Monday, September 19, 2005
Indian Media: Boom Times or Bubble Economics?
Commentary
Media stocks in India are all trading at high premiums today. With HT Media's IPO being the latest in a series of successful attempts to raise money from the market, it would appear that there is an ongoing boom in this sector. Analysts claim that this powerful upsurge has been fuelled by two factors; first, the 'rules of the game' are changing, and foreign players, for example, have been allowed to pump money into Indian media houses within limits; and second, readership, as assessed by the NRS, is growing rapidly like nowhere else in the world. While these are both excellent reasons for refuting the claim that this boom is a bubble, they do not inspire such confidence as to throw caution to the winds. As the article below suggests, the margins on many media stocks are lower than those of their international counterparts, and short- to medium-term downtrends (such as those seen recently in NDTV) could therefore lead to loss of value for shareholders, and a corresponding loss of investor confidence.
However, if a cautious, prudent position is adopted by big media, then there is little justification for any large player staying away from the market. In fact given the significant progress of the Sensex and Nifty over the medium term, there may never have been such a good time to raise money through an IPO as now. South India could well be the next media battleground after Mumbai!
From the Business Standard
Are media valuations justified? Government's move to allow FII investments and growth prospects are firing up media stocks.
The overwhelming response to the HT Media IPO had created quite a flutter recently. The stock debuted at Rs 700 on the NSE, a 32 per cent premium to the IPO price of Rs 530. While listing gains are almost guaranteed these days, what caught the eye in HT's case is the valuation at which the stock is trading.
Though the stock has slipped sharply since its debut, it is currently trading at a trailing 12-month P/E of 67x. If one digs a little deeper, HT's case is not isolated. Almost all media stocks are quoting at high valuations. Are these valuations backed up by fundamentals or are they running way ahead?
While equity markets have witnessed a good run in the past year, media stocks (news papers and channels) have generated quite a lot of interest. A look at the stock prices reveals that apart from TV Today and Zee Telefilms to an extent, all other stock prices have more than doubled in the past year.
Mid-Day Multimedia’s stock went up by more than 260 per cent in the past year, followed by NDTV (157.36 per cent) and Sandesh (103.52 per cent). For a better perspective, the CNX Midcap 200 Index gained 87.65 per cent during the period, while Sensex returns were 50.85 per cent.
Take a look at the trailing 12-month valuations. NDTV's stock is quoting at a P/E of 63.53, on a trailing 12-month basis. Mid-Day Multimedia is going at 56.82 times, Zee Telefilms at 55.66 times and Deccan Chronicle at 44.45 times.
"If we look at the past numbers, these companies will never be able to justify their current valuations," says Tejas Doshi, head of research at Mumbai-based Sushil Finance Consultants.
"Having said that the key to a proper assessment of these firms lies in the future where opportunities will abound. In that sense past performance is not truly reflective of future growth prospects," adds Doshi.
The big triggers
Analysts note that the current interest in media stocks has mainly been triggered by one factor - the government's move to allow foreign investment in print and television media companies within the 26 per cent ceiling.
Corporates like Anil Ambani-led ADA Enterprises have also been scouting for good acquisition targets. This, too, has improved the sentiment in the sector. It is believed that the government's decision to permit FII buying in print and television will lead to heightened interest in these companies.
Foreign holdings in companies such as Mid-Day Multimedia, Sandesh and NDTV are pretty low at current levels.
According to Nitin Khandkar, vice president (research) at Mumbai-based securities firm, Keynote Capitals, foreign media houses and private equity investors will look at acquiring strategic stakes in Indian television news channels and newspapers going forward, in anticipation of a further relaxation of foreign ownership norms.
Previously, only foreign direct investment (FDI) up to 26 per cent was allowed. Under the new ruling, FDI/FII investments have been capped at 26 per cent, unlike earlier when FII investment was not allowed at all.
Following this, Deccan Chronicle Holdings - owner of English dailies, Deccan Chronicle and The Asian Age - recently launched a $54.02 million (Rs 240 crore) FCCB issue, with the yield-to-maturity set at 6.90 per cent for the bonds which have a maturity of five years.
Recently, General Atlantic (GA) European Investments, Cyprus, picked up a stake in broadcasting major NDTV in a secondary market deal for a consideration of just over Rs 116 crore.
GA Investments bought 48.36 lakh shares of NDTV at around Rs 240 per share at a face value of Rs 4 each, representing 7.95 per cent of the equity share capital of the company. Considering the deal, NDTV is valued at around Rs 1,450 crore.
Increasing penetration
Another factor which investors seem to have taken into account is the big growth opportunity that the sector presents. Currently the per capita penetration of newspapers and TVs in the country is pretty low.
According to estimates, India sells just 60 daily newspaper copies per thousand people compared to around 196 in the US and 326 in the UK. Same is the case with television.
"In India television penetration is only around 45 per cent, while cable and satellite channel penetration is even below at 24 per cent. In US, for example, the penetration levels are close to 80 per cent. Considering the sheer size of the population, Indian media companies have only scratched the surface," notes Khandkar.
Increasing penetration will also bring in more ad revenues, the biggest revenue driver for media companies. According to estimates, total ad-spend in India in 2004 stood at Rs 11,800 crore. Print advertising accounted for the largest share at 46 per cent, followed by television at 41 per cent.
