On The Economics of Media Diversity
A spate
of controversies in recent months with respect to India’s media policy
points to the problems related to putting in place, in piecemeal manner, a
policy to regulate a multi-component industry that has experienced rapid
growth without being subject to an adequately worked-out and broad policy
framework.
Growth
of the Print Media
At the
centre of the media industry is the print media, facing much competition
for both audience and advertising revenue from the rapidly growing
television broadcast business. However, despite predictions that the
coming of television and the new media would dampen, if not halt, the
growth of the print media, recent years have seen its relatively rapid and
unhindered expansion. Circulation figures, though known to be unreliable
because of inflated claims by some newspapers, do provide some indication
of the orders of magnitude involved. According to the Ministry of
Information and Broadcasting, the total number of dailies in the country
in the year 2000 stood at 5,364, having expanded at a compound annual rate
of 7.4 per cent between 1988 and 2000. However, not all these dailies
report their circulation, so that the total circulation figures for
dailies refer to a much smaller number. Thus, in 2000, the number of
dailies ‘related to circulation’ (or reporting circulation) stood at just
1,493 (which was lower than the number registered in the base year 1988)
and their reported circulation stood at 59.1 million.
The lack of complete reporting makes it extremely difficult to arrive at
an assessment of the growth of circulation in recent years. Charts 1 and 2
show that the ‘number of dailies related to circulation’ has not just
grown at a much slower rate of 4.8 per cent, as compared to the 7.4 per
cent reported for all registered dailies, between 1988 and 2000, but that
this number has fluctuated erratically over the years. Hence, the rate of
growth of aggregate circulation figures of ‘reporting dailies’, which
stands at 10 per cent per annum between 1988 and 2000, is not a true
reflection of the rate of expansion of actual aggregate circulation.
A more representative, even if inadequate, reflection of the pace of
expansion of the industry may be the average circulation of dailies. The
problem here is that the increase in average circulation figures over time
would be the result of two factors: changes in the average circulation of
dailies that have been reporting their circulation figures throughout the
period under consideration; and the effect of the average circulation of
dailies that have begun reporting their circulation figures at different
points of time within this period. Since it was probably the bigger
newspapers that reported their circulation figures throughout the period,
the growth in average circulation of all reporting dailies, which works
out to 5 per cent per annum, is likely to be an underestimate of the
growth of aggregate circulation. What could be stated is that the
expansion in circulation would, in all probability, be greater than 5 per
cent compound per annum over the period involved, and lower than the 10
per cent rate of expansion of aggregate circulation.
Language and Pluralism
The real
question from the point of view of the evolving competitive structure of
the industry, is the distribution of this average circulation of 39,600 in
the year 2000 among the reporting dailies. If a few dailies account for a
major share, which is also rising, dominance is clearly growing. However,
in a country with a population that speaks and reads a large number of
diverse languages, it is not the distribution of aggregate circulation
among all dailies at the national level that matters. Newspapers
pertaining to each language constitute a separate market segment, which in
most cases, excepting in English, is substantially restricted to a
geographically contiguous area.
This has two implications. First, there are limits to concentration of
readership with a few suppliers at the national level, because of the
substantial degree of ‘diversity and pluralism’ resulting from what one
analyst has described as ‘the vast regional, linguistic, socio-economic
and cultural heterogeneity of a subcontinent’. But this tendency towards
pluralism at the national level is muted by the differential size of each
language-market segment. Besides differences in population size, sharp
variations in literacy, education and politically and socially determined
readership habits result in substantial variations in newspaper and
periodical circulation across states and languages. In terms of the
aggregate circulation of reporting dailies, newspapers in Hindi with an
aggregate reporting circulation of close to 26 million lead the pack,
followed by English with a much lower 7.9 million, Marathi with 4.5
million, Urdu with 3.6 million, Malayalam with 3 million, Gujarati with
2.8 million, Bengali with 2.5 million and Oriya with 2.1 million.
Circulation in all other languages is below 2 million.
