INC 2009: Advertising model Vs Subscription model – the debate continues

Revenue from advertising has been the darling of most publishers in India, while there a few who still chose to embrace the subscription model. The session on ‘Advertising Vs subscription revenues: What will drive the bottomline in future’ saw a lively debate on this issue at the Indian Newspaper Congress 2009.

Moderated by Hoshie Ghaswala, President-Publisher, Cybermedia, the session comprised Arvind Kalia, Nationah Head – Marketing, Rajasthan Patrika; KU Rao, CEO, DNA; Sunil Mutreja, President-Marketing, Amar Ujala; Maheshwar Peri, Publisher, Outlook Group and Vijay Singh, Chairman of ICE - Innovative Concept Exhibition.

The moderator of the session had perhaps foreseen the intense debate and decided to fill the giant video screen with a collage of news channel logos, newspapers, advertisers and digital devices to the accompaniment of a song that went like: ‘A not so long time ago, I can still remember how the big three used to give you reach, if you splurged on a TV spot, your brand could really gain a lot, at least that’s what they told you in a speech, but digital revolution felt like thunder, with every paper that went under, bad news on the blogs, the industry has gone to dogs’.

Said Ghaswalla, “My state of mind about the media industry is as confused as the topic of this session. I believe that we are the only industry that is cross-subsidised. What we are charging is barely Rs 2 for a newspaper or even lesser for a TV channel – hardly 10 paisa – per day. It is not true that digital media is significantly taking away the share in terms of advertising spends, there are barely 10 traditional media companies in the world that would be profitable if they had to load their entire costs. The story is as gruesome there as well. As Dr Shashi Tharoor, earlier in the day, had said that things are moving downstream in other parts of the world, eventually we will have to determine what the readers wants, when he wants it, where he wants it and in what format and what depth he wants it and serve him exactly as he needs it. People are not willing to pay for Intellectual Property Rights be in terms of software or music, so media companies charging for content seems like a bit of a dream.”

Arvind Kalia took the audience through a presentation on two models that formed the core of the newspaper revenues. He said, “I believe that both models have failed at some stage. India is second in number where the newspapers follow the subscription model. We should understand that increase in price would results in decrease in circulation, but the question is will it result in decrease in readership? Circulation and readership are not related. As per the INS, increase in circulation is not affecting increase in readership. In 1996, we were still selling at Rs 2.25 paise, which today will have value around Rs 6 or Rs 7. Considering this, the society today has the power to buy an issue priced at Rs 6/7.”

Stressing on continuing with advertising dependence, KU Rao, affirmed, “The decision that print industry chose to pursue advertising revenue over subscription revenue stands vindicated today. This country is doing extremely well and an advertiser has a right to pay. Just because the recession has slowed the growth, why do we need to re-examine the business model? Why should we talk about circulation revenue? It’s illogical to go back to the subscriber and charge him more. If I wish, I would make DNA free newspaper. The West has a different control. They have outpriced newspapers. The ad industry will do well and I don’t see a problem in the print industry at all. Media agencies have a lot more to pay if they want their ads to be shown in the paper.”

Stating that the cost of a newspaper was almost next to nothing today, Sunil Mutreja noted, “Last year, newsprint cost was quite high. Today, if we think of increasing the subscription cost, it is not worth it. Particularly, if I talk about regional publications, which are on the upswing in volume and readership. The rural reader doesn’t care what he wants to pay for. The advertisers won’t run away. Cover price should not be increased, rather if we want to reduce the price, we should reduce the volume as well. The ratio of 60:40 in advertising to subscription should continue.”

Maheshwar Peri, on the other hand, was more keen on giving subscription revenue the edge. He said, “We are running something like ‘Ponzi scheme’ and hoping that someone else will pay for it is not a good idea. It’s a vicious cycle, where you invest and you lose, especially in these kinds of marketing conditions. Today, we all are hammered because someone else got hammered. Today, we are the only industry in the world, where for every circulation we increase, we lose some money. Most of the people talk about the Internet taking away the weight of other publications. But I think no publisher has ever made money out of the Internet by putting a newspaper content on website. Failure has been that we have not been able to leverage what we have. If I think I can fund the losses from someone else’s pocket, then that is too farfetched. I have the problem with the present model. It like one person versus 100 people deciding your fate, so who would you go with, perhaps the 100 people.”

Sunil Mutreja said here, “If we had to cover our cost without advertising and instead through cover price, we would be selling Amar Ujala at Rs 16.35. Point is advertising is a necessity. Why are we looking at one perspective? If we are dependent on advertisers, they too need media. We have a Rs 20,000 crore advertising industry. And we have almost 10 crore households reading a newspaper at a cost of Re 1 per day. The calculation for a year comes out to be around Rs 3,600 crore. So, should we focus on a scattered market that gives Rs 3,600 crore additional or Rs 20,000 crore advertising market?”

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