Future Tense of Dailies

One billion rupees a year business of daily newspapers is still growing and nearing a second round of shake up within a decade.

Since early 1990s, the business of daily newspapers in Nepal stopped remaining an exclusive domain of the government. And the period after that proved a phase of very fast growth though it was also accompanied by a high mortality, thus characterizing the embryonic stage in the industry’s life cycle. Though still growing and thus attracting more players to join the competition, it is heading towards a shake up in the near future, forecast analysts.

But the shake up is coming not as a result of professional business strategy, but as a brutal justice of market mechanism. And as none of the existing dailies is on sufficiently stable grounds, analysts indicate that even those dailies that are otherwise regarded as strong and established, are not safe. One long-time journalist also points out that nine broadsheets already in circulation is just too many in a country-more so in Nepal which has a small market.

This industry has been growing at around 25% per annum in average over the last five years, as estimated by Suman Shakya, General Manager-Marketing of Space Time Network (P) Ltd., a media house that recently entered satellite TV (CHANNEL NEPAL) and newspaper business through its sister concern by first publishing a vernacular daily (Spacetime Dainik) and then an English daily (Space Time Today). Quoting figures from Advertising Agencies Association of Nepal (AAAN), Shakya notes that the total advertising spend in all the media has exceeded Rs. 1000 million mark today compared to Rs. 150 or 200 million about five years ago. And newspapers command around 55-60% of this pie. Added to it is the figure for copy sales which is estimated to be 20% of total revenue.

Though there are professionals who regard this estimate to be on the higher side, there seems to be a consensus on that the industry is growing 25% every year. SP Singh, who worked as Vice President – Marketing in Kantipur Publications (P) Ltd. (KPP), the pioneer to usher in Nepal an era of private sector media as a business venture, notes that during a period when the media sector in other South Asian countries was going through a phase of recession, it was able to maintain a double digit growth in Nepal. In Singh’s estimation, the business of print, radio and TV has been growing at an average rate of 26% per annum. Though some of that business is in weeklies and magazines as well, the average is pulled up by dailies. "In fact, it is a one-sided growth", he comments citing that while Radio Nepal has been growing at rates between 8 and 11% per annum, Kantipur was able to record as high an annual growth as 55% in some years. "So, all the growth is taken by Kantipur, in a way," says Singh.

Revamping

Other dailies are not staying idle however. Himalaya Times, with which Singh is now associated, is ‘revamping’ as Singh likes to call it. Being one of the two remaining among the four dailies that started publishing almost together in 1994-95, Himalaya Times has fallen behind the old as well as new competitors, though it survived the first round of the shake up in the industry. Look at the circulation figure it claims - only 26,500 against 85,000 (including Biratnagar edition) of Nepal Samacharpatra (NSP), though both are in the 6th year of their first issue published. There are several reasons for HT falling behind, say independent analysts indicating, for example, to its purchase of the press that its senior competitor KPP disposed off. The result was comparatively unattractive print, thus driving the circulation figure downward and consequently hitting hard on the advertisement revenue.

Hem Raj Gyawali Kantipur

Puskar Lal Shrestha Samacharpatra

Jamim Shah Space Times

Ujwal Sharma Himalaya Times

Mahendra Sherchan Rajdhani

Krishna Pd. Gautam Prabhatkalin

In the new strategy, HT is to improve the print quality by printing the publication in a new press which is being set up with foreign investment as a joint venture. As the other part of the strategy, an English daily is proposed as a sister concern of HT. The new printing company will be a commercial printing company and will accept business from any possible client, even book printing, it is said, though Singh or other sources in HT do not agree to divulge the details. HT’S effort follows that of NSP which recently effected its own revamping by inducting some business houses as shareholders. Then it went for a regional edition. Kantipur followed immediately. And now NSP is again contemplating further revamping, according to Puskar Lal Shrestha, its founder and editor-in-chief. Shrestha also talks of plans to go for another edition from the western region.