Segment-wise
Concentration
Second,
beneath the observed national-level pluralism, there can be a substantial
degree of concentration in each linguistic and socio-cultural market
segment. An expansion either in the number of dailies in all languages or
in their total circulation need not mean greater pluralism if within each
segment one or a few dailies dominate the field with a hefty share of the
circulation. Unfortunately, evidence to assess whether this tendency has
been operative is difficult to come by. But some preliminary statements
could be made based on a comparison across linguistic market segments.
Since language-wise distribution of non-reporting dailies is unavailable,
the representativeness of the ranking of circulation by language is not
definitive. But treating the ranking according to average circulation of
reporting dailies in each language as representative, we obtain the ranks
reflected in Table 1, which shows that Bengali and Oriya lead the pack,
followed by English, Malayalam and Assamese.
This average circulation figure, which is the end result of the
distribution of aggregate circulation by language across the number of
reporting dailies, does allow some preliminary judgements on relative
concentration. What is interesting is that the relationship between the
average and total circulation of reporting dailies in each language, as
reflected in the rank correlation coefficient (RCC), which stands at 0.26,
points to a relatively weak relationship between the two (Table 2). This
suggests that the distribution among dailies of the total circulation is
not directly related to the total circulation in any language. This
despite the fact that there is a relatively strong relationship between
the rank of a language in terms of total number of reporting dailies and
its rank in terms of total circulation (RCC of 0.89), which seems to
indicate that it is the number of reporting dailies that drives the total
circulation figure. This apparent contradiction has obvious implications
for concentration of circulation by language.
To capture this, Table 2 presents a set of rank
correlation figures, of which there are a few that are worth noting.
First, there is a significant, even if not excessively strong,
relationship (RCC of 0.38) between the rank in terms of total daily
circulation of a particular language, and its rank in terms of the share
of big newspapers in total circulation (where ‘big’ is defined as a
circulation of 75,000 and above). That is, concentration of circulation is
higher in languages where circulation is larger. Larger market size seems
to be accompanied by some concentration. Second, there is an extremely
strong relationship between the rank of a language in terms of the share
of big newspapers in the number and circulation of dailies in that
language (RCCs of 0.91 and 0.92), and the average circulation of reporting
dailies. That is, the fact of concentration is illustrated by the result
that where the size of total circulation relative to reporting dailies is
high, a few big newspapers dominate and influence the average circulation
figure. Third, there is a relatively strong negative relationship (RCC of
-0.45) between the rank of a language in terms of the share of medium
newspapers (circulation of 50,000 and above but less than 75,000) and its
rank in terms of average circulation. That is, wherever there is a large
number of medium-sized newspapers relative to the total, average
circulation tends to be smaller because of a more equitable distribution
of the market.
These results can be taken to indicate that, underlying the diversity and
disparity implicit in the segmented markets created by language, there is
a basic tendency toward concentration in larger markets among those
languages. Overall, barring exceptions like Hindi, larger circulation is
accompanied by greater dominance. Fortunately, the diversity resulting
from language ensures that this concentration is substantially dampened at
the national level. The only instances where this need not be true are the
English language dailies which command the third largest circulation among
reporting dailies, and Hindi dailies which, though commanding an extremely
large circulation among reporting dailies, are also large in number
resulting in the fact that the rank of this market segment in terms of
domination by big newspapers is small.
The
Threat from
Television
It is
against this background that we need to assess the threat posed by
television to the print medium. The growth of TV households and of those
among them with cable and satellite (C&S) connections has indeed been
rapid. The National Readership Survey of 2001 estimated that 42.3 per cent
of Indian households were TV households and that, of these, 47.8 per cent
were C&S households. As noted earlier, despite this, the gross and average
circulation figures of reporting dailies seems to suggest that newspaper
circulation is on the rise.
