Print media may take hit over high newsprint costs: Fitch

Fitch Rating has come out with its report on Indian print media industry.

Fitch Ratings expects higher newsprint prices to negatively impact the profitability of the Indian print media industry in the short to medium term. At May 2011, domestic newsprint prices had increased by 13.4% compared to average prices in 2010. On the same basis, international newsprint prices (US) were up 7.2%. Newsprint cost is the largest operating cost for newspaper publishers and typically accounts for 40%-50% of total operating costs. At the same time, the agency notes that competition is likely to prohibit newspaper publishers from raising cover prices significantly (and thus passing on incremental costs to the consumers).

However, the agency expects that an increase in advertising revenues may partly offset the rising cost of newsprint. Newspaper publishers generate about 70% of revenues from advertising, with the remainder coming predominantly from circulations. It should be noted however, that expectations of moderate economic growth will negatively affect advertising revenue growth. In its

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