Analysts note that though media industry has been one of the fastest growing sectors in India, in terms of ad-spend as a percentage of GDP, the country still lags behind other nations.
According to industry estimates, Indian ad-spend as a percentage of GDP stood at 0.34 per cent in 2004, compared to 1.34 per cent in US.
A recent report estimated that India's advertising pie grew 8.90 per cent in 2004 and is expected to expand 12.60 per cent to Rs 10,690 crore by the end of 2005 with television and print each accounting 44 per cent of the pie.
Other factors such as improving literacy are also driving the sentiment in the segment. An analyst with a Mumbai-based securities firm notes that as literacy levels improve, more and more people are taking to reading news papers, improving circulation. "The younger generation prefers English news papers these days, which is a good sign for those papers."
According to NRS (National Readership Survey) 2005, all English dailies have a readership of 21.90 million compared with a readership of 18.60 million in NRS 2003. English editions attract the highest advertising revenues with around 50 per cent of ad-spend, followed by vernacular and Hindi newspapers with about 25 per cent ad-spend each.
The foray of several newspapers into the competitive yet lucrative Mumbai advertising market is expected to boost their revenues. HT Media's flagship Hindustan Times recently made its entry into Mumbai.
Analysts feel that the market in Mumbai - where The Times of India is the runaway leader- is still under-penetrated. Besides, considering the big advertising potential in Mumbai, newspapers which have made entries can expect a steady growth in advertising revenues, say analysts. However, considering the intense competition, it may not be possible for players like HT to make a mark.
Analysts note being a ‘habit business,’ it will be tough for new entrants to penetrate the markets in a big way. HT seems to have taken that factor into account and expects to incur losses in its Mumbai operations in the early years. However, analysts note that it is too early to speculate how the situation will pan out in the future.
Apart form consolidating its Delhi and Mumbai operations, HT hopes to expand in Madhya Pradesh, Uttar Pradesh and Rajasthan. It is also looking at publishing vernacular editions and adding a financial newspaper to its product basket.
It also has plans to get into non-print media as exemplified by its tie-up with Richard Branson-promoted Virgin Radio for private FM radio services.
Sweet music
The contribution from FM radio services is expected to boost bottomlines of players like Mid-day Multimedia which owns Go 92.5 FM radio station.
Considering that the government has decided to roll out a one-time license fee and revenue sharing (pegged at 4 per cent of gross annual revenue by the expert committee), the companies operating in the segment are expected to tread a smoother path going forward. The current regime is based on city-specific license fee (Rs 15 crore for Delhi, Rs 12.50 crore for Mumbai, Rs 7.50 crore for Chennai, etc.). Analysts note that Mid-Day Multimedia is likely to draw a major share of future revenues from its radio operations.
At present, the bulk of its consolidated turnover comes from the tabloid Mid-Day. In FY05, the company's topline from radio was around Rs 6 crore (of a total income of Rs 102.43 crore) - all of it from the single station running in Mumbai for the last two-and-a-half years.
"The company had to shell out close to Rs 13 crore as radio licensing fee in FY05. Now with the licensing fee fixed at 4 per cent, that outgo will be much less going forward," says an analyst. Mid-day expects revenues from radio to touch Rs 10 crore in FY06. The government has also decided to allow 20 per cent foreign direct investment in the radio segment, which is also likely to invite foreign money into the business.
Future holds the key
Considering the fact that the media sector has been among the fastest growing segments in India, the high valuations may not be entirely out of place. The sector is estimated to have grown at 13.40 per cent in 2004. However, some analysts feel that current valuations are unjustified.
"Valuations in the media sector are looking quite stretched right now. Most of the recent surge in stock prices has been driven by liquidity. I expect a consolidation in stock prices at current levels, if not a serious correction," notes Khandkar. Doshi sees a brighter future.
"It is better to take a long-term view on these stocks. The key to the success of these companies lies in changes in the government’s policies and demographical factors," he notes. "Markets seem to have realised the future growth potential of these stocks, which explains the interest in these counters."
According to Harrish Zaveri, media analyst with domestic securities firm, Edelweiss Capital, one has to approach valuations in the segment on a case-to-case basis. "For example, considering the high valuations of NDTV, one can say there is no margin of safety in the stock, in the event of another earnings shock as happened in the last quarter," he says.
NDTV reported a 98.82 per cent decline in net profits to Rs 9 lakh in the June quarter, mainly due to a near 50 per cent jump in employee costs. However, with the operations of its Profit channel stabilising, the company is expected to see better days ahead. The prospects of established players like Zee Tele and Television Eighteen are also looking good, says Zaveri.
"While Zee should be able to post a growth rate of 15-18 per cent in the next fiscal, Television 18 should see a 30-32 per cent growth."
As for Deccan Chronicle, it recently acquired Odyssey India, a retail chain in southern India, for Rs 61.20 crore. Odyssey has 12 retail stores in six cities.
According to analysts, the company is expected to continue exploring the inorganic route for growth, especially since it could soon be flush with funds from the FCCB issue. Deccan Chronicle expects Odyssey's revenue to go up to Rs 90 crore in FY07 and Rs 150 crore in FY08. The FY06 revenue guidance of Deccan Chronicle has been revised to Rs 330-350 crore from Rs 280-300 crore after the company's board approved the acquisition, while profit guidance has been increased to Rs 70-90 crore from Rs 65-70 crore.
