Media companies do not have a choice but to pass on part of the increase in input costs to the advertising sector and part of it to consumers, that is the readers. HT Media believes continued focus on cost productivity, expense control and then some amount of media inflation will have to be pursued as a strategy if margins are to be protected.
Despite there being some improvement in the advertising space, Rajiv Verma, CEO, HT Media, does not see major signs of revival there. However, sectors such as real estate and education seem to be doing better than last year in terms of augmenting ad growth. He further adds other sector is FMCG, and packaged goods has suddenly found some joy in advertising in newspaper.
In an interview on CNBC-TV18, Verma says there is bound to be some media inflation. "Irrespective of how growth comes about, continued focus on cost productivity, expense control and then some amount of media inflation will have to be pursued as a strategy if margins are to be protected," he says.
Below is the verbatim transcript of Rajiv Verma's interview on CNBC-TV18
Q: Last quarter when we spoke, you spoke about some improvement in the advertising space. Has that continued or is that tapering out?
A: I would say that there is a major improvement although early signs that few sectors are beginning to show some traction. There is also a bit of base effect improvement happening. However, if you were to ask me if there is a major sign of revival in advertising environment then I would not say so. I think we still have to see advertising environment getting far more robust compared to what we see at this point in time.
Q: Two part question; one, what kind of sectors are beginning to augment ad growth for you and second, even if you do not see great improvement, would you say there is more stability in the situation now, in that you expect a steady state performance over the next few quarters on ad growth?
A: The sectors that have shown some signs of revival were real estate also we saw some revival coming from education sector relative to last year and there is a bit of base effect also, some retail in local markets of Uttar Pradesh and Bihar showed a bit of traction but it is not something where I would say it is a major revival taking place in the mood and momentum.
I would say our customers are trying and they are trying to push a bit harder the offtake therefore some amount of advertising is taking place. The other sector is fast moving consumer goods (FMCG); packaged goods have suddenly found some joy in advertising in newspaper and that has been a good form of revival that we are seeing.
Q: Would it be fair to say that over the next two quarters at least in this environment it will be very difficult for you to push rates up, whatever growth you get would be by way of volumes?
A: You have seen what has been happening to the input cost. We are a major user of newsprint which is a commodity that is mostly imported and the way exchange rate has moved, I do not think media companies have any choice but to pass on part of the increase to the advertising sector as well as part of it to the consumers, which are the readers.
Therefore, irrespective of how growth comes about, continued focus on cost productivity, expense control and then some amount of media inflation will have to be pursued as a strategy if margins are to be protected. Therefore, I do not think companies who are in media business have a choice but to look at some media inflation.
Q: Are you confident of setting out some kind of targets for the rest of the year in terms of how much you expect ad revenue growth to trend as also circulation revenues to pickup?
A: I think you are going to be looking at double digit growth, in any case most of it is coming due to price inflation and also those companies that have been innovating and those companies that have invested in the past behind good brands, stand a better chance of recovering the investments they have made through all the innovation that have been pursued so far, an example being the investment HT made in Mumbai, which has become a fairly robust brand now.
The investment we made in our Hindi business that now contributes almost 40-50 percent to our margins. Therefore, I remain very confident that a company like ours which has pursued a long-term oriented strategy and invested behind new growth engine like Mumbai, like Hindi and now going forward digital, which is almost becoming 5 percent of our overall revenue structure, will stand a better chance of navigating these headwinds.