Time to smell the chai, newspaper owners!

19 Jan,2017

 

By Pradyuman Maheshwari

There are some who may believe that as a media professional one mustn’t attack others in the fraternity even if the demands they are making to the government are unjustified. For, why grudge the special benefits given to them, if they are able to successfully convince or the coerce the government to give in to them.

First, the fact: the media – especially newspapers – are in a mess on revenues, esp after the Nov 8 demonetisation announcement. Some established papers have seen a shaving off of around a quarter of their revenue projections. The smaller ones even more. This 20-60% drop in revenues is not just from retail who have obviously been the most affected by demonetisation. Even large corporates have put off their spends. Consumers in general are said to have pushed their big spend plans given uncertainties. Hence automobiles, durables and even second-homes have seen a drop in sales.

Then there’s the wage board that newspapers are governed by. The recommendations that are likely to be forced on them will increase their spends considerably.

Add to that the unfortunate reality of lesser – cheque and cash – payments coming from political parties and individuals. There is no evidence on it, but some of the larger non-English newspapers especially are known to make monies from political advertising and paid content.

But does all of this mean that the print players in news make unjustified demands to the government? For decades, they’ve got away with it because they are all-powerful. Minister and bureaucrats don’t want to displease the mighty media barons… especially those who own newspapers.

It’s not that newspapers haven’t got the wrong end of the stick. The Indian Express faced a lot of it from the Congress government under Rajiv Gandhi, The Times of India faced many regulatory troubles when Ashok Jain was at the helm and more recently Rajasthan Patrika has alleged some rough weather from the Rajasthan government.

But this time around, it’s my view that the Times of India (and possibly representing the interests of some others too) is incorrect in its demands.

So let’s read what The Times of India unsigned editorial notes. Here’s the link: http://blogs.timesofindia.indiatimes.com/toi-editorials/indian-newspaper-industry-red-ink-splashed-across-the-bottom-line-hard-hit-by-factors-beyond-its-control-print-media-needs-reasonable-tax-and-labour-policies/) and here are the highlights (in italics) with my comments:

The headline of the article: Indian newspaper industry: Red ink splashed across the bottom line – Hard-hit by factors beyond its control, print media needs reasonable tax and labour policies

Everyone needs reasonable tax and labour policies, so that’s a valid point but is the newspaper business impacted by factors beyond its control? How about upping cover price? Is that beyond the control of the industry?

There is already blood on the floor of one of the last bastions of print media in the world. Major national dailies are shutting editions, laying off staff, slashing costs, and freezing expansions and investments.

The decision to shut editions by some of these major national dailies speaks for faulty planning and projections. And why was it allowed to flounder for so many years. For instance, it was evident that Hindustan Times in Kolkata could not beat a Telegraph and even Times of India despite its content and superior infographics… so why did it wait all these years?

Worse is to come if taxes are raised under the GST regime

Yes, this can have an adverse impact, and perhaps it is fair for the news media to ask for some concessions… but this should not be restricted to newspapers alone.

Already, implementation of the latest wage board recommendations has bled a number of print companies to the point of sickness after the previous government accepted the board’s report and forced newspapers to raise salaries by 45-50% along with arrears – so that blue collar staff including peons, clerks and drivers in certain scales are now paid more than three times what they earn in any other industry in India. Hitherto profitable large publishers went into the red because of unsustainably high wage board payouts. The venerable Hindu reported a pre-tax loss in 2013-14 and 2014-15 as staff costs soared due to unsustainably high wage board payouts…

Governments shouldn’t be dictating terms on salaries. It should have no role in this. But, historically, some newspapers are known to have been unfair on salaries. Which is why the government got into the act. If the salaries are as per market standards, there is no reason why the government would have established a wage board. For too long, several newspaper managements have been paying low wages to staff saying they are in the business not for profit but for a social cause. However, they have been making profits and diversifying into non-news businesses. On the wage board, we guess, it is too late. The government has got onto the act and wage boards – whether managed by the government or retired judges – are here to stay. Moving employees on the contract system as many managements have been able to successful switch their staff to is the only solution… but for that they need to pay people market salaries.

Demonetisation has also wreaked havoc on the print media. The Indian newspaper business is heavily dependent on advertising revenue, which contributes 70-80% to its total revenue.