As for HT Media, analysts do not expect topline growth to translate into bottomline growth, at least in the next three years. Domestic research firm, SSKI had recently initiated coverage on the company with an ‘under performer’ rating.
According to a media analyst with a domestic securities firm, HT Media is likely to post revenues of Rs 70 crore in FY06 (of an estimated total revenue of Rs 786.60 crore) from its Mumbai operations alone. "But considering the investment mode the company is currently in, especially in Mumbai, the bottomline is expected to take a hit," he noted.
Total operating expenditure of about Rs 100 crore in Mumbai is likely to take the net profit down to Rs 4.50 crore in FY06, compared to Rs 27.25 crore in FY05.
Valuations are looking stretched
Analysts are unanimous that the current valuations of print media companies are looking stretched. They note that valuations are high compared to not only domestic standards but global peers.
"Global media companies operate at much higher margins - at 20 per cent on an average, but still the stocks trade at 20x forward earnings," says a media analyst.
Apart from Deccan Chronicle, all other print media majors have low margins (HT Media - 4.36 per cent and Mid-Day Multimedia - 7.05 per cent). However, the market cap to sales ratios of Indian media companies are pretty low. While a robust topline is a good thing, whether print media companies will be able to justify their premium valuations will ultimately depend on the earnings growth, say analysts.
Media stocks in India are all trading at high premiums today. With HT Media's IPO being the latest in a series of successful attempts to raise money from the market, it would appear that there is an ongoing boom in this sector. Analysts claim that this powerful upsurge has been fuelled by two factors; first, the 'rules of the game' are changing, and foreign players, for example, have been allowed to pump money into Indian media houses within limits; and second, readership, as assessed by the NRS, is growing rapidly like nowhere else in the world. While these are both excellent reasons for refuting the claim that this boom is a bubble, they do not inspire such confidence as to throw caution to the winds. As the article below suggests, the margins on many media stocks are lower than those of their international counterparts, and short- to medium-term downtrends (such as those seen recently in NDTV) could therefore lead to loss of value for shareholders, and a corresponding loss of investor confidence.
However, if a cautious, prudent position is adopted by big media, then there is little justification for any large player staying away from the market. In fact given the significant progress of the Sensex and Nifty over the medium term, there may never have been such a good time to raise money through an IPO as now. South India could well be the next media battleground after Mumbai!
From the Business Standard
Are media valuations justified? Government's move to allow FII investments and growth prospects are firing up media stocks.
The overwhelming response to the HT Media IPO had created quite a flutter recently. The stock debuted at Rs 700 on the NSE, a 32 per cent premium to the IPO price of Rs 530. While listing gains are almost guaranteed these days, what caught the eye in HT's case is the valuation at which the stock is trading.
Though the stock has slipped sharply since its debut, it is currently trading at a trailing 12-month P/E of 67x. If one digs a little deeper, HT's case is not isolated. Almost all media stocks are quoting at high valuations. Are these valuations backed up by fundamentals or are they running way ahead?
While equity markets have witnessed a good run in the past year, media stocks (news papers and channels) have generated quite a lot of interest. A look at the stock prices reveals that apart from TV Today and Zee Telefilms to an extent, all other stock prices have more than doubled in the past year.
Mid-Day Multimedia’s stock went up by more than 260 per cent in the past year, followed by NDTV (157.36 per cent) and Sandesh (103.52 per cent). For a better perspective, the CNX Midcap 200 Index gained 87.65 per cent during the period, while Sensex returns were 50.85 per cent.
Take a look at the trailing 12-month valuations. NDTV's stock is quoting at a P/E of 63.53, on a trailing 12-month basis. Mid-Day Multimedia is going at 56.82 times, Zee Telefilms at 55.66 times and Deccan Chronicle at 44.45 times.
"If we look at the past numbers, these companies will never be able to justify their current valuations," says Tejas Doshi, head of research at Mumbai-based Sushil Finance Consultants.
"Having said that the key to a proper assessment of these firms lies in the future where opportunities will abound. In that sense past performance is not truly reflective of future growth prospects," adds Doshi.
The big triggers
Analysts note that the current interest in media stocks has mainly been triggered by one factor - the government's move to allow foreign investment in print and television media companies within the 26 per cent ceiling.
Corporates like Anil Ambani-led ADA Enterprises have also been scouting for good acquisition targets. This, too, has improved the sentiment in the sector. It is believed that the government's decision to permit FII buying in print and television will lead to heightened interest in these companies.
Foreign holdings in companies such as Mid-Day Multimedia, Sandesh and NDTV are pretty low at current levels.
According to Nitin Khandkar, vice president (research) at Mumbai-based securities firm, Keynote Capitals, foreign media houses and private equity investors will look at acquiring strategic stakes in Indian television news channels and newspapers going forward, in anticipation of a further relaxation of foreign ownership norms.
Previously, only foreign direct investment (FDI) up to 26 per cent was allowed. Under the new ruling, FDI/FII investments have been capped at 26 per cent, unlike earlier when FII investment was not allowed at all.