Investment Becoming Restrictive

That means the barriers for new entry into media sector, particularly in daily newspapers, are already high and are becoming higher. A newcomer must come with one Nepali and one English newspaper and a capacity to print four colour pages for which the cost are about 35% higher than in printing black & white. Such barriers also have raised the minimum capital required. While Kantipur is said to have started with a scheme that required less than Rs. 30 million, recent estimates put the required figure for a new daily at around Rs. 100 million. Bandan Deo, Senior Manager, Finance, KPP, puts the figure at Rs. 150 million for investment in fixed assets (Rs. 50 million) and to finance stocks, account receivables (90 days) and bad debt (5%). According to another recent estimate, a tabloid size daily (20 thousand copies circulation, 2 pages in 4 colour, total 12 pages) will need Rs. 20.8 million. Of this Rs. 10 million is for the press only. For a machine of the type that KPP has (web offset that can print 30,000 copies per hour ), the price is around Rs. 12.5 million and KPP has three of them. The cost is getting higher also because now one must be prepared for six to 12 months of zero revenue because of the growing competition.

This makes the business a capital intensive one with long gestation period, thus requiring financial strength. The cash flow management is important as there is a daily outflow while the inflow may be intermittent. KPP’s Deo reveals that his company already has about Rs. 100 million as bad debt.

Multi-front Competition

Added to it now is another barrier. As KPP is said to be cross-subsidizing the print media with profits from its FM radio, a newcomer should also go into FM radio. On top of it is another barrier created recently. As Nepal Samacharpatra and, after it Kantipur as well, started publishing regional editions, the newcomer should be able to compete on that front as well.

As a result, the management needs to be lot more efficient. Contrasted to the period when Kantipur started, the requirements today are highly demanding. There was only one competitor then - Gorkhapatra, which was not so difficult to face as it was a dilapidated government establishment shackled by red tapism. But the number of competing organization has now grown to six including Gorkhapatra. And the competition to be faced is also on electronic media. Apart from FM radio, now TV is emerging as the other field in which new entrant has to compete. Space Time’s efforts in getting its Channel Nepal on the air can be regarded as directed for this very purpose, though there also are other interpretations made by different types of people. The number of subscribers to it’s cable TV services provides it a large prospective market for the circulation of its newspaper. As claimed, there are about 120,000 cable TV connections in kathmandu valley, including those that are pirated.

As shown by the steps they are taking, the players, old as well as the new entrants, recognize the additional fields of competition to be faced to remain in this business. That is evident from NSP inducting a couple of business houses in going for regional edition. Looking at the web offset machine that Kantipur has, a recent entrant, Utsarg Prakashan (P) Ltd. (that publishes Rajdhani daily in vernacular) has installed the same in its press.

To compete in going regional and also on FM radio, Himalaya Times too is coming up with FM and has already been allotted the frequency (99 MHz). As Kantipur has one FM in Kathmandu valley and another in Eastern region, Himalaya Times FM will have one station in Kathmandu valley and one more in Pokhara valley (the Western region). The attraction to FM radio is primarily the cost, it is pointed out. Compared to Rs. 100 or 150 million needed for print, an FM station can be set up at even as low a cost as Rs. 100,000 and at as high as Rs. 10 million depending upon various considerations. Contrasted to the hurdles in distribution of printed material due to frequent problems in transportation, FM provides wider and faster reach even to the illiterate masses.

That may indicate that the competition is heating up. But, as analysts point out, professionalism is yet to come in this business. Though business houses have started stepping into it, they are still to prove that they are bringing in professionalism together with the finance. Even Kantipur, regarded as the most successful in attracting advertisements, has not been able to do so sufficiently enough on its own, accepts Deo, meaning that a vigorous effort has to be made in soliciting advertisements. Still his paper’s ad tariff was hiked recently. On the other hand, Purushottam Thapa, Marketing Manager of Nepal Samacharpatra says, his paper has not experienced decline in ad sales despite hike in ad tariff.

