As part of The Hoot's continuing commitment toward creating greater media awareness and fostering debates related to media issues we are excerpting a second passage from Vanita Kohli-Khandekar's The Indian Media Business. New extracts will be posted on the site every month and readers are invited to send in comments, book recommendations, and reviews.
The media boom in India over the past decade and more has been the subject of discussion and debate. This growth, as Kohli-Khandekar argues, is not limited to print media • where there has been a considerable surge • but is also evident in the growth of television and, more recently, radio as well as new media. The book offers in-depth and empirical analyses of the business paradigms of various media ecologies in India. It is a compendium of valuable facts related to the media business backed by case studies and comparative frames with media in other parts of Asia, Europe, and the U.S. This excerpt focuses on the media revolution in Tier 2 and 3 towns in India highlighting not only the changes in these media markets but the continuing Metro and English language bias amongst advertisers and media buyers.
Vanita Kohli-Khandekar. The Indian Media Business. third Edition. New Delhi, Thousand Oaks, London: Sage Publications, 2010. http://www.sagepub.in/browse/book.asp?bookid=1454&Subject_Name=&mode=1
The Indian Media Business
412 pages / Paper: Rs 495.00 (978-81-321-0235-9)
In June 2007 the Noida-based B.A.G films Dhamaal radio launched in 10 cities. Big deal? Yes, if you consider that Muzaffarpur, Dhule, Ahmadnagar, Jalgaon, Jabalpur, Hissar, Shimla, Patiala and Karnal are the towns in question. These are some names you may be tempted to look up in the map. Most analysts dismissed the station in Tier 2 and 3 towns such as Karnal. These hardly made for hot advertising sources, was the logic. Detractors were in for a surprise. Total ad billings for Dhamaal rose from Rs 4 lakh a month to Rs 30 lakh. Anurradha Prasad, managing director B.A.G Films and Media, expects the figure to go up to Rs 50 lakh a month this year and expects to break even in three years. 'It is easier to get an audience in these towns,' says Prasad.
Small-town India is rocking. One estimate puts the value of sales from small towns at 30-50 per cent of the total for some of the leading durables, financial services and FMCG majors. Bajaj Auto's Pulsar, Discover and Platina are brands that are meant for small towns and do exceedingly well there. Mobile phone makers too are happy. 'The last two years have seen a greater drive in tier 2 and 3 cities,' says Lloyd Mathias, director, marketing, India and South-West Asia for Motorola. Before proceeding further, an important distinction has to be pointed out. This story is not about rural India. It is about non-metro India. There are 382 towns with populations ranging from one lakh to under 40 lakh. Some marketers include towns with a population of 50,000. If you consider them, there are 779 towns.
According to Hansa Research, the HPI or Household Premiumness Index (introduced three years ago) for many of these towns is higher than the national average. The HPI calculates the affluence levels after studying the demographics, ownership and consumption of products and services. It makes up for the shortcomings of using SECs to segment the consumers.
Affluence levels in towns such as Kanpur, Indore or Surat are three fourths or more than that in Mumbai. Not only do residents of these cities buy durables, financial services and telecom products at roughly the same pace as metro buyers, they also consume media in more or less the same quantities. Internet penetration, DTH sales and C&S offtake is growing faster in small towns. This is an attractive market in terms of purchasing power, time spent on media and product consumption says a recent report (The Dhoni Effect) by Ernst & Young. All this has led to a boom in mass media options. For long, 'the perception of (mass) media was limited to the seven metros,' says Tushar Dhingra, CEO, Adlabs Cinemas. Now, 1,700 digital screens, hundreds of multiplexes, over 225 radio stations, the rise of Bhojpuri, Bangla and Marathi cinema, the surge in language television and hundreds of language editions in print offer a undreamt-of range of mass media options.
The fact that mass media is finally reaching out to these towns in various forms is helping unlock their potential. 'Industry has been pushing growth in small towns but advertising had lagged. That has changed and advertising is following,' says Vikash Mantri, assistant VP, ICICI Securities. Take Future Media, which is a part of Kishore Biyani's Future Group. It offers everything from TV screens, radio stations, physical space and even a magazine to marketers wanting to reach out to the 200 million-plus consumers•claims the company•who walk into its 500-odd stores daily. In January 2007, when Future Media began selling space in these outlets, there wasn't much interest. 'Six months later they started walking in asking to be shown the options,' says Partho Dasgupta, CEO, Future Media.
