Points of View: How have rising newsprint prices hit print?

Paper prices have gone up by 50 per cent. How has this affected the print business?

The economic slowdown has affected not just the consumer durables, automobiles and real estate sectors, but also the media industry – the print industry in particular. As per industry sources, this year’s Diwali was not as glittering as usual as far as advertising was concerned. And with rising newsprint costs, matters will only get worse. Let's hear from the experts how the print industry has been affected.

Mohit Jain

Director, Times of India

There are two points that I’d like to make. Firstly, the print media in India is different from the Western world in terms of cost. The single largest expense, particularly in the US and Europe, is not newsprint – it is people. In India, newsprint is by far the dominant input cost. In this context, if it goes up by 50 per cent, it can erode bottom lines.

Secondly, the situation in India is complicated by the acute depreciation of the rupee – down by more than 20 per cent against the dollar in the last three months. Further, India is still dependent on imported newsprint.

The outlook seems to be more volatile in view of the turmoil in the financial markets, rise in oil prices and logistics. Publishers may hold back launches and defer investments in new projects.

Rajiv Jaitly

President (S&M), Dainik Bhaskar

The surging newsprint costs have affected the print media industry and its players adversely.

The Indian print industry comprises big and small players. But the real impact would have been felt more by the smaller players, who do not have the margins or investment to withstand such a steep increase.

The bigger players have probably been able to handle it better. However, even the bigger players have not been insulated and are considering various options to tide over the increased newsprint costs.

In most cases, players have had to pass on some of the costs to the consumers. According to industry sources, a major newspaper has increased its advertising rates by as much as 40 per cent and hiked its cover price by 20-25 per cent.

Jwalant Swaroop

Director, Lokmat Group of Newspapers

Newsprint prices have jumped by almost 50 per cent in the last couple of months, primarily because Canadian and European paper manufacturers have shut down plants. The scarcity of indigenous newsprint has made it worse. It has compelled newspapers to cut down on pages and reduce supplements. This has meant a reduced inventory for advertisers.

Many newspapers have had to revise their cover price. This has affected circulation. Sourcing inferior quality newsprint was a solution, but it has had an adverse impact on the quality of production. Publishers have had to put on hold plans like launching new editions. Though some publishers have come up with better inventory management systems, smaller newspapers will suffer because they do not have the room to reduce the number of pages.

C Mathew

Deputy general manager, marketing, Malayala Manorama

The rising cost of newsprint has posed a substantial threat to the industry as a whole. During April-October 2008, newsprint prices rose by 46 per cent. Moreover, the value of the rupee declined against the dollar. These two factors resulted in a hike in operating costs of 67 per cent. The price hike is visible in consumables like inks. This may continue till September 2009.

As a result of the price hike, newspapers in India are proposing steps like an increase in ad rates (50 per cent on government ads and 30 per cent on normal ads) or their cover price or cutting down on the consumption of glazed newsprint.

The ad rate hike is logical. Newspapers across the world operate on advertising and circulation (subscription) revenues. In most cases, the cost of producing and delivering a newspaper is higher than its cover price. So, what makes a newspaper profitable is the ad revenue, which not only makes the price affordable for the readers, but also generates margins for the publisher.