Is publishing a good investment opportunity?

There is certainly a lot of action suddenly, as this Businessworld Cover Story shows:



And a lot of investments going on as well:



But are the players going to make money?

Sure, it has been a good year for advertising and many mainline papers are doing well, but The Hindu's Murali thinks it is a "bubble". "A shakeout or churn is bound to happen," he thinks. "All this growth has come on the back of very low pricing."

What he means is that it is not economically sensible for publishers to sell newspapers for Rs 1-1.50 a copy, when the printing costs alone are anywhere between Rs 4-7 a copy (This does not include fixed costs)...

...This puts newspapers in India at the mercy of advertisers. It means that the focus is more on the trade, the advertiser and the media buyer and less on the main currency of publishing - the reader. Now, add price cuts to an already reduced cover price. "Price cuts are usually short term if you look at the UK market. In India, TOI started using price cuts in 1994 and worked at it for 10 years in Delhi," says Murali.

That is bad for everyone, TOI burnt cash by bleeding on circulation revenues, and so did HT in trying to match it. "We are just chasing numbers which have become a surrogate yardstick for success. How many of these papers are making money?" asks Murali. What he says is not new, but when dozens of brands start doing that, the value they sometimes erode could be greater than the one they create. So, if all that investor money simply goes in price cuts and circulation losses, and not in creating a good brand that will survive the slump years, it will bring publishing back to where it started. Instead of unlocking value, all that Rs 1,000 crore will go into destroying it.

Arun Natarajan is the Editor of TSJ Media, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of TSJ Media's Venture Intelligence India newsletters and reports.