Business Media Opportunities in India

A white paper researched and written for American Business Media
by Business Strategies Group Ltd.

Business Media in India Overview The first point to make in an overview of the industry is that business media remains a very small business in India by international standards. We estimate that combined revenues from business-to-business events and publishing are in the region of $100 million.

The past 2-3 years have been tough ones for publishers in particular with advertising revenues falling dramatically as they have elsewhere in the world. Estimates vary but we have typically heard of drops of 30% from the peaks of 2000 and, in the case of technology publishing, 40 - 50%.

Publishing Our estimates suggest that business magazines generated revenues of only around US$20-25 million in India in 2003. To get a perspective on this, it is worth noting the media research company ORG-MARG has identified the tobacco, paper board and hotels conglomerate ITC as India's top magazine advertiser. In 2001, their spending in this sector was only Rs105 million (US$2.3 million); this figure includes consumer and other general interest publications.

There is very little published data on Indian business media in this category and the following estimates are, by necessity rough. We do believe, however, based on a number of interviews conducted during February 2004, that they do give an accurate view of the overall scale of the market:

In a number of categories, the split is erring towards television with major companies such as IBM for example switching $5 million, a substantial chunk of its India advertising budget, into the increasingly competitive and businessoriented TV sector.

Circulations are moderate by US standards although much larger than those in many other Asian markets.

The FIPP/Zenith Optimedia report also lists Intelligent Investor magazine with the business titles. This was acquired by the Raheja Group, the publisher of the news weekly Outlook and has now been re-titled Outlook Money. This is a general investor title along the lines of Money magazine in the US and we have not included it in our analysis as a business magazine. We understand that publications of this type face particularly severe competition from the personal finance sections of the major daily newspapers and their financial daily spin-offs (e.g., Economic Times and Financial Express).

Key players

The market for business publishers is dominated by a small number of companies each of which we believe has around 10-15% of the business publications market. The following table shows the top six publishers who, between them, account for 67% of the market ranked here by BSG's private estimates of revenues from business publications. We do not believe that any other publishers achieve more than 5% share of the market:

Because of its relatively small size and the fact that it has remained tightly closed to foreign publishers, the presence of international business media companies in India is very limited. The following summarises our understanding of the current situation. The companies are listed in alphabetical order.

Publisher profiles

The following profiles represent the largest and most important of India business publishers. Some of this information was compiled from interviews while other parts of this section are drawn from companies' own publicity materials: Company Comments 1 Cybermedia Leading and longest-established major technology publisher. Research and events revenues not included in this calculation. 2 ABP Group Publisher of Business World. 3 Living India India's largest magazine publisher. Now publishes only one B2B magazine, Business Today. 4 Jasubhai A leading publisher of technology and other business magazines. 5 Business India Flagship publication is Business India. Some events and other media activities. 6 Indian Express BPD The Business Publications Division of Indian Express Newspapers has a range of specialist business titles of which Express Computer is the flagship.

Cybermedia

Cybermedia is one of the best established of the business publishers in India. Founded in 1982 by Pradeep Gupta, the Chairman and Managing Director, the company has for most of its 20+ years history focused on technology publishing. Most recently, it has announced its intention to work with McGraw Hill to launch an Indian edition of Business Week although approvals for that venture are still pending. The company is also planning an IPO. Press reports in early March suggested that this could take place as early as May 2004 although no further details have yet been released. The company has various business lines, as well as its eight magazines, it has an events division and what is regarded as the leading on-line service for the technology industry (www.ciol.com).

The company has also ventured successfully into producing technology programming for television as well as multi-media content and CDs. Its market research business is the Indian arm of IDC and it has separately started a media education business, the School of Convergence. Chairman Gupta told BSG in February that the company now also wants to move into the business of content generation as an offshore outsourcing service to international media and IT companies. In recognition of the importance of the Business Process Outsourcing Business to India, they are also looking at launching a magazine focusing on that and IT enabled services. Cybermedia employs 375 staff with offices in Delhi (its Gurgaon head office is one of the more sophisticated publishers' offices in India), Mumbai and Bangalore. Corporate web site: www.cmil.com

ABP Group

The weekly Businessworld has emerged as the leading general business title in India with a circulation of 135,000. Although it carries rather fewer pages in each issue than its fortnightly rivals, Business Today and Business India, our estimates still put the magazine in the top spot with over 10% of all India's business revenues. Businessworld is published by the Kolkata-based ABP Group which also produces the English language The Telegraph newspaper and the Bengali newspaper Ananda Bazar Patrika. Web site: www.businessworldindia.com

Living India (India Today)

India's leading magazine publisher now has one major business title, Business Today. The Group was launched in 1975 with the fortnightly English newsmagazine, India Today. Today, that magazine claims a circulation of 417,505 and total readership of 15.9 million across all its editions. The publishers say it is "the most widely read magazine in the country" and that Living Media India is the largest magazine publisher in the country. The company also published Computers Today for a number of years but pulled back from that market. An attempt to re-launch as Smart Inc. was not sufficient to keep the company in that market, leaving Business Today as the only business focused title in a portfolio which otherwise focuses on consumer titles. Web sites:
www.india-today.com
www.business-today.com