The real threat from TV,
therefore, is that it could steal a share of the ad revenues. As is well
known, newspaper revenues in India are completely dependent on advertising
revenue, since the cover price is inadequate to cover the costs of
producing the paper. In the circumstance, if the advertising revenues of
newspapers are eroded by television, even large newspapers are under a
competitive threat. On the other hand, if this erosion of aggregate print
advertising revenues is accompanied by a concentration of available
ad-spend among a few dailies in each language, the tendency towards
concentration could be aggravated. Since advertising revenues are indeed
influenced by circulation, and since there is evidence of greater
dominance over circulation in markets with larger aggregate circulation,
such concentration of ad-spend can actually occur and is corroborated by
industry insiders. This effect is all the more significant, inasmuch as
reports indicate that there has been some decline in the concentration of
advertising revenue among English newspapers, resulting in a growth in
advertising revenue shares of the language dailies.
What
has been the actual experience with ad revenue growth?
Chart 4 captures the trend in absolute newspaper ad-spend and its share in
total ad-spend points in two directions. First, the share in ad-spend of
the print media, which declined marginally between 1990 and 1993 (73 to 69
per cent), fell sharply subsequently to touch a low of 53.5 per cent in
1999. However, between 1999 and 2002, the print media was able to stop
this erosion partly through raising advertising rates. Thus, at present,
the threat to newspaper ad revenues in terms of a reducing share of the
advertising pie has been stalled. Second, despite the decline in revenue
share, between 1990 and 2000, absolute newspaper advertising revenues rose
continuously because of a massive expansion in total ad-spend (Chart 5).
It is only during the years in which newspapers were able to stall the
erosion in revenue shares that aggregate ad-spend, and therefore newspaper
advertising revenues, stagnated.
Chart
6, providing figures of advertising revenue shares of television is an
exact mirror image of Chart 4, with revenue shares rising sharply between
1993 and 1999 and stagnating thereafter. On the other hand, as the same
chart shows, since aggregate ad-spend rose till 2000 and stagnated
thereafter, absolute advertising revenues in the TV business rose quite
sharply up to 1999, and the stagnated. It is true that during the early
years of expansion of private satellite television in India, net revenues
and profits were completely driven by advertising revenues, since the
challenge of generating a viewership and competition for eyeballs had
encouraged a strategy of providing their channels ‘free-to-air’. Revenues
from consumers, however limited, were monopolized by the distributors via
cable.
The sharp increase in television’s revenues and
revenue shares from advertising during the 1990s made this a viable
strategy. However, the stagnation of aggregate ad-spend and of
television’s share of that ad-spend during 1999-2000, could lead to a
shift in the competitive game in the industry. Some observers argue that
this is unlikely to occur, since international trends suggest that even
now the share of ad revenues garnered by the print media is high. Over
time, print media shares could go down to as low as 35 per cent if
international trends are replicated here.
But there
are a number of specificities of the Indian marketplace that could make
the recent stagnation of relative ad revenue shares of newspapers and
television persist, or make the expected decline in newspaper shares
extremely gradual. To start with, given the fact that literacy and basic
education in India are far from universal and that there is a strong
relationship between education, and income and spending power, newspaper
readers are a self-selected market for manufactures and services of
different kinds that are consumed at income levels above a certain
threshold. On the other hand, given the nature of the medium, television
offers infotainment of a kind that is easily ‘consumed’ by those with
lower levels of education and reach. This does mean that beyond a point
the expansion of television’s reach in the Indian context need not be into
segments with the same levels of purchasing power as the viewership at the
pre-existing margin. This could have implications for the media choice of
advertisers.
Second, it is known that different media are variously suited to the
advertising of different products. Advertisers of so-called
‘fast-moving-consumer-goods’ or FMCG products, who outlay huge budgets,
are known to prefer television for their products. But any advertising
that requires making a more elaborate case or offering opportunities for
recall are bound to choose the print medium. It is possible that given the
fact that the Indian market is generated by a combination of a low average
per capita income and a highly skewed distribution of that income, the
structure of demand is such that both newspapers and television have found
their levels of saturation in terms of advertising revenue shares.
