MUMBAI: The slowdown in the economy has hurt the Indian print industry badly as it depends highly on advertisement revenues. The sector grew by 7.3 per cent to Rs 224 billion in 2012, lower than KPMG?s earlier forecast of 8.3 per cent growth for the year.

Though growth in the sector will continue to be subdued in 2013, the long term prospects look promising. The Ficci KPMG report estimates the print industry to grow at a CAGR of 8.7 per cent to Rs 340 billion by 2017, contributing 20.5 per cent to the Indian M&E industry.

Advertising contributes 67 per cent in 2012 to the total revenue earned by the print sector. However, with ad budgets tightening and the eventual threat of newer competitive platforms such as digital, in the long run it would be prudent for the industry to increase circulation / subscription revenue as much as possible.

Some of the big spending sectors such as Education, Banking, Financial Services and Insurance, Telecom and Retail tightened budgets and the ad spends remained flat or declined. In such challenging times, the Indian print industry has adopted a pragmatic approach with most print players now focusing on consolidating their position in core markets and penetrating them further through the launch of new editions rather than entering newer territories.

Regional Newspapers are the star; English struggles

Growth in the previous year was mainly driven by an increase in advertising volumes and circulation revenue, according to the Ficci KPMG report. Yield in most markets remained flat or marginally improved and did not have any material impact on the overall growth of the print sector. Overall, advertising in the industry has grown 7.3 per cent - lower than previous estimate. The English segment faced the roughest weather.

While the market for English dailies continues to be tough, the regional and vernacular markets continue to defy gravity and grow on the back of rising literacy and low print media penetration as well as the continued tide of advertisers wanting to spend in these markets. The growth of the overall print industry was, hence, largely driven by Hindi and the vernacular print markets. The Hindi print market grew by 9.8 per cent from Rs 62 billion in 2011 to Rs 68 billion in 2012 and vernacular from Rs 63 billion 2011 to Rs 69 billion in 2012 respectively.

The slowdown in ad volumes was particularly more intense in the case of the English market. The share of English print ad volumes declined from 32 per cent in 2011 to 27 per cent in 2012. Vernacular dailies continued to enjoy volume growth with their share increasing from 37 per cent in 2011 to 39 per cent in 2012.

The print industry derived 94 per cent of its revenues from the newspaper category. The Rs 13 billion magazine segment continued to decline in share due to decline in readership of general category magazines. The industry is worried that the readership of the sector is holding flat but not growing. Niche magazines with their defined readership and advertiser base continued to perform better.

For the first time in the last five years, the Education category is not the highest spender in the print medium. While the Education sector has maintained its share on print advertising at 10.6 per cent, the Auto sector has increased its contribution to 11.4 per cent in 2012 as compared to 9.8 per cent in 2012.

FMCG continued to be one of the top spenders on the print medium contributing 10.3 per cent in 2012 as compared to 8.9 per cent in 2012. Its contribution in 2008 was 5.8 per cent. Increased spend by FMCG companies has been a big respite for the print sector in a year where growth was hard to come by.

The next two years will be critical with the ad growth to be largely driven by increases in election spends, advertising driven by the launch of new products (30 auto model launches in the next 12-18 months), categories expanding due to product and brand launches (4G, foreign retail chains), launch of new editions and publications catering to niche markets.

2012 witnessed some improvement in circulation revenues which increased by 7.3 per cent year on year as compared to only 3.8 per cent in 2011. This was achieved through launch of new editions and increase in cover prices of established editions.

Going forward, the industry may adopt a differentiated pricing strategy by increasing the price of established editions in mature markets while holding the prices low in case of tier II and III markets or while entering newer markets. Such an approach will enable mature editions to gradually decrease their dependence on ad revenues.

Hiring and retaining talent

The tough macroeconomic situation has been challenging publications to find innovative ways to cut costs without compromising on the quality of content. In the light of current circumstances, players are investing heavily in building strong editorial teams while at the same time reducing overall headcount. A quality talent pool will be a key asset for the industry and its success would depend upon the publication?s ability to differentiate its content from mass market information available for free on digital platforms.

However, availability of talent remains a challenge for all media segments, especially so for print. While there are many journalism schools in India, quality remains a challenge. Industry discussions indicate that even today to a great extent, few students choose a career in print as their first preference. This means the talent pools remain fragile and the ability to deliver original content low.

The Future

The industry?s future performance will be a factor of the macroeconomic environment stabilising and print players achieving greater operational efficiencies and connecting with readers through delivery of high quality content.

The industry is expected to focus on profitable growth by implementing cost control initiatives and adopting technology across key business performance areas such as planning, budgeting, customer relationship management, strategic outsourcing, etc. While leading players have made a head start in this direction, many still have to fully review their existing business models.

The inherent advantages of print industry ? extensive reach, localisation benefits and ability to create trust and achieve a higher ?attention span?, are expected to serve as a base for growth and ensure that print continues to be one of the most important platforms for Indian advertisers.

The Indian print industry is comparatively better off than its global counterparts, which have been experiencing declining revenues over the past few years. Although the overall Indian scenario looks promising, capitalising on future potential, however, will depend on how the industry deals with the present challenges.