart in Europe and North America, it simply doesn't make economic sense to use a business model of “almost free” to grow a print audience that advertisers won't pay for.
With advertisers pulling back during today's recession, Indian publishers are calling for a gradual increase in circulation pricing. Unlike their counterparts in monopoly markets worldwide, this is trickier in India because of the hyper-competitive nature of local and regional markets.
INMA held its third annual South Asia Conference last week in New Delhi. The circulation pricing debate was central the conference. We brought together CEOs and senior executives from The Times of India, Hindustan Times, The Hindu, Dainik Jagran, Dainik Bhaskar, Malayala Manorama, and ABP (see photo above). I'm told it was one of the few times (maybe the first) all of these executives gathered on one stage.
Generally, the publishers agreed in public on a re-set of circulation pricing. They agreed the Indian business model was too reliant on advertising, which seemed to suggest a certain danger for their financial futures and their editorial integrity today.
Maybe their pronouncements were words in the air. But they were important words. They needed to get on the public record. Perhaps it's a spark.
Meanwhile, Indian publishers continue to see the Digital Revolution as something that will occur much later for them than counterparts worldwide. Here are some numbers:
- Online penetration of active monthly users is 3.5% in India, or 40 million.
- India has 6.8 million broadband subscribers, or nearly six-tenths of 1% of the population.
- Some 37% of Indian internet traffic comes from cyber cafes. Office access also is a major traffic contributor.
- There are 441 million mobile users in India, or 38% of the population.
What I suspect will happen is that, like other developing countries from the past decade, the mobile will likely be the bypass medium where short-term opportunities reside. But the impact on the Indian newspaper's business model will come with connectivity speed and processing power in the home.
Before that occurs and the inevitable shift in the advertising community's mood shifts with it, what can India's newspapers do to avoid the pitfalls seen in the United States and, to a lesser degree, in Europe?
For starters, collaboration among competitive publishers needs to happen. That INMA is a facilitator of this is a point of personal pride for this author. Circulation pricing can be a first step. Sharing best practices is a second step. Perhaps the German model of incubators should be considered by the big publishers.
There needs to be a transparent and open discussion among Indian newspapers about the best way to prepare for the transformative nature of the digital storm to come. Indian publishers can gamble that the vast majority of the new readers still to come will embrace print newspapers and this will offset any digital disruption. Or, publishers can open new fronts of experimentation and exploration through collaboration and transparency.
I hope the confidence in India continues. But I hope it's a confidence tempered by what the country's own publishers concede is a dangerous reliance on advertising in their business model. I hope it's a confidence tempered by the experiences in developed countries with shifts in advertising once internet penetration reaches a certain level. And, yes, I hope it's a confidence tempered by the idea that recessions are humbling reminders that markets don't grow forever.
Merge the optimism of Indian newspapers with the sober experiences of newspaper executives in developed markets, and you have the kind of access to innovation that adds value to your company.