Following this, Deccan Chronicle Holdings - owner of English dailies, Deccan Chronicle and The Asian Age - recently launched a $54.02 million (Rs 240 crore) FCCB issue, with the yield-to-maturity set at 6.90 per cent for the bonds which have a maturity of five years.
Recently, General Atlantic (GA) European Investments, Cyprus, picked up a stake in broadcasting major NDTV in a secondary market deal for a consideration of just over Rs 116 crore.
GA Investments bought 48.36 lakh shares of NDTV at around Rs 240 per share at a face value of Rs 4 each, representing 7.95 per cent of the equity share capital of the company. Considering the deal, NDTV is valued at around Rs 1,450 crore.
Increasing penetration
Another factor which investors seem to have taken into account is the big growth opportunity that the sector presents. Currently the per capita penetration of newspapers and TVs in the country is pretty low.
According to estimates, India sells just 60 daily newspaper copies per thousand people compared to around 196 in the US and 326 in the UK. Same is the case with television.
"In India television penetration is only around 45 per cent, while cable and satellite channel penetration is even below at 24 per cent. In US, for example, the penetration levels are close to 80 per cent. Considering the sheer size of the population, Indian media companies have only scratched the surface," notes Khandkar.
Increasing penetration will also bring in more ad revenues, the biggest revenue driver for media companies. According to estimates, total ad-spend in India in 2004 stood at Rs 11,800 crore. Print advertising accounted for the largest share at 46 per cent, followed by television at 41 per cent.
Analysts note that though media industry has been one of the fastest growing sectors in India, in terms of ad-spend as a percentage of GDP, the country still lags behind other nations.
According to industry estimates, Indian ad-spend as a percentage of GDP stood at 0.34 per cent in 2004, compared to 1.34 per cent in US.
A recent report estimated that India's advertising pie grew 8.90 per cent in 2004 and is expected to expand 12.60 per cent to Rs 10,690 crore by the end of 2005 with television and print each accounting 44 per cent of the pie.
Other factors such as improving literacy are also driving the sentiment in the segment. An analyst with a Mumbai-based securities firm notes that as literacy levels improve, more and more people are taking to reading news papers, improving circulation. "The younger generation prefers English news papers these days, which is a good sign for those papers."
According to NRS (National Readership Survey) 2005, all English dailies have a readership of 21.90 million compared with a readership of 18.60 million in NRS 2003. English editions attract the highest advertising revenues with around 50 per cent of ad-spend, followed by vernacular and Hindi newspapers with about 25 per cent ad-spend each.
The foray of several newspapers into the competitive yet lucrative Mumbai advertising market is expected to boost their revenues. HT Media's flagship Hindustan Times recently made its entry into Mumbai.
Analysts feel that the market in Mumbai - where The Times of India is the runaway leader- is still under-penetrated. Besides, considering the big advertising potential in Mumbai, newspapers which have made entries can expect a steady growth in advertising revenues, say analysts. However, considering the intense competition, it may not be possible for players like HT to make a mark.
Analysts note being a ‘habit business,’ it will be tough for new entrants to penetrate the markets in a big way. HT seems to have taken that factor into account and expects to incur losses in its Mumbai operations in the early years. However, analysts note that it is too early to speculate how the situation will pan out in the future.
Apart form consolidating its Delhi and Mumbai operations, HT hopes to expand in Madhya Pradesh, Uttar Pradesh and Rajasthan. It is also looking at publishing vernacular editions and adding a financial newspaper to its product basket.
It also has plans to get into non-print media as exemplified by its tie-up with Richard Branson-promoted Virgin Radio for private FM radio services.
Sweet music
The contribution from FM radio services is expected to boost bottomlines of players like Mid-day Multimedia which owns Go 92.5 FM radio station.
Considering that the government has decided to roll out a one-time license fee and revenue sharing (pegged at 4 per cent of gross annual revenue by the expert committee), the companies operating in the segment are expected to tread a smoother path going forward. The current regime is based on city-specific license fee (Rs 15 crore for Delhi, Rs 12.50 crore for Mumbai, Rs 7.50 crore for Chennai, etc.). Analysts note that Mid-Day Multimedia is likely to draw a major share of future revenues from its radio operations.
At present, the bulk of its consolidated turnover comes from the tabloid Mid-Day. In FY05, the company's topline from radio was around Rs 6 crore (of a total income of Rs 102.43 crore) - all of it from the single station running in Mumbai for the last two-and-a-half years.
"The company had to shell out close to Rs 13 crore as radio licensing fee in FY05. Now with the licensing fee fixed at 4 per cent, that outgo will be much less going forward," says an analyst. Mid-day expects revenues from radio to touch Rs 10 crore in FY06. The government has also decided to allow 20 per cent foreign direct investment in the radio segment, which is also likely to invite foreign money into the business.
Future holds the key
Considering the fact that the media sector has been among the fastest growing segments in India, the high valuations may not be entirely out of place. The sector is estimated to have grown at 13.40 per cent in 2004. However, some analysts feel that current valuations are unjustified.
"Valuations in the media sector are looking quite stretched right now. Most of the recent surge in stock prices has been driven by liquidity. I expect a consolidation in stock prices at current levels, if not a serious correction," notes Khandkar. Doshi sees a brighter future.