Over 300 brands such as ICICI Bank, Vodafone, Mitsubishi Pajero and Club Mahindra now use Future Media's TV and activation options in Big Bazaar and Pantaloon among other stores. More than 60 per cent of these brands came because they wanted to target small towns and their rising rupee power. The average deal size? Rs 30•40 lakh. Almost every media company is now plugging into this growth story. Sanjay Trehan, CEO, NDTV Convergence says that more than one-third of traffic on NDTV.com comes from small towns. To cash in, it recently launched NDTVKhabar.Com.
UFO Moviez, the country's largest digital theatre chain, has 1,080 screens across India. Of these, 80 per cent are in tier 2 and 3 cities. Since 2005, when UFO rolled out its offering, 'each of these witnessed a 150 per cent jump in audiences walking in,' says Rajesh Mishra, CEO, UFO Moviez. Viewership trends on TV too reveal the non-metro pull. According to Nikhil Rangnekar, executive director, India (West), Starcom Worldwide, the viewership for news in English, Hindi and other languages has grown faster in non-metros. It is the same for cricket and reality shows.
As the acceleration sets in, several things are bound to happen across the value chain•from marketers to agencies. The metro bias within corporate India is reducing. So media and ad agencies will go where the money is.
Secondly, marketers will need to rethink everything from the idea of value for money to premium for small towns. Mathias reckons that, in the last three years, the average value for most of the phones sold in these towns went up from Rs 3,000 to Rs 5,000. Popular features are extendable memory cards and MP3 players, something only metro buyers would be interested in earlier.
Big spending in retail is now more visible. Earlier this year, the biggest bill in a Big Bazaar outlet•for Rs 2.25 lakh•came from Sangli, a town in Maharashtra with a population of 6.5 lakh. The fact that it is in a district that is one of the highest sugar-producing ones in the country is really not the point. Bill sizes are increasing. 'The number of items on the bill may be lower in Baroda than in the metros, but the per-unit value is higher,' says Vishakha Singh, director, MaRCom, Future Media. The volumes too are bigger. Compared to 4,000 footfalls a day in Mumbai's upmarket Phoenix mills area, the Lucknow Big Bazaar gets 16,000 people in the store.
The Media Platform
As the prosperity of smaller towns draws in media, it has to learn to localise more. Radio, probably, has the biggest opportunity. Bundeli music in Jhansi, Dogri in Jammu and Bhojpuri in Ranchi is what gets audiences to switch to FM. Tarun Katial, CEO, BIG FM points out that in many cases it has revived the local music industry. In Orissa, for example, ringtones and downloads have made Oriya music viable. Media agencies have to stop looking for spikes. For instance, the listening pattern on radio in small towns is flatter, since there is little commute time which means stations can use all time bands, not just morning and evening,' says Katial.
Marketers and media buyers will admit, albeit off the record, that there is an English and Metro bias among agencies and advertisers. More than half the marketing spend decisions nationally are taken by people based in Mumbai. In essence, the ad spend directed at Mumbai is B2B (business to business) rather than B2C (business to consumer). An internal study done by a national media company shows that in 2006 over Rs 6,600 crore•an overwhelming 30 per cent•of the Rs 20,000 odd crore national ad spend was blown up on Mumbai-centric media. One marketer puts the spends on the six metros at over 60 per cent of the national spend. Even in a metro, on a really local level, this bias shows up. The cable trade is full of stories about the premium on carriage fees in Worli and Bandra in Mumbai where media buyers and agency guys work and stay. Then there are other biases.
Take English. Seven per cent of the readership of Indian newspapers comes from English, 53 per cent of the ad spend goes to English, as per the statistics available. Or take the fetish for TV. 'Most planners are TV babies, they don't read. They probably wouldn't even know what towns fall in the list of 50 towns,' says Sulina Menon, consultant, Brand and Media. It is to the credit of groups like Bhaskar and Jagran that the gap in the ad rates between regional languages and English has been narrowing. They have managed to repeatedly prove that reading in an Indian language does not translate into a down-market consumer. 'The problem is media buyers only decide through SEC cuts,' says Vishakha Singh, director MaRCom, Future Media. These are now beginning to tell on the business. The whole process is rate-oriented and the resulting fall in rates has meant increasingly smaller amounts for the two per cent odd that media agencies get. In a bid to become relevant they are starting to offer 360 degree solutions•direct marketing, digital, outdoor. That is exactly what creative agencies did sometime back, but eventually specialists grabbed that piece of the pie. And that is what is happening to media agencies too. More than 40 per cent of marketing spends now does not necessarily go through an agency, because marketers spend it directly on media that they think is relevant.
Maybe it is time for media agencies to find another weapon in their fight for relevance.