Till further research provides more details, any judgement on what is
likely to happen to advertising revenue shares must necessarily be
speculative. All that can be said is that if the recent trend of
stagnation in shares persists, an increase in the competition among
television channels for viewership, to which advertising is linked, is
inevitable. But competition for viewership increases costs, leaving
unresolved the problem of sustaining net revenues or profits. The fall-out
of this could be two-fold. First, in each market segment, created by the
pluralism and diversity inherent to India’s socio-cultural context, only a
few channel providers can survive in the long run. Second, wherever
possible, channel providers will seek to exploit the option of turning
into pay channels, to directly obtain revenues from consumer. The danger
in the latter strategy is that even as it would be facilitated by the
conditional access system (CAS), which resolves the ‘informational
opaqueness’ and ‘conflict of interest’ problems associated with the
current distribution mechanism, a shift to CAS would reveal the actual
viewership of the channel concerned, with obvious implications for
advertising revenues. This makes the choice of ‘turning pay’ one that is
open only to those channels that are obviously successful in their niche
and face no major competitive threat. Overall, the tendency would be for
an increase in concentration in each market segment, which, as in the case
of print, is aggravated by the ‘winner-takes-all’ tendency resulting from
the ‘herd instinct’ of advertisers.
In sum, the principal issue in the media business, dominated by print and
television, is not one of inter-media competition but of the likelihood
that in each market segment within each kind of media business there is a
real threat of a kind of domination that dilutes the basic tendency
towards diversity and pluralism characteristic of the Indian media
marketplace.
This trend towards dilution is likely to be aggravated by one other
tendency specific to the two languages which, for completely different
reasons, command a relatively large newspaper circulation: English and
Hindi. While these are individual languages, they have been relatively
insulated from the tendency towards intra-language concentration because
the circulation in these languages is spread across large, sometimes
non-contiguous regions with varied socio-cultural characteristics. Thus,
the total circulation of these dailies does not relate to one market but
to a number of market segments created by specific expectations and habits
of populations with diverse socio-cultural characteristics. Not
surprisingly, the number of newspapers in these languages tends to be
large, and different market segments are dominated by different
newspapers.
However, recent developments resulting from factors captured by
inadequately defined categories such as ‘globalization’ and
‘liberalization’, and the ‘dumbing down’ driven by the more truly ‘mass’
medium of television, are resulting in a homogenization of tastes in
sections of these segmented markets. In the event, a homogenized,
‘national’ market niche is emerging in these languages that were earlier
characterized by sharply segmented markets.
In this context the drive to dominance takes two forms. One is to tailor
editorial styles to target the space created by these homogenizing
influences, with adverse implications for serious and good journalism. The
second is to use aggressive competitive practices, such as sharp
reductions in the cover price, to ‘win’ a circulation share in the market
currently dominated by niche players and wean away a share of the
advertising. The latter strategy, it should be obvious, can be pursued
only by those with deep pockets. Smaller newspapers with small advertising
revenues would be unable to sustain their editorial spending and their
bottomlines if they are to match the price reduction forced by such
practices. The tendency to use such practices to increase dominance is
thus disastrous for both good journalism and for pluralism and diversity
in the print media, which has served Indian democracy well.
All of this suggests that media policy in India must take account of two
needs. First, the need to preserve the pluralism and diversity crucial to
truly democratic functioning, which may require finding ways to set limits
to the uncontested reach that media channels (print or television) owned
and controlled by a single decision-making authority can have in any
individual language market segment. Larger reach of any single entity must
be accompanied by greater pluralism. Second, since the real issue is not
inter-media competition but concentration in each market segment within
each medium, haphazard and uncontrolled growth in cross-media control and
ownership needs to be checked, because that implies a degree of dominance
and dilution of pluralism and diversity that is doubly damaging.
References:
Bagdikian, Ben H.
(1997), The Media Monopoly, Fifth Edition, Boston: Beacon Press.
Herman, Edward S and Robert W. McChesney (1997), The Global Media: The
New Missionaries of Corporate Capitalism, London: Cassell.
Kumar, Sashi (2003), "The news according to Star", The Hindu,
Monday, July 28.
Ram, N. (2000), "The Great Indian Media Bazaar: Emerging
Trends and Issues for the Future", in Romila Thapar (ed.),
India: Another Millenium?,
New Delhi: Viking.
Rao, N. Bhaskara (2001), "Of
content and control", Frontline, Vol. 18 Issues 18, September 1-14.