"It is better to take a long-term view on these stocks. The key to the success of these companies lies in changes in the government’s policies and demographical factors," he notes. "Markets seem to have realised the future growth potential of these stocks, which explains the interest in these counters."
According to Harrish Zaveri, media analyst with domestic securities firm, Edelweiss Capital, one has to approach valuations in the segment on a case-to-case basis. "For example, considering the high valuations of NDTV, one can say there is no margin of safety in the stock, in the event of another earnings shock as happened in the last quarter," he says.
NDTV reported a 98.82 per cent decline in net profits to Rs 9 lakh in the June quarter, mainly due to a near 50 per cent jump in employee costs. However, with the operations of its Profit channel stabilising, the company is expected to see better days ahead. The prospects of established players like Zee Tele and Television Eighteen are also looking good, says Zaveri.
"While Zee should be able to post a growth rate of 15-18 per cent in the next fiscal, Television 18 should see a 30-32 per cent growth."
As for Deccan Chronicle, it recently acquired Odyssey India, a retail chain in southern India, for Rs 61.20 crore. Odyssey has 12 retail stores in six cities.
According to analysts, the company is expected to continue exploring the inorganic route for growth, especially since it could soon be flush with funds from the FCCB issue. Deccan Chronicle expects Odyssey's revenue to go up to Rs 90 crore in FY07 and Rs 150 crore in FY08. The FY06 revenue guidance of Deccan Chronicle has been revised to Rs 330-350 crore from Rs 280-300 crore after the company's board approved the acquisition, while profit guidance has been increased to Rs 70-90 crore from Rs 65-70 crore.
As for HT Media, analysts do not expect topline growth to translate into bottomline growth, at least in the next three years. Domestic research firm, SSKI had recently initiated coverage on the company with an ‘under performer’ rating.
According to a media analyst with a domestic securities firm, HT Media is likely to post revenues of Rs 70 crore in FY06 (of an estimated total revenue of Rs 786.60 crore) from its Mumbai operations alone. "But considering the investment mode the company is currently in, especially in Mumbai, the bottomline is expected to take a hit," he noted.
Total operating expenditure of about Rs 100 crore in Mumbai is likely to take the net profit down to Rs 4.50 crore in FY06, compared to Rs 27.25 crore in FY05.
Valuations are looking stretched
Analysts are unanimous that the current valuations of print media companies are looking stretched. They note that valuations are high compared to not only domestic standards but global peers.
"Global media companies operate at much higher margins - at 20 per cent on an average, but still the stocks trade at 20x forward earnings," says a media analyst.
Apart from Deccan Chronicle, all other print media majors have low margins (HT Media - 4.36 per cent and Mid-Day Multimedia - 7.05 per cent). However, the market cap to sales ratios of Indian media companies are pretty low. While a robust topline is a good thing, whether print media companies will be able to justify their premium valuations will ultimately depend on the earnings growth, say analysts.
Wednesday, September 14, 2005
Sink or Swim? A Prognosis for the Fourth Estate
An old theme revisited: Newspaper survival in the digital age- optimism or inevitability?
To return to a subject of past blogs, the question of survival of traditional, printed news is looking a little more hopeful. With The Guardian being the third broadsheet in the UK to adopt either the tabloid or Berliner format, clear evidence of the willingness of newspapers to adapt to external 'threats' from the new media is emerging. It's ironic that it may be the preference of newspaper readers to get their daily dose of news in the loo that may well save this billion-dollar industry from being slowly obliterated!
The story must however be cast in an even more optimistic light for the newspaper industry in the most rapidly growing economies of the world- India and China. In India in particular, the deleterious effects on newspaper readership arising from the growth of the digital media is being counterbalanced by an autonomous boom in newspaper readership itself. Thus the time is ripe for the big newspapers of the country to take on a form that they will anyway have to in the future- Berliner or 'compact' (aka tabloid). The article below, from the BBC news website, explains why such a move may well be an inevitability.
As always, a suggestion for that most respectable of papers in the country- The Hindu: Take a look at the online models of The Guardian and even The Economist magazine. They price differentiate across articles- zero price for some, minimal charge for premium content. This is, given the electronic explosion in the country, a powerful means to tap into the demand for online news (perhaps for a few paise more per day), and yet retain the readership base of loyal subscribers to the print version. This is not a new idea. Perhaps a variant of this scheme could be to offer the online version free of charge to those who subscribe to the print version. The possibilities are endless.
But, alas, there will be a price to pay for procrastination...
From the BBC: What will newspapers look like in 20 years?
The re-sizing of the Guardian into a so-called Berliner is the latest radical step by newspapers trying to arrest declining sales. So what will papers look like in 20 years, if they're still around?
Not even the wisest sage could predict with confidence what form newspapers will adopt - but there are certain pointers which seem to be sensible.
Firstly the fact of newspapers' existence at all. Their death has long been predicted. Even just 10 years ago, doom-mongers said websites and rolling television news would mean the end of cumbersome, outdated and smudgy print.
Just as the bowler hats had disappeared from the City, so the newspapers tucked under arms would follow into oblivion, they said.
Since that prophesy, the threat has been compounded by blogs, search engines, mobile phones, PDAs and even electronic paper.
