Print media still weak from the pandemic blow, though fighting back

Authored by Nitesh Jain, Director, CRISIL Ratings.

The print media segment is on a strong rebound as the two mainstay revenue streams – subscription and advertisements (ads) – recover, but could take beyond this fiscal to reach pre-pandemic levels.

Unlike western countries, print media remains popular in India despite rapid ingress of digitalisation. Besides low cover price and the convenience of home delivery, it benefits from the ability to provide original and credible content, and people’s habit of reading physical newspapers.

Despite the pandemic, physical subscription of newspapers has held ground for Hindi and regional language newspapersbecause of their strong roots in the hinterland.

For English dailies, on the other hand, the shift in consumer preference towards digital newsfrom physical newspapers has been more pronounced given their higher share in metros and Tier 1 cities, where digital adoption is also higher.

Indeed, notwithstanding a gradual recovery as offices reopen and working people return to cities, subscription would still be 12-15% lower than the pre-pandemic levels.

That being said, subscription revenue accounts for only ~30% of the sector’s topline, while the bulk comes from ads.

Ad revenue, on its part, has a strong correlation with economic activity. It rebounded sharply post the second wave and, in fact, reached ~85% of the pre-pandemic level in the third quarter of last fiscal, aided by the festive season and state elections. The third wave had a mild impact and only lasted until January.

In line with improving economic activity, we expect print media companies to log a 25% growth in adrevenue in fiscal 2023, on a low base. Ad volumes are expected to recover to pre-pandemic levels, but ad yield will take longer.

Net-net, this fiscal, print media revenue is expected to grow ~20% on-year to ~Rs 27,000 crore from an estimated Rs 22,500 crore in the last, but still fall short of the pre-pandemic (fiscal 2019) mark of over Rs 32,000 crore.

The likely recovery in topline would have expanded the operating margins of print media companies, too, but for higher newsprint prices.

The price of newsprint – the main raw material, which accounts for 30-35% of the total operating cost of print media companies – has risen a staggering 60% in the past year. The reasons include a shortage of new and recycled newsprint, increased freight prices, rupee depreciation, and a drop in supplies due to the closure of manufacturing capacities.

Print media companies are taking cover price hikes and rationalising newsprint consumption to combat the situation. Still, their operating margins are expected to shrink to 6.0-6.5% this fiscal, from 9.0-9.5% last fiscal, according to the assessment of CRISIL-rated print media companies that account for 40% of the sector’s revenues.

To be sure, imports account for more than half of India’s total newsprint demand. As Russia is a major newsprint exporter, its conflict with Ukraine may impact the demand-supply scenario and prices even further.

Our base case estimate, however, assumes the prices will peak in the current quarter and soften from second quarter onwards. That said, continued rise in prices, extended geopolitical stress, or new waves of the pandemic that may impact India’s economic growth will bear watching.