The contract printing option for reducing production costs

Indian dailies hit the wall on innovation and digital transformation

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It is mostly a myth that Indian daily newspapers are growing. They have hit the same wall that publications in developed markets hit 20 years ago. Given the recent trend in flat and decreasing circulations of Indian dailies, even the juggling of the readership surveys to reflect digital reach cannot sufficiently add significantly to revenues.

It is simplistic to say that newspapers can shift to digital media. Publishers have been struggling to do this for more than a decade with little or marginal success. Although digital revenues are growing at more than 38% year on year, these are mainly going to Google and Facebook. In some of the recent second-quarter results of the listed Indian dailies, it is apparent that revenues are decreasing at a very fast pace. The decline in ad revenues cannot be blamed entirely on either the failing economy or the reduction in automobile sales.

Although readership is declining, newspapers remain an accessible mode of news distribution. A smartphone is not the answer for a long and detailed story to be read comfortably, especially by an essential and influential part of the demographic. The overall decline in circulation, pagination, and ad revenues leaves the newspaper owners at the crossroads with no solution at hand.

While a majority of the Indian dailies are thinking about and planning to put up paywalls, their reluctance in implementing these betrays their lack of confidence. Print ad revenues are still somewhat more comfortable to generate than paid digital subscriptions. A few dailies think their content is differentiated enough to attract a loyal readership and that readers will shift to free access dailies rather than pay for a single digital subscription. There are exceptions amongst the business dailies, such as Business StandardThe Economic Times, and The Hindu Business Line, but their paywalls cannot yet guarantee their overall economic survival.

As printed editions shrink both in pagination and circulation, one survival trend is to get out of the printing business by outsourcing production to a contract printer. Practiced for several decades by many newspapers for smaller circulation editions, the trend has now shifted to larger circulation editions as well.

Cities such as Bengaluru offer five choices of contract printing plants for daily newspapers. Large contract printers such as Rajhans in Bengaluru, who produce both dailies on standard newsprint and supplements and magazines on heatset presses, have set up newspaper printing plants in several cities for major national dailies. Other major cities such as Mumbai and the Delhi/NCR are as well equipped to produce multiple dailies in a choice of plants and networks.

While a contract printer may sometimes be a little more expensive compared to captive printing, the newspaper saves a lot on the headaches of managing a large workforce with huge salaries, and the organization can operate with a very lean capital structure. The most significant advantage is that the digital switch in the future becomes easier with less legacy baggage associated with the print infrastructure. The organization is free from the operational and human resource costs associated with the government’s wage board, environment, health and safety issues, labor problems, and the maintenance of huge factories with impending obsolete equipment and infrastructure.

Large newspapers like The Times of India, The Hindustan Times, The Indian Express, Business Standard, The Hindu, Thanti, Eenadu, Anand Bazaar Patrika, and many others already use contract printers to print their small and medium remote editions. They concentrate on printing the major editions in the biggest centers in their own plants.

There are a variety of outsourcing models. The most popular is to create a separate legal entity within the organization and shift the production operations to the new entity. Various functions like marketing, circulation, security, finance, HR, and sometimes the editorial are operated through the outsourced company. However, it must be noted that companies that have tried this approach have realized that there are few, if any, legal benefits and have shifted to other models.

Newspapers encourage third parties by giving them long-term contracts to develop the entire infrastructure with plant and machinery, people, and resources. Variations include the provision of capital as an advance, providing machinery, or providing key resources to operate the plant so that the quality and consistency are maintained. Often, only the manpower is outsourced and paid on a cost-plus basis. The outsourcing vendor sends a bill periodically based on the number of editions and the number of copies printed.

At the same time, newspaper groups like the Indian Express, Dainik Bhaskar, Hindustan Times, and several others provide contract printing to other dailies to utilize their spare capacities. These operations generate substantial revenues and rationalize their capital and production costs to a great extent.

As a general trend, newspapers are getting away from their commitment to printing their publications and converting their organizations into news processing and content management setups. With this strategy, papers would be free from the burden of capital-intensive structures and can sever these costs without any significant legal entanglements in the future.

It is important to note that the readers or consumers of news choose the medium, and the media industry is no longer a seller’s market. Readers and consumers now have a wide choice of media channels, and the combination of market forces and innovations will determine the way forward for the newspaper industry and, indeed, its survival.

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V Siva Raja
V Siva Raja, formerly associated with several large Indian newspapers, is currently proprietor of Innovation Factory. He can be reached at fivei.innovationfactoryllp@gmail.com.

2 COMMENTS

  1. This article is rightly timed in the present Indian newspaper context. The days are not far off wherein major newspaper houses with large circulation centers will be forced to switch on to this model. As rightly pointed out by Mr.Raja, running a newspaper print plant involves huge costs apart from wages; with strict environment and safetly rules in place it is becoming increasingly difficult to manage.

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