What is pushing mass media into these markets? It arises from the confluence of three factors. The first is the rapid increase in purchasing power in small towns that almost coincided with the saturation in metros. Secondly, the rising below-the-line spends are going to small-town India. The third is the growth of local SMEs. In several categories such as telecom, financial services, durables, the growth in the metros has been slower than in the rest of urban India, points out the Ernst & Young Report. In telecom, for instance, subscriber growth in the four metros is growing at 57 per cent compared to 92 odd per cent in the rest of urban India. Till even a few years ago, communicating to this growing pool was a problem. Compared to a Mumbai, Delhi or Bangalore mass media options in Karnal, Surat, Sangli or Madurai were limited. The options would invariably be a local cable channel, the local DD station, the local newspaper and All India Radio. As marketers started getting desperate to reach small towns, they began using (out of home) OOH and events. Of the $6 billion that was spent on advertising in 2006, more than 30 per cent went to non-mainline (below the-line) options. Much of this was spent to reach small towns. Rising BTL spends boosted local advertising in the early part of this decade. Combined with the growth of regional brands, it triggered the growth of hundreds of local dailies and catapulted local cable stations into a Rs 800-crore ad vehicle. Media companies are yet discovering gold. 'The trend of BTL going to small towns will increase,' thinks Atul Phadnis, CEO, MediaE2E, a media services firm that has done work on media in small town and rural India. There is an interesting twist to the tale. 'Advertiser interest in small towns is driven not just from Mumbai and Delhi but from regional SMEs wanting to go national,' says Katial. One of BIG FM's largest advertisers is Aligarh based Pavna Computers. Katial points out to local brands like the Rs 250-crore Wagh Bakri Tea (it has a brand ambassador in Smriti Irani and is popular in Gujarat) or the Punjab State Cooperative Milk Producers' Federation's Verka cheese. Each spends a few crores on advertising every year. Katial reckons he gets one third of his revenues from national brands, one-third from purely local SMEs and the rest from regional (across the state). And there is the strong retail push. 'Thirty per cent of our business comes from retailers. For many marketers, the decision-making has shifted to regional,' says Prashant Panday, CEO, Radio Mirchi, a part of Entertainment Network India (ENIL). Sanjay Gupta, editor and CEO, of Jagran
Prakashan concurs. He points out that there has been a lot of decentralisation of national budgets over the last few years with dealers and local offices deciding how to spend the money. Many companies do not release ads through national agencies. His flagship daily, Dainik Jagran, taps into this trend with 32 editions and 230 sub-editions across the country.
It is not all rosy. There are thorns too. Two of the biggest ones are infrastructure and the rates that a media owner can charge. 'Electricity is the main issue. The switchover to consumption will happen when there is infrastructure feeding into that consumption,' says L.V. Krishnan, CEO TAM Media Research. TAM's biggest challenge in large audience markets such as UP is the lack of electricity which make it difficult to capture viewership patterns (the upside is that this makes UP and Bihar great markets for radio). The second problem is getting better yields. Radio Mirchi has 32 radio stations. When it sells them as a network, the bulk rate is, say, Rs 15,000 for 10 seconds. This works out to roughly Rs 500 for a station. But when it tries to sell space on individual stations•say just Jabalpur, advertisers expect the same rate. This makes it less lucrative to sell local media to national advertisers. This is where the growth of regional and local advertising is a god send. Gupta reckons that local advertising offers better margins. A regular 100 cc ad, for example, in a regional daily would bring in 50 per cent more from a local advertiser because there is no discounting on the card rate. Earlier, even if the local advertiser paid the card rate, it was not as tempting as the national advertiser because volumes were not enough to justify a separate brand. Now they are. 'The local advertiser is more demanding because he wants to see walk-ins. Once you succeed locally, you succeed nationally,' says Gupta. Remember Aaj Tak? It began as a beacon of hope for small and local advertisers. Today, it commands more than half its viewership from outside of Delhi and Mumbai, but 70 per cent of its ad revenues come from advertisers in these two cities. TV Today's CEO G. Krishnan points out that most of this ad spend is aimed at small towns. Is regional proving to be the ace in the pack for media owners? Some certainly do believe that it is. The biggest money spinner in Zee's stable•after its flagship Hindi channel•is Zee Marathi. Nitin Vaidya, director, regional channels, Zee Network, says that Zee Marathi delivers not just in non-metros but has been ahead of Star Plus in Mumbai (till May 2008). Many 'small-town' media brands have a higher audience share than national brands. It is when these brands start becoming bigger than 'national brands' in revenues that the fun will begin.