Although newspapers have so far defied the gloomy predictions, they are taking radical steps to respond to the competition. The Guardian is the third daily broadsheet to adopt a more compact size - and others may well follow.
Despite these changes, though, the format has not changed hugely radically since the first English language private newspaper, the Corante, was published in 1621 in London.
Today, global newspaper sales are up, by 2.1% in 2004, but not in the UK, down 4.4% on 2003.
This is hardly surprising, given the competition. The appetite for news websites or search engines which gather news stories has rocketed. More and more people are accessing news on other platforms like mobile phones, while blogs offer a more personalised and off-beat take on news events.
And other technical innovations - such as electronic paper which can display text and be re-written - are in the pipeline.
A glimpse of what could be possible came in the film Minority Report, in a scene where a man reads what looks like a newspaper, but the page changes electronically as he is reading it.
British newspapers won't die out, says media commentator Vince Graff, because they are so portable, easy to use and cheap.
Their content has changed, in response to the competition of 24-hour news outlets, to reflect more entertainment, lifestyle and analysis, he says. But the paper format will survive.
RIP broadsheets
"I think even in 50 years' time there will be newspapers on paper, though they may be a niche product then, perhaps in the same way vinyl records are now," he says.
"The thing is paper is terribly convenient: how many newspaper-buyers read them on the loo?
"But I think it is looking increasingly unlikely that there will be anything in broadsheet shape. That is already looking very old fashioned."
More people will use e-papers, says Caroline Bassett, senior lecturer at the department of media and film at Sussex University.
"You could imagine newspapers existing as data which can be sent to many kinds of electronic screens.
"So you could collect your paper from your portable device such as mobile phone or laptop. At the other end of the market there could be newspapers delivered to public screens in stations, for example."
But the newspaper as we know it today will survive, says Ms Bassett, because it is favoured by many readers who find it easier to scan and more pleasant to hold.
Just as radio has survived television and theatre has defied film, the traditional newspaper - and in a form we would recognise - could endure.
To return to a subject of past blogs, the question of survival of traditional, printed news is looking a little more hopeful. With The Guardian being the third broadsheet in the UK to adopt either the tabloid or Berliner format, clear evidence of the willingness of newspapers to adapt to external 'threats' from the new media is emerging. It's ironic that it may be the preference of newspaper readers to get their daily dose of news in the loo that may well save this billion-dollar industry from being slowly obliterated!
The story must however be cast in an even more optimistic light for the newspaper industry in the most rapidly growing economies of the world- India and China. In India in particular, the deleterious effects on newspaper readership arising from the growth of the digital media is being counterbalanced by an autonomous boom in newspaper readership itself. Thus the time is ripe for the big newspapers of the country to take on a form that they will anyway have to in the future- Berliner or 'compact' (aka tabloid). The article below, from the BBC news website, explains why such a move may well be an inevitability.
As always, a suggestion for that most respectable of papers in the country- The Hindu: Take a look at the online models of The Guardian and even The Economist magazine. They price differentiate across articles- zero price for some, minimal charge for premium content. This is, given the electronic explosion in the country, a powerful means to tap into the demand for online news (perhaps for a few paise more per day), and yet retain the readership base of loyal subscribers to the print version. This is not a new idea. Perhaps a variant of this scheme could be to offer the online version free of charge to those who subscribe to the print version. The possibilities are endless.
But, alas, there will be a price to pay for procrastination...
From the BBC: What will newspapers look like in 20 years?
The re-sizing of the Guardian into a so-called Berliner is the latest radical step by newspapers trying to arrest declining sales. So what will papers look like in 20 years, if they're still around?
Not even the wisest sage could predict with confidence what form newspapers will adopt - but there are certain pointers which seem to be sensible.
Firstly the fact of newspapers' existence at all. Their death has long been predicted. Even just 10 years ago, doom-mongers said websites and rolling television news would mean the end of cumbersome, outdated and smudgy print.
Just as the bowler hats had disappeared from the City, so the newspapers tucked under arms would follow into oblivion, they said.
Since that prophesy, the threat has been compounded by blogs, search engines, mobile phones, PDAs and even electronic paper.
Although newspapers have so far defied the gloomy predictions, they are taking radical steps to respond to the competition. The Guardian is the third daily broadsheet to adopt a more compact size - and others may well follow.
Despite these changes, though, the format has not changed hugely radically since the first English language private newspaper, the Corante, was published in 1621 in London.
Today, global newspaper sales are up, by 2.1% in 2004, but not in the UK, down 4.4% on 2003.
This is hardly surprising, given the competition. The appetite for news websites or search engines which gather news stories has rocketed. More and more people are accessing news on other platforms like mobile phones, while blogs offer a more personalised and off-beat take on news events.
And other technical innovations - such as electronic paper which can display text and be re-written - are in the pipeline.
A glimpse of what could be possible came in the film Minority Report, in a scene where a man reads what looks like a newspaper, but the page changes electronically as he is reading it.
British newspapers won't die out, says media commentator Vince Graff, because they are so portable, easy to use and cheap.
Their content has changed, in response to the competition of 24-hour news outlets, to reflect more entertainment, lifestyle and analysis, he says. But the paper format will survive.
