In a very significant development, the Audit Bureau Of Circulation (ABC) has revised the maximum trade term/commission to the distribution trade for daily newspapers to 35% instead of 40% (as applicable at present) whilst arriving at Net Paid Sales.
This major development could have serious ramifications for various newspapers and is going to especially get the leading newspapers The Times of India and The Hindustan Times to rethink their strategy.
Apart from the above mentioned amendment two more amendments have been also made. The ABC has made it mandatory that a Responsibility Statement be provided by all daily newspaper publisher members stating that the Net sale price of their publication for each issue at the maximum trade term offered to the distribution trade was higher than its value in waste whilst submitting the Incoming Certificate. The statement would be subject to scrutiny by publisher’s as well as Bureau’s Auditors (as the case may be). The bureau also has stipulated that the Minimum subscription rate for newspapers as well as magazines to be atleast 50% of the cover price of the publication for the relevant period.
The decision as regard to the above mentioned amendments was taken on 22nd January at a meeting of the Council of Management and was circulated to members yesterday. The Council, has from time to time, considered various suggestions in order to strengthen Bureau’s audit guidelines and procedures so as to achieve its prime objective of certifying actual Net Paid Sales of member publications.
Leading print media advertisers and advertising agencies depend on ABC certified circulation data for their media planning and buying decisions. Keeping its prime objective in focus, Council was concerned about the alleged practice of copies of newspapers possibly being sold as waste even though were indented and paid for by agents and sale of copies as subscription sales to various categories at a throwaway price.
In order to curb these alleged practices, the Council decided to take above mentioned steps so as to enhance the credibility of the ABC certificate. The amendments would take effect from 1st July 2002 corresponding to the audit period July/December 2002. The above amendments would revise the existing definitions and audit guidelines and procedures as and where applicable in the Guide to ABC Audit.
The revision of the Maximum trade term/commission to the distribution trade for daily newspapers of 35% instead of 40% (as applicable at present) whilst arriving at Net Paid Sales could impact the fortunes of the two leading daily newspapers The Times of India and the Hindustan Times as over the years the bedrock of their growth strategy has been to improve circulation using various tactics and use the ABC figures to showcase their gains in circulation.
The strategy of these two leading newspapers, who have been involved in a very competitive and fierce price war has been to rev up circulation and have undertaken numerous initiatives that could lead to increase in their ABC numbers. These included initiatives like the Catch them Young initiatives directed as school going readers. The Times of India had launched Newspaper in Education “NIE” some 10 years ago and Hindustan also followed suit couple of years ago with its PACE initiative. The newspaper in these initiatives was priced at Rs. 1.20 and helped both of them notch up impressive numbers so that the ABC numbers went up.
Another tactic followed was to launch numerous satellite editions and show them as part of Delhi numbers. It has been alleged by media watchers that large numbers of copies were dumped in deep far flung areas like Orissa so as to increase circulation numbers.
Also the newspapers increasingly started utilising gift-based promotions to increase subscription. A large number of products would be bundled with the subscription where the product would be subsidised substantially and hence the subscription would be bought by the reader not because they wanted to read the newspapers but because of the goodies coming with the subscription.
The newspapers could give extremely lucrative price on the goods and in most cases substantially lower than the normal price of the product in the market. This would not hurt the newspaper as the products were bought in large numbers and the price was paid mostly not in cash but the product owners got advertisements in lieu of the goods. The moot point debated often has been that do the advertisers want this kind of audience or readership?
The important thing to notice would be how hawkers in the newspaper trade react to this development as over the last many years their commission has remained static at 40% and they have not gained as the cover price has not increased. Currently they get 60 paise out of the Rs.1.50 and in case this is made 35%, it will become 52.5 paise which in all probability will not acceptable to them.
In order to maintain the current remuneration of 60 paise to the hawker and also comply with the new 35% slab the newspaper might have to increase the price to Rs.1.70. Will TOI and HT increase their cover price to deal with hawkers? More importantly in case they do so will the new arrangement be acceptable to hawkers or would they want to get more commission on account of increase in cover price?
It would also be interesting to see what kind of impact this new price if at all introduced will have on the circulation and readership numbers of these newspapers. Will the consumers accept this or will there will be a drop in growth numbers? How are the newspapers going to balance the twin objectives of growth in readership and acceptable remuneration to hawkers?
Media watchers are also keen to see whether the affected newspapers will continue to be a part of ABC or opt out of it or get the amendments to be relooked at by committee members. They feel that over the years the strategy of these newspapers have revolved around improving the ABC numbers and it would be interesting to see how they deal this sudden development.
The other key question that is also thrown up is that whether they are going to get together on this development and deal with both the hawkers as well as ABC as one or will they blow their own trumpets separately. In the past TOI and HT have had a tacit and professional understanding and an ethical code with each other in regard to various issues that impact each other, whether it was not to poach key people from each other or whether it was the issue of not dumping copies in far flung areas.
In the recent past some of these tacit understanding have not been followed and it might be in their collective interest to tackle this new development together with the fraternity. One thing is sure that this new development coming from ABC will force them to relook at their circulation strategy and get them to think of innovative ways as they have done in the past and handle this sensitive development in manner so that their interests are protected.