Hike in newsprint cost having a domino effect; print media girdles up for hike in rates

Hike in newsprint cost having a domino effect; print media girdles up for hike in rates

Author | Swapna Rahul Shah | Monday, Aug 04,2008 8:53 AM

Hike in newsprint cost having a domino effect; print media girdles up for hike in rates

Hike in newsprint cost is forcing print players to rework their ad rates. BCCL had recently announced that it would hike its ad rates by 40 per cent. Mid-Day, too, has increased its ad rates by 20-25 per cent, while DNA is contemplating an increase in its price. Media observers have said that these steps are a result of the increase in costs, specifically newsprint costs. They also said that media houses may find it difficult for advertisers to agree to the hike in ad rates.

Media planners expressed their disagreement on the hike as they fear that their return on investment (ROI) would decrease. But media owners argue that they are left with no choice but to increase the ad rates as well as cover price to share the burden of inflation in newsprint price.

The rise in newsprint cost has got everyone worried – from media planners to media owners. This is the first time that the print industry has to bear 60 per cent of the rise in newsprint costs. Media observers stated that advertisers might shift to other mediums due to this. They believe that if all players had to increase their ad rates to placate the cost increase, it would work in the favour of mediums such as radio and television. These mediums may suffice to solve the low budget objective to reach the relevant target audience compared to the print medium. Nonetheless, print media cannot be discarded completely, especially when the campaign objective is to reach a broad target audience.

exchange4media spoke to various industry people to know their views on the newsprint hike, which has led to hike in ad rates as well as cover price of newspapers. Will the print media owners get the increase that they are proposing?

Other mediums will benefit

Nikhil Rangnekar, Executive Director, India – West, Starcom Worldwide, said, “If all print players increase their rates, there could be a shift to other media like radio, where localisation is needed, or digital media, which can give the same audience, although in maybe smaller numbers, but more effectively. There are cases where the clients will still need print campaigns like tactical campaigns, sale advertising, etc., which will make sure that the print media will keep getting business. Also, if the second rung players do not increase their rates they can benefit from this.”

Bringing another point of view, Harish Shriyan, Joint MD, OMD, said, “The 40 per cent ad rate hike by TOI is quite steep. It will certainly impact small and medium budget advertisers. So far, Hindustan Times and DNA have been more or less great supplements to The Times of India, but I guess going forward it may change to an extent. Big budget print advertisers will also feel the pinch, but they will certainly not look at replacing TOI as it still is the market leader and a great reach vehicle. However, the frequency may go down depending on campaign objectives.”

“The possibility of looking at alternate mediums like radio and outdoor will increase,” Shriyan added.

According to Kunal Jamaur, GM, Madison Media, “As an agency person I obviously don’t want to see my ROI going down. I don’t think it is fair enough to hike the ad rates unless and until they justify it with better returns on investment, which none of the publication do. 40 per cent hike is not something which is amicable to me.” He further said that TOI would have a tough time in getting this because 40 per cent hike was too steep. “Somewhere they need to realise that they are losing money to other media, and that they would lose it further if they hike ad rates in this manner,” Jamuar added.

Jamaur further said, “If all had to increase the ad rates, the impact would be positive, especially for the radio industry. Radio as a medium will gain more because substantial local advertising would be coming in.”

Print players have no option but to hike rates

According to Manajit Ghoshal, CEO, Mid-Day Infomedia, there are only two ways in front of media companies to bear the inflation in newsprint prices. They could earn either through the reader, hence by increasing the cover price and subscriptions, or through the advertisers. “Unfortunately for the print industry, the newsprint prices have shot up by 60 per cent because of various global reasons such as mills shutting down, China stopping exporting newsprint and so on. Newsprint prices are more than 50 per cent of the total cost, so we need to do something about it,” he maintained.

Ghoshal claimed that Mid-Day’s increase in ad rates and cover prices had not affected their readership numbers.

KU Rao, CEO, Diligent Media, which publishes DNA, is of the opinion that someone has to pay for the increase in newsprint and other input cost increases. The print industry is totally reliant on advertising revenues for its income, so there is no option but to hike the prices. He said, “DNA will take a decision to raise its price within the next fortnight.”

Speaking on impact of hike in ad rates, he said, “The print market has grown well during the first quarter and will continue to grow. All listed companies have reported excellent financial results and overall the print business is robust.” He asserted that there were no viable options to print at this stage and advertisers had to understand that the print business was experiencing huge input cost increases which had to be passed on.

George Sebastian, General Manager, Marketing, The Mathrubhumi, admitted, “We are in a stage where existing newspapers are under threat due to inflation in newsprint prices. The hike has almost been from $200 a tonne to $900 a tonne. The last hike in our ad rates was in April 2008, which was an annual increase by 10 per cent.”

Sebastian is of the opinion that as long as the print medium is viable and cost efficient, it wouldn’t lose out its share of the advertising pie to other mediums.

The Times Group was not available to offer any comments for this report.

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