RIP broadsheets
"I think even in 50 years' time there will be newspapers on paper, though they may be a niche product then, perhaps in the same way vinyl records are now," he says.
"The thing is paper is terribly convenient: how many newspaper-buyers read them on the loo?
"But I think it is looking increasingly unlikely that there will be anything in broadsheet shape. That is already looking very old fashioned."
More people will use e-papers, says Caroline Bassett, senior lecturer at the department of media and film at Sussex University.
"You could imagine newspapers existing as data which can be sent to many kinds of electronic screens.
"So you could collect your paper from your portable device such as mobile phone or laptop. At the other end of the market there could be newspapers delivered to public screens in stations, for example."
But the newspaper as we know it today will survive, says Ms Bassett, because it is favoured by many readers who find it easier to scan and more pleasant to hold.
Just as radio has survived television and theatre has defied film, the traditional newspaper - and in a form we would recognise - could endure.
Thursday, September 08, 2005
Tabloid, Mid-Size or Broadsheet? Newspaper Size and Competition in the UK
Commentary
It would appear that the Guardian has finally decided to institute a format change, moving into the mid-range size, also known as 'midi'. Very much akin to The Hindu in India (also a newspaper that provides news access freely online), The Guardian is striving to claw its way back to the former circulation figures of 400,000+. They have dipped in recent times, as the article below suggests.
Is this a possible future scenario for The Hindu? Definitely likely. In addition to providing its services at no charge on the internet, The Hindu also resembles The Guardian in that it is a serious, credible and responsible paper, targeting the discerning reader who, alas, does not constitute a major proportion of the population. As the article mentions, the TOI's circulation is the greatest of any English daily in the world. So papers like The Guardian and The Hindu will have to do all it takes, including perhaps changing to tabloid or midi and using a subscription model for online news to avoid being annihilated. The good news, though, is perhaps that there will come a time in the future when the price war and thus raddi economics end (see article) and that will perhaps herald an era where only true quality determines which newspapers dominate the market. Optimistic?
From Raymond Snoddy of Brand Republic, UK- Veni, midi, vici. Guardian is out to win
All eyes in the media next week will be turning toward The Guardian - and you haven't always been able to say that in recent years. All the paper's rivals have been watching like hawks and sharpening their talons in case its imminent Berliner format enjoys the benefit of the new and starts to claw back sales from The Times and The Independent.
Advertisers who are awake will want to be present in the first days, even the first weeks, of the first full-colour Le Monde-sized national in British newspaper history. First reports of the dummies of the new beast have been complimentary and the all-new Guardian, which will appear on 12 September, will receive a great deal of free attention across the media for its £80m investment.
The big unanswered question is whether its fall to sales of 358,345, the lowest since 1978, is the result of the appearance of tabloid rivals, the newspaper's adherence to Old Labour values or its generosity in offering its sophisticated online service to the world for free.
The reality is that a combination of all three is probably at work, and once the sampling effect is over it could prove difficult for the new midi-sized paper to fight its way back to what used to be rock-solid territory for The Guardian -- a circulation of 400,000.
The December ABC figures should start to give a serious indication as to whether size also matters in the midi market.
In an ideal media world, The Guardian should be rewarded for its virtue, investment and enterprise and start to punch its weight again in the market after an unfortunate blip. It would also be nice if at the top end of the market there could be not just diversity of opinion, but also of format - tabloid, midi and broadsheet.
In the real world, executives at The Daily Telegraph will be watching next week's events most carefully of all. Will the paper be able to continue with its by-now increasingly distinctive broadsheet format, or will broadsheets simply become so associated with the old, the passe and the retired colonels of Cheltenham that they are simply no longer viable?
If the broadsheet is no longer sustainable, the Berliner format could be a possible route out of the dilemma for the Telegraph. As Guardian editor Alan Rusbridger puts it, one of the challenges he faced was to find a format which combines 'the portability of a tabloid with the sensibility of a broadsheet'. If the Telegraph thinks its broadsheet days are numbered, then retaining the 'sensibility' of one might still be something to aspire to, while avoiding tabloid associations.
Should The Daily Telegraph succumb, then the position of the Financial Times becomes interesting. It is a unique publication with a tailor-made audience, but not every FT reader commutes in a chauffeur-driven Roller with plenty of elbow room, so convenience could be a factor here too.
The appearance this month of City AM, the free daily aimed at the City, may represent little more than the tiniest pink-prick for the FT, but it is a further sign that it no longer inhabits its own perfect world.
The response of The Times is the most interesting of all. Not for the first time, the Murdoch approach is to get its retaliation in early. A week before the new-look Guardian appears, out comes The Times with a new T2 section and new specialist daily sections - of the sort pioneered by The Guardian.
But here is the really courageous bit: up pops the price of The Times by 5p to 60p. The apparently routine rise represents a symbolic moment.
Twelve years since Rupert Murdoch cut the price of the paper in the hope of burying the Telegraph, the price war at the top end of the market is finally over.
The battle is now a fairer one between editorial quality and three distinct formats.
30 SECONDS ON ... NEWSPAPER FORMATS- The broadsheet format was developed in 1712 when a tax was placed on British newspapers based on their number of pages. The Times of India is now the world's most widely circulated broadsheet, with more than 2m copies a day published from eight cities.
