Print media revenue is expected to rise by 13-15% to approximately Rs 30,000 crore this financial year on the back of higher advertisement spending by corporates and an uptick in government ad spend in view of the upcoming state and general elections, a Crisil Ratings report says.
A growing topline, along with a decline in newsprint prices, will lead to profitability of the sector surging around 1,000 basis points (bps) to about 14.5% this fiscal (see chart 1), a Crisil analysis of print media companies accounting for over 40% of the sector revenue indicates.
Print media revenue — split 70:30 between ads and subscriptions — had plunged to 40% in the 2021 financial year amid the pandemic. In the 2021-2022 and 2022-2023 financial years, the revenue bounced back by around 25% and 15%, respectively, as pent-up demand released by economic recovery led to increased ad spend, the report says.
Interestingly, last year, Crisil had predicted that circulation and advertising revenues would recover by about 20% to approximately Rs 27,000 crore in FY 2022-23, from Rs 18,600 crore in FY 2021-22.
Despite the optimistic outlook, Crisil’s projection for the 2023-24 fiscal still falls a little short of the industry’s pre-pandemic high of Rs 32,000 crore.
Naveen Vaidyanathan, director, Crisil Ratings, says the steadfast domestic demand for fast-moving consumer goods, retail, clothing and fashion jewelry, launches of new automobiles, rising preference for higher education, online shopping, and growing real estate sales — sectors that contribute about two-thirds of the print media ad revenue — will keep the momentum in ad revenue growth going.
“Higher ad spends by the government, which contributes a fifth of the sector’s ad pie, in the wake of the upcoming elections next year, will also push growth. Therefore, we expect ad revenue to grow 15-17%, almost reaching the pre-pandemic level this fiscal.”
The sustained recovery indicates the enduring popularity of print media in India, Crisil says. Newspapers and magazines are preferred because of low cover prices, the convenience of home delivery, and the ability to provide original and credible content and sticky reading habits.
The whirlwind of fake news and disinformation on digital mediums had led to trust issues in the overall news media, which the print media leveraged to its advantage to bounce back from near zero circulation and a huge fall in revenue during the peak pandemic. Apart from supply and delivery issues, print circulation was hit by rumors that newspapers could be potential carriers of the coronavirus.
The Crisil report says a significant share of readers still continue to prefer physical newspapers as reflected in the 8-10% growth in subscription revenue in each of the past two fiscals. This fiscal, subscription revenue is expected to grow 5-7%, largely led by moderate revisions in cover prices.
Additionally, print media companies, especially English newspapers, have started monetizing premium digital content, which is seeing good traction. English newspapers have been feeling the heat of digital competition more than the vernacular ones. The shift to digital was more visible during the pandemic when circulation took a hit due to delivery problems.
Nevertheless, subscription growth has a bearing on the profitability of print media companies because of the increased requirement of newsprint, the key raw material for the production of newspapers. India imports more than half of its total newsprint requirement and Russia, a major source, has been at war with Ukraine since late February 2022.
Freight rates soared amid logistics logjams (see chart 2) as the conflict intensified which pushed up newsprint prices in the last fiscal, hampering profitability as seen in the annual reports of listed media houses as reported Indian Printer and Publisher. Newsprint prices are, however, down from the peak and the bottom line, which was affected, is now holding up, CEOs of major print houses acknowledged in recent interactions or media summits.
Says Rounak Agarwal, Team leader, Crisil Ratings, “The steep surge in newsprint prices sheared ~850 bps off the operating margins of print media companies to ~4.5% last fiscal even though revenue increased. However, newsprint prices have come down in recent months – correcting as much as 15-20% from the peak last fiscal – owing to modest global demand and easing of supply chain issues. This, along with revenue growth, should shore up margins by ~1,000 bps to ~14.5% this fiscal on a low base of last fiscal. Over the medium term, margins should remain healthy but below the steady-state margins of >20% seen in the past.”
That said, any significant rise in newsprint prices or macroeconomic factors affecting the sector’s growth and profitability will bear watching, the report said.
Recent forecasts and analyses by other rating agencies have also pointed to increased ad spending as the economy opens up, though there are huge differences and discrepancies, especially in print media’s share. However, all these data are only estimates and need to be taken with a pinch of salt. Only serious and granular research can unravel the real picture.