Right Time To Experiment With Cover Prices: Publishers @ INMA

The International Newsmedia Marketing Association’s (INMA) conference in New Delhi last week saw a spirited discussion on newspaper cover prices and how it could be engineered to lower advertiser dependency. The panel, featuring a galaxy of celebrated newspaper executives, disagreed on many things, but agreed on one–the advertiser was becoming more and more intrusive and was now pushing for the editorial space. “If we continue in this path, advertisers will strip us of every last shred of credibility and we can remain in this business only if our credibility is intact,” said Mid-Day Multimedia MD Tariq Ansari.

(In the pic L-R: Rajiv Verma, CEO, HT Media Ltd; Jacob Mathew, executive editor, Malayala Manorama; N. Murali, JMD, Kasturi & Sons Ltd; D.D. Purkayasta, CEO, ABP Ltd; Girish Agarwal, director, Bhaskar Group; Ravi Dhariwal, CEO, BCCL; Sanjay Gupta, Editor & CEO, Jagran Prakashan Ltd.)

India’s publishers are caught in an unenviable dilemma. For years, they used a strategy they call penetrative pricing (essentially very low cover prices–many monthly newpaper subscriptions cost less than a cup of of coffee at a coffee shop) to increase circulation and readership and then demanded higher rates from advertisers. In the boom years, this worked, as newspapers marketed themselves in new and innovative ways to increase their reach and advertisers happily paid higher rates supported by record profits. Ad revenues account for some 85% of the total revenues at many publishing houses.

Then things took a turn for the worse.

Newsprint prices zoomed, making high circulation newspapers very expensive operations. As the economic slowdown hit sales and bottomlines, advertisers slashed ad budgets, and lower demand forced newspapers to give discounts upto 50% and sometimes more on the ad rate card. The pressure exerted by media agencies made publishers painfully aware of their dependency on advertisers and emerging fresh from this experience, many executives supported the idea of raising cover prices and getting readers to pay for their newspaper.

That would have been easy, but for the high price elasticity of demand in the newspaper business. HT Media CEO Rajiv Verma said Hindustan Times experienced a 10% fall in circulation when it raised prices by 50 paise. The moment a paper reports falling circulation, advertisers use that to pull down ad rates further. This great dilemma was at the core of Thursday’s discussion.

N. Murali, joint managing director at Kasturi & Sons, which publishes The Hindu, said India’s newspapers were following a flawed business model. “Very low cover prices can work during a boom time, not otherwise… After housing and credit bubbles, we might see a newspaper bust next,” he cautioned.

Ravi Dhariwal, CEO at Bennett, Coleman & Co. Ltd, which publishes The Times of India and The Economic Times, said the low cover price model “has benefitted everybody on this panel, including The Hindu. We have all enjoyed growing circulation and profits by following this model,” he said.

Dhariwal said he was of the opinion that may be this was the right time to experiment with cover prices. There is high price elasticity, but today a marketer has at his disposal, tools that can be used to make sure readership doesn’t drop, he said. “Whenever we raise our cover price by say 50 paise, let’s say readership drops by 5%. But the remaining 95% is paying the higher cover price. And that can afford me marketing initiatives to make sure the readership goes back to where it was,” he added.

ABP Ltd CEO D.D. Purkayasta said The Telegraph and The Times of India raised the cover price by 50 paise in the Kolkata market and neither experienced a drop in circulation.

Mostly everyone agreed that the ad revenue-circulation revenue should tend more towards the 50:50 mark; may be a 70:30 or a 60:40 would be desirable. The instance of Malayala Manorama, which sells every copy at Rs4 in Kerala, was cited. Regional language publishers said cover prices can go up in their businesses only if English language publishers take the lead. English newspapers typically offer many more pages, supplements and all-colour editions for a much lower price.

The session agreed to disagree, but we were happy to see that publishers are bothered about the degree of ad dependency they have. Whether or not something will be done about this remains to be seen. We think it is safe to bet that we will see some tinkering with the cover prices.