In the UK, The Independent began the shift to smaller formats in 2003 when it started producing a 'compact' edition alongside its broadsheet. It went fully compact in May 2004. The Times followed suit in November 2004, despite vocal opposition from some of its readers.
The term 'compact' was coined in the 70s by the Daily Mail to differentiate itself from 'downmarket' tabloids.
The Berliner format being adopted by The Guardian is slightly bigger than tabloid. Guardian Newspapers has built new presses in Manchester and London to print it. The Observer will switch to the format early next year.
It would appear that the Guardian has finally decided to institute a format change, moving into the mid-range size, also known as 'midi'. Very much akin to The Hindu in India (also a newspaper that provides news access freely online), The Guardian is striving to claw its way back to the former circulation figures of 400,000+. They have dipped in recent times, as the article below suggests.
Is this a possible future scenario for The Hindu? Definitely likely. In addition to providing its services at no charge on the internet, The Hindu also resembles The Guardian in that it is a serious, credible and responsible paper, targeting the discerning reader who, alas, does not constitute a major proportion of the population. As the article mentions, the TOI's circulation is the greatest of any English daily in the world. So papers like The Guardian and The Hindu will have to do all it takes, including perhaps changing to tabloid or midi and using a subscription model for online news to avoid being annihilated. The good news, though, is perhaps that there will come a time in the future when the price war and thus raddi economics end (see article) and that will perhaps herald an era where only true quality determines which newspapers dominate the market. Optimistic?
From Raymond Snoddy of Brand Republic, UK- Veni, midi, vici. Guardian is out to win
All eyes in the media next week will be turning toward The Guardian - and you haven't always been able to say that in recent years. All the paper's rivals have been watching like hawks and sharpening their talons in case its imminent Berliner format enjoys the benefit of the new and starts to claw back sales from The Times and The Independent.
Advertisers who are awake will want to be present in the first days, even the first weeks, of the first full-colour Le Monde-sized national in British newspaper history. First reports of the dummies of the new beast have been complimentary and the all-new Guardian, which will appear on 12 September, will receive a great deal of free attention across the media for its £80m investment.
The big unanswered question is whether its fall to sales of 358,345, the lowest since 1978, is the result of the appearance of tabloid rivals, the newspaper's adherence to Old Labour values or its generosity in offering its sophisticated online service to the world for free.
The reality is that a combination of all three is probably at work, and once the sampling effect is over it could prove difficult for the new midi-sized paper to fight its way back to what used to be rock-solid territory for The Guardian -- a circulation of 400,000.
The December ABC figures should start to give a serious indication as to whether size also matters in the midi market.
In an ideal media world, The Guardian should be rewarded for its virtue, investment and enterprise and start to punch its weight again in the market after an unfortunate blip. It would also be nice if at the top end of the market there could be not just diversity of opinion, but also of format - tabloid, midi and broadsheet.
In the real world, executives at The Daily Telegraph will be watching next week's events most carefully of all. Will the paper be able to continue with its by-now increasingly distinctive broadsheet format, or will broadsheets simply become so associated with the old, the passe and the retired colonels of Cheltenham that they are simply no longer viable?
If the broadsheet is no longer sustainable, the Berliner format could be a possible route out of the dilemma for the Telegraph. As Guardian editor Alan Rusbridger puts it, one of the challenges he faced was to find a format which combines 'the portability of a tabloid with the sensibility of a broadsheet'. If the Telegraph thinks its broadsheet days are numbered, then retaining the 'sensibility' of one might still be something to aspire to, while avoiding tabloid associations.
Should The Daily Telegraph succumb, then the position of the Financial Times becomes interesting. It is a unique publication with a tailor-made audience, but not every FT reader commutes in a chauffeur-driven Roller with plenty of elbow room, so convenience could be a factor here too.
The appearance this month of City AM, the free daily aimed at the City, may represent little more than the tiniest pink-prick for the FT, but it is a further sign that it no longer inhabits its own perfect world.
The response of The Times is the most interesting of all. Not for the first time, the Murdoch approach is to get its retaliation in early. A week before the new-look Guardian appears, out comes The Times with a new T2 section and new specialist daily sections - of the sort pioneered by The Guardian.
But here is the really courageous bit: up pops the price of The Times by 5p to 60p. The apparently routine rise represents a symbolic moment.
Twelve years since Rupert Murdoch cut the price of the paper in the hope of burying the Telegraph, the price war at the top end of the market is finally over.
The battle is now a fairer one between editorial quality and three distinct formats.
30 SECONDS ON ... NEWSPAPER FORMATS- The broadsheet format was developed in 1712 when a tax was placed on British newspapers based on their number of pages. The Times of India is now the world's most widely circulated broadsheet, with more than 2m copies a day published from eight cities.
In the UK, The Independent began the shift to smaller formats in 2003 when it started producing a 'compact' edition alongside its broadsheet. It went fully compact in May 2004. The Times followed suit in November 2004, despite vocal opposition from some of its readers.
The term 'compact' was coined in the 70s by the Daily Mail to differentiate itself from 'downmarket' tabloids.
The Berliner format being adopted by The Guardian is slightly bigger than tabloid. Guardian Newspapers has built new presses in Manchester and London to print it. The Observer will switch to the format early next year.
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