Print media: Tough times ahead - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Print media: Tough times ahead

Mar 23, 2009

After recording nearly 20% growth for the past 3 consecutive years, the media sector is now facing a slowdown. While the first nine months of the calendar year 2008 had been good, ad spends took a beating in the December quarter and after that, it has been a consistent downslide for the industry. As per Pitch Madison, the ad and media industry grew by 17% YoY for 2008 as compared to the expected 22%. Automobiles, banking, tourism and real estate which were major advertisers, which saw a huge slowdown which in turn affected the print, television and outdoor medium.

Print media which continues to be the biggest player of the ad media mix with 47.4% share reported a lower growth of 16%, down 2% from the estimated growth rate. The print media which was already relenting under higher newsprint prices, got further hit on account of lower ad spends by corporates. Burdened by the economic slowdown, print ad volumes have declined by 25% to 35% and publishers are giving 50% price discounts. As seen from the chart, the insertions have reduced. The newspapers had also either discontinued or delayed some editions. Even the number of pages are being reduced.

Source:Pitch Madison

Newsprint costs: Newsprint prices had risen steeply since the beginning of last year on account of lower production capacities in North America and Europe and reduction in exports from China. Elections in the US and Olympics in China led to lower exports, thereby increasing the newsprint prices. Further, depreciating rupee added to the fire. The price of newsprint, which accounts for 50% to 55% of the total cost of producing a newspaper, declined by US$ 310 to US$ 360 a tonne in January this year from the high of US$ 960 it touched in the quarter ended December 2008. The price has come down mainly due to lower demand on account of recession and lower crude prices. Many global suppliers are also cutting production due to the liquidity crisis. Hence, with supply contracting, the newsprint producers expect the price decline to be temporary and the second half will see the prices heading northward.

Government aid: The government has come to the rescue of these companies. Apart from hiking the DAVP (The Directorate of Advertising and Visual Publicity) rates, the government provided relief on the cost front. Due to the current economic slowdown impacting the print media industry, the Government has announced special customs duty exemptions for the newspaper and magazine publishing industry. Till now, a custom duty of 3% was applicable on newsprint and 5% on lightweight coated paper. This has been complete exempted.

Hike in cover prices: The cover prices that had gone down due to the rise in competition had to be rethought due to higher raw material costs. Newspapers hiked their cover prices at least by 50 paise in many markets. English dailies, too, have raised their cover prices in many markets. However, with newspaper companies generally making loss on the subscription front, it is the ad revenues which make them profitable. Hence the hike in cover prices would not be of great help.

Going forward…
Ad revenues are linked to the economy. With the print sector depending on advertisements for a large portion of the revenue, as long as the economy remains subdued, the print sector would also find the going difficult. The companies would have to diversify into newer segments and products. Jagran Prakashan and HT Media have already established their presence in other media segments. These companies might look at making the business model more efficient and provide higher synergies.

Equitymaster requests your view! Post a comment on "Print media: Tough times ahead". Click here!

  

More Views on News

Sorry! There are no related views on news for this company/sector.

Most Popular

It's the Beginning of a New Bull Phase in Smallcaps (Profit Hunter)

Feb 24, 2021

Last time the smallcap index crossed 19k a big correction followed. Here's what makes it different this time.

Make Rs 5,000 Per Day Trading the Market (Fast Profits Daily)

Feb 25, 2021

In this video, I'll show you how to get started on the path to daily trading profits.

I Believe the Investment of the Year Will Be...

Feb 19, 2021

In this episode, ace trader Brijesh Bhatia talks to us about the best investments of 2021, his profitable trading system, and much more.

The Hidden Tesla in My Great Indian Wealth Project (Profit Hunter)

Feb 23, 2021

An Indian company founded three decades ago in a garage caught my attention...

More

India's #1 Trader
Reveals His Secrets

Secret To Increasing Your Trading Profits Today
Get this Special Report,
The Secret to Increasing Your Trading Profits Today, Now!
We will never sell or rent your email id.
Please read our Terms

S&P BSE TECK


Mar 2, 2021 02:02 PM

S&P BSE TECK 5-YR ANALYSIS

COMPARE COMPANY

MARKET STATS