Product Differentiation

Shakya says that newspaper business too is like any other business that needs similar management. He is indicating to, what is sometimes also referred to as, the "herd mentality" prevailing in all the business sectors of the country. And newspapers business is no exception. It did not take long for the number of airlines, banks, insurance companies and paging service companies to swell up after one was started by somebody. Same is the case in newspapers. After Kantipur was seen doing successfully as a broadsheet daily, four others - Lokpatra, Shree Sagarmatha, Himalaya Times and Ajako Samacharpatra (now renamed Nepal Samacharpatra) - were born one after the other. The early demise of Lokpatra and Shree Sagarmatha (together with its co-publication Everest Herald in English) put a break on the entry of newer broadsheet dailies, but that was for only a short while. Spacetime Dainik started last year and recently came Rajdhani. Prabhatkalin, another morning newspaper published by Krishna Prasad Gautam (popularly known as Mailadai) of Chandeswori Prakashan (P) Ltd., regarded as one of the cleverest publishing houses of the country today, appeared in the broadsheet form for sometime, though soon returned to its original tabloid size. Mahanagar, a tabloid that pioneered evening newspaper and published by Kamana Prakashan (which also publishes Samacharpatra) is still there, but has earned competitors in the form of Commander, Sandhyakalin and a number of other afternoon dailies, all in tabloid size with four pages. Naya Sadak, another tabloid but which comes out in the morning was also started recently and is said to have gained popularity among the readers who belong to this segment. Its four colour print on the cover pages helped in the popularity, it is believed.

Thus, there seems to be some segmentation and specialization. Still, analysts do not hesitate to call them "me too" products. "If you remove the masthead, you can’t feel which of the dailies is in front of you". This is so not only in the visual aspects (such as lay out and the fonts used), but also in the content, and the angle of presenting the content. Though the reports carried are mostly with by-line of the in-house reporters, the content is mostly a photocopy of the press release issued by the source.

But the editors or publishers do not accept the blame. Purushottam Dahal, Editor of Rajdhani, draws attention to three facts that he says clearly distinguish his paper from the rest of the flock. One, it has proved to be the first in reporting a number of issues and that has been the case almost every day so far. Second, within the 12 pages, it has been coming out daily with two pages colour supplements (Batika and Indreni). And third, the front-page layout, particularly the left-hand side strip that runs from the top of the page to the bottom, clearly distinguishes it from the other dailies.

Whether that is enough for segmentation may be debatable. But such differences can be found also in other dailies. Among the three English dailies, The Rising Nepal (TRN) of Gorkhapatra and The Kathmandu Post (TKP) of KPP are clearly different, be it in their layout, print or content. But this distinction is rather a result of default than management effort, analysts argue. However, Space Time Today seems trying to differentiate itself at least in the layout and font used and that looks to be a deliberate management effort. The response from the ‘Post’ to the new entrant ‘Today’ so far has been to add a midweek supplement. That again is seen as an effort by KPP to raise the entry barrier further.

In this respect of product differentiation, weeklies score better, because their market is clearly segmented, though it is mostly along the lines of political inclination of the respective editor or publisher. "Weeklies still have committed readers. Otherwise they should have been dead by now", views Singh. However, the economics of weeklies is quite different.

The second part of this statement by Singh also indicates to another tendency among the dailies : fanning rumours. If weeklies are being blamed for rumour-mongering, the same accusation is being labeled against the dailies looking at some instances of their reporting.

Shakya too has almost similar conclusion, though he comes at it from somewhat different angle. The tendency, as he sees it, is in believing that newspaper run (i.e. have greater circulation and thus attract more ads) when the reports printed are interesting to the readers. So, there seems to be a lot of emphasis on collecting reports. So much so that reporting transcends the boundary of professional journalism and becomes sensational.

The conclusion : there seems little brand building exercise in this business, though, some papers, Gorkhapatra, Kantipur and Bimarsha, for example, are reaping benefits of their respective brand that got built over the period, be it by default or by design. Till recently, only Kantipur could be seen doing something to build its brand by various promotional exercises, such as placing hoarding boards on different locations inside cities and along the highways. Himal Khabarpatrika is the other example. More recently, Space Time too has started doing the same, and to some extent also Nepal Samacharpatra.

Yet, that is not going to be enough, views Shakya. And the reason he puts forward : none of the dailies is established enough as yet. So they need to do more. Though Kantipur seems relatively established one, it may hope to survive on the strength of its brand image only for a short period. It survived the previous round of shake up when there was a mass exodus of journalists from it into new entrants (and as it has happened so far, every time there is a new entrant, it is Kantipur that loses most in terms of human resources), it is not necessary that the fate will be equally in its favour in the future. If a really strong competitor comes into the arena, Kantipur too may find itself in a tight spot. Existing publishing houses such as Chandeswori Prakashan may reenter the business and succeed on the strength of their readership orientation.

