Even the private newspapers that hit the market after 1992 couldn’t fix the defective business model mainly due to the presence of two state-owned dailies, Gorkhapatra and The Rising Nepal—the powerful propaganda tools of Panchayet system. Since both the newspapers used to enjoy state subsidies to suppress the cover price, private newspapers were forced to keep the cover price at par with the government-owned newspapers. They were forced to adopt a business model of building up a huge readership through cheap cover price in order to lure enough ads to cover up the loss in newspaper production. Undisputedly, low cover price of newspapers greatly helped to widen their circulation, enabling them to penetrate the lower sections of the society where newspaper reading habit was virtually nil just couple of years ago.
Undoubtedly, the business model has handsomely paid off for the print media in India, where the economy has been constantly expanding for last ten years and advertisement revenues have increased by around 20 percent alone in 2010. However, it failed in Nepal due to a number of reasons. The first and the foremost is that industrial production has shrunk to six percent of the GDP from nine percent in 2000. The contracting manufacturing sector, which also lowered their volume of ads for their range of products, was the major clause for the recent decline in the ads market. In addition, the deepening slowdown in the realty and automobile sectors has further strained the ads market. Some of the industrial products that need constant branding like beer and noodles have been thriving but their near-monopoly in the market makes them unlikely to pursue an aggressive ads campaign. Service industry has, of late, emerged as a potential ads generator but being highly seasonal, it is not big enough to compensate for the loss of ads from manufacturing sector. The saddest part of the saga is that almost all domestic industrial products were replaced by cheap foreign imports which could never contribute to the domestic ads market.
Though the business model of suppressing the cover price initially produced moderate returns for newspapers in 1992-2000 when the Nepali economy was booming, it had, of late, become self-destructive for the industry. How? Let’s see the economics of daily newspapers in Nepal.
An estimated 70 percent of newspapers’ revenue comes from ads in Nepal, while remaining 30 percent comes from sales of newspapers. Indian newspapers are even worse off, standing at 10 percent; whereas the proportion of revenue from newspaper sales in the developed countries is up to 70 percent. It is shocking that publication houses get just about half of the cover prices of Rs 5 after deducting post-production distribution costs, commission for distributors, loss on unsold newspapers and ever-growing cost of hundreds of cycle boys, who take newspapers to every doorstep every morning. In addition, the almost-double rise in the price of newsprint, which alone represents 35-45 percent costs of a publication house, along with the recent over 20 percent depreciation of Nepali currency against the US dollar, swelled the cost of printing a 16-page broadsheet newspaper, excluding wage bill and overhead expenses, to around Rs 7 per copy. So, depending on the scale of production, each copy of newspaper was incurring a loss of Rs 3-4 in printing cost alone at the cover price of Rs 5.
As a result, newspapers were reluctant to increase circulation because it simply added to loss. At the same time, they were forced to maintain a ‘lucrative’ circulation level to impress the advertisers with their reach and influence. So, daily newspapers were curbing circulation to keep the loss at a bearable level, an unnatural act for newspapers as they are always trying to increase readership. It is estimated that the total circulation of daily newspapers could have crossed 600,000 from current level of around 400,000 had publication houses not had to curb their circulation. More than that, low cover pricing of newspapers also threatened to undermine the essence of journalism—independent and impartial news writing. It is because the ads, which contribute around 70 percent of the newspapers’ income in Nepal, not only bring business to the media but also represent interests and the big influence of big advertisers, thereby limiting the capacity of newspaper to report their wrongdoings. Nepali journalism has seen big advertisers putting sanctions against those newspapers that refuse to dance to their tunes. Nonetheless, we have also seen incidents of Nepali journalism running a series of stories against certain products or services when they fail to secure lucrative ads contracts from the advertisers.
In this context, the recent cover price increment, which now covers the cost of printing and lowers dependency of newspapers on ads revenue to around 50 percent, will help improve the financial health of newspapers, ultimately helping them to withstand illegitimate influences of big advertisers. Moreover, concerns are often raised on the quality of journalism with reference to imperfect reporting, violation of standard journalism ethics, among others. However, many are unaware of the fact that most of them are the products of weak financial condition of the media houses. As a result, journalism in Nepal has neither been able to attract new talents nor retain the ones who have entered journalism. The financial rewards in the profession, which demands well-educated and smart manpower, is very low compared to other professions. We often meet readers comparing our contents to those of world-class newspapers, but they forget that we pay less than 10 percent of their cover price for the newspapers. Average pay scale of Nepali journalists is less than one-fourth of what Nepal’s banking professionals currently enjoy. The secret behind the astonishing success of the banking industry is that the handsome pay they offered lured many talented brains and made the profession highly competitive and innovative.
As far as the allegation that major newspaper houses were carteling by simultaneously raising cover prices is concerned, yes, it was a coordinated act, which is not a new phenomenon in Nepal. We have long been witnessing similar practices in highly competitive sectors ranging from noodles to chicken to soft drink. That collaboration was a necessity because in a highly competitive media market like ours, it is impossible to take the decision of raising cover price unilaterally for the fear of losing out market share. That was the reason why the cover prices of newspapers had remained unchanged for last several years. By definition, a cartel is a consortium to limit competition by controlling production and distribution of goods and services. But since the collaboration was only for the purpose of revising the cover price, and not to limit competition among newspapers or to control scale of production to keep the cover price at a certain level, it is not an act of cartelling, as many have understood it.
The writer is Associate Editor of Republica
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