Print media's inevitable digital future: A tough ride

Print Media - Embracing the inevitable transition to a digital future

Print media has fundamentally remained the same since the invention of the printing press.Traditional print media survived and even flourished in the radio and television age, as users favoured the benefits of convenience, physical delivery format, flexibility and reach. The digital medium combines the advantages of traditional print media with the added conveniences of any-time information, real time updates, and increased personalisation. Globally, user preferences and habits are beginning to change in favour of digital consumption. Increasing laptop and computer usage, growing internet penetration and availability of a large body of varied and quality content (largely free) initially drove digital readership. The proliferation of tablets and smartphones has provided the tipping point for online readership through "anytime, anywhere" access.

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In developed markets, increasing online consumption is threatening traditional print models

As per a 2013 survey conducted in Britain, 55 percent of adults consumed news digitally, up from 20 percent in 2007. Similarly, in the US, it is estimated that in 2012 more than 50 percent of adults accessed their news and information digitally as compared to 44 percent in 2011. Further, over the last five years, US newspaper print readership is estimated to have declined by around 3 percent every six months while newspaper circulation declined by 25 percent. Most magazines, especially news and general interest publications, also witnessed a decline in all three audience measures—newsstand sales, number of subscriptions and total circulation along with pressure on advertisement sales. It is estimated that in 2011, around 31 newspapers closed operations in England, while 152 newspapers shut shop in the US (151 in 2010). The changing consumer mix in favour of online readers has necessitated news houses to rethink their business models. While most newspapers are developing strategies for a combination of traditional print and digital news dissemination, some publications are moving to become „online only „editions.

Indian print media has been largely insulated, but for how long?

Indian newspaper circulation grew at a 4 percent CAGR over the last 7 years while readership grew at a CAGR of 2 percent. A significant portion of the growth is from the large and underpenetrated Hindi speaking and vernacular markets. Newspaper reach in India is only 100 copies per 1,000 populations, as compared to more than 400 copies in most developed countries. Large headroom, both in newspaper penetration and advertising growth, combined with increasing literacy levels and growing rural purchasing power are driving print media growth in India.

Conversely, digital news consumption has been constrained by low internet penetration and usage. While the internet user base in India is now estimated to be in excess of 200 million, regular users comprise less than 50 percent of this base. Further, user habits are not yet geared towards online news consumption with only around 25 percent of the internet user base visiting newspaper websites and only around 5 percent visiting daily. With growing broadband and mobile internet user base, shifting demographics in favour of younger population and growing smartphone penetration, it is inevitable that over time more readers will gravitate towards digital news and information consumption.

Monetisation and customer stickiness are key challenges

As the digital world is still evolving, newspapers are facing significant challenges with their revenue streams. Subscription based model has been a challenge for most online newspapers given the vast amount of free content available on the internet along with user expectations of free content. There are exceptions in case of newspapers that have a strong and loyal user base and are therefore able to charge subscription fees eg The New York Times, The Wall Street Journal etc. The New York Times paywall (online subscription) revenue (based on 727,000 subscription base) is estimated to be higher than its advertising revenue.

As a result, most online newspapers are advertising dependent. Globally, online advertising revenues have been growing at a significant pace with a 15 percent growth in the US in 2012 to $37 billion with local targeted adverting forming a major portion. The scale of online advertising is significantly lower than print advertising and it is estimated that for every 7$ of advertising earned by print newspapers, comparable digital advertising is only about 1$. In the digital world, the consumer is spoilt for choice given the availability of vast amount of content. Customer stickiness is therefore key, both to earn subscription revenues as also to attract advertisers. User expectations from online experience are different from print experience and hence the transition to the digital world requires a balance between quality, bankable content and relevant, innovative presentation.

Indian print media is facing similar challenges with viability of online models, given the resistance to subscription models for online news as also the nascent digital advertising market in India. Digital advertising in India is estimated at INR27 billion and though it is growing at 31 percent annually, it still comprises only 7 percent of the overall advertising market in India. Given the growing internet user base, the significant headroom available for digital advertising growth and the low cost per user, it is expected that digital advertising will become a significant revenue driver in the future.

Mobile platforms are key drivers of digital print growth

Mobile and tablet usage, which has provided the tipping point for digital news media consumption, is currently the focus of digital news strategy. Media houses are looking for ways to improve user experience through innovative presentation, interactivity, localisation, personalisation while retaining the quality of the content. The hope is to increase customer stickiness and also leverage the mobile platform through a combination of ad-supported apps, freemium models or subscription based/ paid apps.

India currently has 762 million active mobile users with more than 60 million smartphone users and around 10 million tablet users. Around one third of internet users in India access the internet on their mobiles. Globally, reading habits gravitated towards online with the explosion of smartphones and this trend is likely to be replicated in India as smart phone penetration increases combined with increased 3G and 4G coverage. As a result, digital strategy of newspapers in India will need to have significant emphasis on mobile platforms and mobile app development. Most major publications have taken baby steps in this direction through mobile applications (largely ad-supported) along with tie ups with online news aggregators for reach.

What next?

Globally, digital players are looking to innovate to improve user stickiness as also increase the monetisation potential of the digital offering. Some of the strategies include digital-first strategy (breaking news on digital platforms), leveraging social media for news sourcing and dissemination, user generated content, user groups and forums, localization and personalization of content etc. Monetisation alternatives being evaluated include Paywall models for subscription, leveraging news websites for complimentary businesses such as online shopping networks.

Given the continuing growth potential in the Indian print media, there is a distinct lack of urgency with regard to online print among Indian players as compared to their global counterparts. While the strength of content would still be at the core of the digital offering; pace of growth of digital advertising, developing innovative monetisation mechanisms and the ability to overcome customer resistance to subscription models would be key drivers for sustainable success. While the Indian players can learn from global experiences, the players need to customise strategies to the requirements of Indian consumers through a balance between global and localisation, regional language content, differentiation, multi-pronged access to content and simplicity of access and usage While the shift to a primarily digital future appears inevitable, the ride is not going to be easy. Hence, fasten your seat belts!!

(The author of this article is Girish Menon, Director, Finance at Grant Thornton India LLP, an assurance, tax and advisory firm)

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