Jasubhai Group

Jasubhai Chairman, Jasu Shah, is one of India's business media pioneers. Starting with his flagship Chemtech trade show some 30 years ago, he has built what is now clearly one of the leading business media groups in the country. As well as the chemical industry, the Group's magazine portfolio covers IT (DIGIT, Computer Reseller News, Network Computing, and Developer 2.0 are the main titles), architecture, interiors and, in its newest venture, the pharmaceuticals and biotechnology sectors. Corporate web site: www.jasubhai.com

Business India

The original Indian general business magazine founded by Ashok Advani 26 years ago, Business India, is a powerful brand in the Indian market. Published every two weeks, the magazine bears some resemblance to The Economist and has a reported circulation of 89,000. Along with all the other publishers with whom BSG spoke for this research, Advani commented that "the magazine market has been terrible for the past three years". Commenting on the future, he said, "All the media companies are under-capitalized and run on old networks. There will be a lot of consolidation as we saw in UK in the 70s and 80s. Those with national brands will be able to take advantage of that". As well as Business India magazine itself, the company produces magazines and events for interiors (Inside Outside). The events division was previously very active producing, amongst other things, Comdex India. Advani expects that once again to become an important part of their activities.

Indian Express BPD

The Indian Express is one of the great Mumbai newspaper titles founded by independence campaigner Ramnath Goenka. Its Business Publications Division was founded in the early 1990s by his grandson and remains an important publisher of trade titles in the IT, hospitality, pharmaceuticals and textiles. The group's flagship weekly Express Computer competes vigorously with Cybermedia and Jasubhai in the IT sector. Web sites:
www.indianexpress.com
www.expresscomputer.com

Information, Internet & mobile data services

Internet

Regulatory restrictions on telecommunications have meant that India opened up relatively slowly to private Internet usage. This is changing fast. The National Association of Software and Service Companies, NASSCOM, in its annual review of the IT industry noted, "Internet penetration became more widespread with bandwidth becoming readily available, Internet tariffs coming down and computer hardware becoming cheaper"6. The report goes on to note, however, that "the Indian Internet and E-commerce market…is nowhere close to its expected potential. E-mail applications still constitute the bulk of Net traffic in the country". The number of users is growing rapidly but remains behind a number of India's rivals including China and the Philippines.

Source: Strategic Review 2004: The IT Industry in Industry, NASSCOM

High speed access also continues to lag behind other countries. A recent report says that, at the end of 2003, India had only 82,000 high speed lines. This compared with the United States with over 25.1 million lines, Japan with 13.6 mn, China with 13.5 mn, and South Korea with 11.1 mn. One of the national telephone companies, BSNL, is quoted in the report as saying that they aim to have 500,000 broadband lines installed by the end of 2004.

A closer analysis of the estimated users data shows a heavy weighting towards business users. NASSCOM's estimates show business and household subscribers relatively evenly weighted. In terms of users, however, business outweighed household use by a factor of 7.35:1 in 2003

Business vs. household Internet estimated Internet users, 2001 - 2005

The implications of this for business media are clear: the Internet is only just emerging in India as a truly powerful tool for business communications. It is likely, however, that the rapid increases in penetration of Internet usage in the business environment could make the web and related tools a powerful B2B media tool in the next 2-3 years.

The impact of this on business practices is already beginning to be seen. Sudhir Nair heads Grey's on-line activities in Mumbai and noted "interactive has moved from brochure web sites to being a direct adjunct to business. We are working on fully integrating the web with business processes."

Spending on advertising and related services is soaring. Accurate data is hard to come by but, according to Grey's Nair, as recently as 2002, online spending was as low as Rs20 crores (US$4.4 million). In 2003, this number had risen to Rs50 crores (US$11.1 million) and may be as high as Rs100 crores (US$22.2 million) this year.

As would be expected, IT companies are leading the way. A few, such as Oracle, are reported to be spending up to 40% of their Indian promotional spend on various forms of on-line promotion and marketing activities.

Mobile data services

The introduction of real competition into the Indian cell phone market in the past 2-3 years has seen tremendous development in this sector. Soaring subscriber numbers and reduced tariffs mean that the emergence of mobile data as a valid media format has begun. The market more than doubled in 2003 from 10 million to 28 million users8. Expectations are that the growth will continue at something like the same rate through 2004 and that, during the course of the year, cell phone subscribers will outnumber the 42 million fixed line subscribers, still a highly regulated market.

Peer-to-peer SMS traffic grew 46% in the 2002 - 2003 period while application driven SMS traffic was up 204% in the same period9. Merrill Lynch has estimated that SMS could generate over US$75 million for mobile telephone operators by 2005.

Opportunities for foreign involvement in the market

India in the first three months of 2004 has seen visits from at least a dozen major international magazine publishers. It is clearly high on many corporate agendas. The international association, FIPP, organized a magazine publishers delegation to the country in early March. All are clearly interested in what opportunities now exist for foreign publishers.

