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Tuesday, May 10, 2005

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Mumbai print media entrants unfazed by newsprint cost

Latha Venkatraman
Shyam G. Menon

Mumbai , May 9

IN the city's Fort area, brothers Charudutt and Sudanshu Dangat of Dangat Newspaper Agency are gearing up for the arrival of at least three new English newspapers in the months ahead. Unlike the anticipation drummed up through media hoardings and a sudden demand for journalists, the brothers - who represent many a masthead's link to the readership - are matter-of-fact about the market.

"Obviously the market potential has to be there. It was a question raised before too when the number of Marathi dailies went up. Eventually they all settled into regular run," Mr Charudutt Dangat said blandly.

Newcomers may offer incentives in the initial stage but the real driver would be volume, as the distribution business largely works on set commissions.

The brothers didn't reveal much but admitted that a larger volume travelling through the distribution channel would be a cost-plus affair.

Additional investment for agents would be in the form of recruiting more hands and tackling the morning delivery of steadily growing newspaper sizes. After all, you can promise 100 pages but can that sit on a cycle rack without pushing out someone else's paper?

Neither these worries nor soaring newsprint prices or rising employee costs have deterred new entrants into the print media business here.

Newsprint prices have risen on an average by 25 per cent over the last one year, from $430 per tonne to $540, and are projected to move up further for most of 2005.

"Newsprint prices have risen primarily due to a surge in demand and rise in input costs. Supply was unable to catch up with demand because capacity additions in newsprint takes time," said Mr Mohan Goenka, Director of Emami, which has presence in the newsprint business.

On an average, newsprint costs account for 53 per cent of total costs at a newspaper while employee costs are in the region of 12-15 per cent.

"Newsprint prices have already been factored into our business plan," said Mr Suresh Balakrishnan, Head (Sales & Marketing), Diligent Media Corporation.

The company, a 50:50 joint venture between the Essel group and the Dainik Bhaskar group, will be launching a daily newspaper called DNA - Daily News & Analysis. It is slated for an August-September launch.

Other newspapers entering the fray include Bombay Mirror from Bennett & Coleman (publishers of the Times Of India) and Hindustan Times.

Equity analysts tracking the sector said that cost pressures could prompt existing players to raise cover price, something that both the Times of India and Economic Times have done.

Mr Tarique Ansari, Managing Director of Mid-Day Multimedia, offered a different take. He said that in an evolved economy, cover price would move down and advertising revenues would move up, quite the opposite of emergent trends in the broadcast industry.

But that would be a long-term view, for in the short run Mumbai's newspaper rush may cast downward pressure on advertisement rates, courtesy the higher number of papers seeking advertisements.

Mid-Day itself has decided to go in for a rate hike ahead of the rush. "As there would be no scope later, we are increasing rates now before the new papers are launched," Mr Ansari said.

On the other side, Mr Balakrishnan saw it differently. "What may happen is that random rate hikes will stop," he said, adding that three new papers were likely too few to spoil the party.

A listed entity, Mid-Day has entered into an arrangement with the Indian Express group to work together on advertisement revenues. This followed the Indian Express group acquiring a 10 per cent equity stake in the company.

"In every city where there is one well-established player, there is room for two or three others. In the long run, each product vindicates itself," said Mr Dangat.

Given the cost pressures amid which all these launches are happening, would that be each deep pocket vindicating itself?

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