Shree Sagarmatha’s Story

When many journalists moved to Shree Sagarmatha and Everest Herald from Kantipur during the last round of shake up in this business, Kantipur survived because Shree Sagarmatha and its sister publication in English collapsed under the weight of their weak management caused largely by political interference by the party to which the publication felt no qualms at being affiliated. Krishna Acharya of Rara Noodles fame was at the helms, but he was more as the coordinator of the investors than as the CEO, say people who saw the publication’s functioning from close quarters. But soon, Acharya was replaced by Rishiraj Lumsali as CEO and then came Hiranya Lal Shrestha as the Chief Editor, though Tirtha Koirala, a professional journalist and one of the investors, was already working as the editor. After the Mahakali treaty issue, HL resigned and then came Govind Bhatta as Chief Editor. The political identity of Lumsali, HL and Bhatta were more than enough to wreck the management, it is said. In the process, the major investor, Upendra Mahato, lost interest, and the business that was still in the phase of needing further investment started running short of capital. The investment was less than Rs. 30 million against the requirement calculated at Rs. 50 million. For Mahato, who had interests in businesses such as an oil refinery (in Belarus), a carpet company, a computer hardware trading company and a private nursing home (in Nepal) and was promoting a private bank (again in Nepal), the additional investment required should not have proved difficult to arrange.

Regarding Lokpatra’s failure, analysts pinpoint one major cause to be the treatment meted out to the journalists by the management. Being a knowledge-based industry, the human factor has a very crucial role to play in this business. There is no guarantee that these examples will not be repeated by existing publications, view the analysts.	SP Singh	Suman Shakya	Purushottam Thapa
So far, Kantipur alone seems to be growing, but doubts are expressed at whether it has been a natural growth or	Media Marketers
some entrepreneurship was also involved. Obviously, it took into consideration the readers’ and advertisers’ requirements, and there are some instances of activities forced by the management and owners that resulted into better business. At the same time, it is also true that the market itself was growing on its own. The growth of IT helped it by making information collection easier and there also are around 200,000 persons appearing in SLC exams each year, thus expanding newspaper readership for pleasure as well as for employment. The business sector that is traditionally dominated by trading also helped as it realized that advertisement does help grow the business/sales. And competition was also heating up with a lot of Indian brands becoming visible in the market offering relatively cheaper option to ‘phoren’ products.

Other Hurdles

After completing a whole decade in media, private sector still finds that media respectability is yet to be enhanced. Advertisers seem to have stronger bargaining power as to the advertisement rates. Therefore, publishers themselves assume the role of salesmen on many times and there is push-selling for both the ad space and copy sales. This way, the marketing is not sufficiently responsive to the customer needs. Most importantly, the advertisers do not believe in the number of circulation figures claimed. And in the absence of the Audit Bureau of Circulation (ABC) to verify the circulation figures, it is not right to blame the advertisers only. As some recent examples indicate, media seems to have realized the importance of marketing, but the product itself needs to be of good quality for the marketing professionals to market. And that is yet to happen in this business, point out the observers. Moreover, there is strong competition from the TV which is still the number one choice of the advertisers for consumer goods, as pointed out by Nabin Lal Joshi, Media Director of Thompson Nepal (P) Ltd. But the prohibitive cost of producing an ad material for TV is working in favour of print media, he says. Among the broadsheets, there are only three that the advertisers choose themselves to advertise in. "For the rest, it is relationship, push marketing and agency recommendation", says Joshi.

There are opportunities, however, say analysts. According to Shakya, the trial rate is very high for a new product in Nepal, and it applies also in newspaper business. "The key is to sustain it", he points out. Tirtha Koirala, who is now the consulting editor of Himalaya Times shows another opportunity as well. "There is no independent daily that has left-wing leaning. And there is a good market for that", he says.

But the question still remains who will come winner in the next round of shake up? The answer is : Those few which manage to remain ahead in professional management by maintaining a distinct identity. In the process, however, the area of segmentation has to be large enough to attract sufficient revenue. Such segments may be sports, music, economy or diplomacy in terms of coverage while it may be news analysis or breaking news in terms of speed and depth of coverage. What is to be realized is that newspaper is a serious business, so better it is profit- motivated, though editorial credibility and content will be crucial and deciding factor in the long run. Equally important will be the technological competency in terms of modern printing press and other equipment used as well as in access to electronic medium.

By KG & MPL