Until recently, opportunities in this market were limited by regulatory constraints to licensing arrangements (see "The regulatory environment" on page 31 below for more details about how this has recently changed).

Those constraints have been removed but there are still commercial issues which have to be considered by any foreign company entering the market. The most significant of these are:

• Competition:
  
  This is a highly competitive market in which a well established set of domestic competitors already vie for supremacy with a huge range of products.
  
  
• Pricing:
  
  By any standards prices are low in India and the market is small in dollar terms. Market conditions in the past three years have seen further downward pressure. For most international publishing companies, it is going to be very challenging to structure a business in a way which can generate sufficiently large returns to look attractive in a global context.
  
  There are, though, a number of factors which mean that companies will consider this market. These include:
  
  
• Consolidation opportunity:
  
  There has so far been very little consolidation of business media of the type that was seen in the US and Europe and in the 1980s and 1990s. As Business India's Ashok Advani pointed out to us, this means that most media companies are relatively small and poorly capitalized. The 'giants' such as Bennett, Coleman of the Times of India and, to a lesser extent, the Living India Group are exceptions. In non-news media in particular, there are clearly opportunities for foreign investors with a long-term perspective to build up a portfolio of titles in a larger company than currently exists.
  
  
• Language:
  
  English is the language of business in India and that makes it more accessible in some respects than the other major markets in Asia, Japan and China. There are no additional translation costs and, in theory at least, communications between partners should be more direct than in markets where language is a constraining factor.

Recent developments

The following is a summary of business media developments in India tracked by BSG since the middle of 2002. These reports originally appeared in BSG's free weekly e-newsletter which tracks business media developments in Asia (for subscription information, please see www.bsgasia.com):

June 2002: Restrictions on foreign investment lifted: Foreign holdings in news and current affairs publications are now allowed up to 26% while technical and other non-news media can sell up to 74% to non-Indian companies. Former Information and Broadcasting Minister Sushma Swaraj was reported as saying that editorial and management control have to remain in Indian hands. The Government retains veto rights over investments by foreign companies and needs to approve subsequent changes of ownership. It also requires that 75% of all employees are Indian nationals. The move received a mixed welcome from Indian media groups. The major ones remained opposed to it while smaller players saw it as an opportunity to tap outside capital sources.

Aug. 2003: AMP acquires stake in Hindustan Times: Australian financial services group AMP acquired 19% of the Hindustan Times, a Delhibased general newspapers, the first transaction of its type after the 2002 regulatory liberalization.

Sept. 2003: Financial Times acquires stake in Business Standard: The Financial Times (FT) announced the acquisition of a stake in the Mumbaibased Business Standard newspaper. The investment of Rs141 million (US$3.1 million) gave the FT a 13.85% stake in the pink broadsheet which is printed in seven Indian cities. The existing shareholders, investment bank Kotak Mahindra and Great Eastern Shipping, both retained their equity positions following the deal.

ICICI acquires Tata Infomedia: India's industry giant, Tata Sons entered into a definitive agreement to sell its controlling stake of 49.99% in Tata Infomedia Ltd. to ICICI ePayments Limited, wholly owned by India Advantage Fund at a price of Rs176/= per share.

Expomedia/Informa alliance: India is identified as one of the countries targeted in an agreement between Expomedia Group Plc and Informa Group PLC to co-launch a conferences programme in five countries. The other countries are Russia, Poland, Hungary and North West Africa. Expomedia is separately investing in a new exhibition and convention centre in Delhi.

Dec. 2003: CHIP re-launched in India: Infomedia India Limited (formerly Tata Infomedia) launches a new Indian edition of Vogel's CHIP magazine. Originally launched in India in the late 1990s with Jasubhai, the magazine pioneered high quality, newsstand IT publications with cover-mounted CDs.

Jan. 2004: Wall Street Journal announces Indian edition: Dow Jones announced an agreement with Bennett, Coleman & Co. Ltd., publisher of The Times of India and The Economic Times, to establish a joint venture to publish an Indian edition of the Wall Street Journal. Dow Jones will own 26% of the new business, the maximum allowed under current rules. The Indian Journal will be published five days a week. Bennett, Coleman has been among the more aggressive Indian companies in taking advantages of the liberalization of foreign media ownerships rules first announced in June 2002. Last year it also announced a joint venture with BBC Worldwide to publish speciality consumer magazines in India.

March 2004: Cybermedia announces IPO: Cyber Media, India's longestestablished and largest IT media company, confirmed that it plans to go public possibly as soon as the end of May this year. The online newsletter exchange4media quoted Cybermedia Chairman and Managing Director, Pradeep Gupta saying, "We intend to go public by May-end...In the next 10 days, things will take a definite shape." He reconfirmed to BSG that this is indeed his plan. Gupta added that the pricing of the initial public offer hadn't been finalized although market analysts are speculating that the price would be around Rs60 (US$1.33).