Tch, tch. But why depend only on ad revenues. How about increasing the cover price? The concept of near-free newspapers in recent years was pioneered by The Times of India group. Why don’t our newspaper owners and their organisations take a decision to increase rates. If people are willing to pay Rs 20 or more for a soft drink, surely they can pay the same for a newspaper. If it offers value…

This has been exacerbated by government refusing to hike its rock-bottom DAVP advertising rates in line with market rates. DAVP rates have been revised only once since October 2010. Government advertising in large national newspapers is heavily subsidised by the newspapers themselves and does not even cover the cost of the paper they are printed on.

So don’t accept these ads! Just as you wouldn’t accept ads of a marketer not paying the desired dosh. If the government wishes to use your media vehicle for its ads, let it negotiate a good rate and pay you that. The fact of the matter is that many newspapers depend on DAVP-released government ads for their survival. And they’ve even lobbied hard in the past for rates to be increased.

What has compounded the situation is a sharp spike in overheads like newsprint costs, particularly of the imported variety – which is used by large newspapers in high-speed printing machines – because of rupee depreciation.

This is bound to happen. Ask an ice-cream maker, and s/he will give you the same story. There is a sharp hike in costs across the board!

Despite all this, Indian newspapers have kept cover prices among the lowest in the world (Rs 3-5 per copy on an average) so as to keep them affordable for readers for whom the newspaper is a source of not just information and entertainment, but also education and knowledge.

He he, ha ha, he he, ha ha. That’s not the reason why newspapers are priced so low. It’s a flawed model, and managements worry that their readers will desert them if the cover price is hiked. And they are also worried that a new entity might come in with lower prices. Newspaper managements have asked for this predicament… and they must collectively take a decision to hike the cover price.

As result, circulation revenue remains low and does not come anywhere near covering the cost of producing and distributing newspapers (advertisers cross-subsidise readers, which is why the steep fall in ad revenues since November is such bad news for the industry).

Obviously!

The cumulative effect of all these factors means that there is an existential threat to the vast majority of Indian newspapers, including the larger ones, which themselves have been financially weakened in the last few years. To cite an example, one of the most profitable publicly-listed national newspaper groups reported only a 4% CAGR revenue growth between 2011-12 and 2015-16 while its manpower cost jumped by over 58%. If this is the challenge before a major player, imagine the situation in smaller entities.

There is an existential threat to newspapers not just in India but across the world. There is need to reinvent and exploit the digital media to reach out to newer readers. Manpower costs are bound to increase… it’s a business that depends on skilled labour though some automation is likely to get in here too.

One, government must review wage board and remove non-journalist staff from its ambit. Print media is the only industry in the Indian private sector where a government-appointed wage board fixes wages. The National Commission on Labour in 2002 had unequivocally recommended that there was no need for a wage board to be constituted for any industry. In any case, the very concept of a ‘print journalist’ no longer exists as journalists have become platform-agnostic, moving from filing for online to writing for print to appearing on television, all in the course of a single workday.

Start paying people well across the board, and across all your offices, and we can be sure the government can be made to step back.

Two, the new GST regime must ensure zero rating of newspapers so as to fulfil its guiding principle that tax rates will be kept same as or lower than current levels of duty. Promotion of freedom of speech and upholding of democratic values have for over six decades formed the bedrock of the principle of zero or very low indirect tax on newspapers. The Supreme Court’s interpretations of Constitutional protections for newspapers hold that any tax on newspapers is a tax on knowledge and militates against the spread of literacy and dissemination of news. Hence, advertisements in print media must be declared as zero-rated supply under GST; additionally, there must be exemption on sale of newspapers to consumers to avoid any additional cost burden on the reading public. This would be in line with international benchmarks: democracies all over the world don’t just protect newspapers from taxation, but also promote them through affirmative action.

Concessions shouldn’t be only for newspapers. If newspapers promote freedom of speech and help uphold democratic values, so do news channels and websites. For instance, there is no service tax on ads in print, but this exists for other media. For instance, digital, which reaches more people potentially given the high usage and sales of smartphones, must be encouraged more than any other media.

Media in general and newspapers in particular are at an inflection point today. Rather than taxation squeezes and attacks on revenue streams, this is the time to strengthen an industry that can help spread literacy, deepen democracy, become a force multiplier for India as a soft power, and grow in scale to take on agendas and interests inimical to the nation. What the industry needs is for government to pursue reasonable fiscal and labour policies.

Be fair to all news media and all businesses, one would say. Look at the profits that some of these newspapers make. And look at some of the business practices some of these have, including charging for editorial content by putting up a token disclosure.

Pradyuman Maheshwari is editor-in-chief of MxMIndia. The views expressed here are his own and not necessarily those of MxMIndia.

 

 

 

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