Why paid content is embedded in the media business
Business Standard / New Delhi Aug 29, 2010, 00:21 IST
Much righteous shock and horror has been expressed at the issue of paid editorial content but no one should be surprised at the media’s disinclination to address the issue. That’s because doing so would entail radically altering the dynamics of the business as it has developed over the past two decades. The media business has always been unique in that it serves two sets of customers: readers and advertisers. Debates over conflicting interests have never been far from media managements’ concerns but in the days before profitability became the centre-piece of the business, it was reader subscriptions rather than advertising revenues that drove the industry. Newspapers — the medium in which the issue developed — were priced such that the subscription costs more than covered basic production costs. Advertising, therefore, was the revenue that covered the fixed costs. In the eighties, to provide an example, an eight-page black-and-white daily cost roughly 11 paise a page to produce against subscription rates that could vary between Rs 3 and Rs 4.
By the nineties, the growth of the information business prompted several proprietors both in India and globally to radically rethink the model, especially in a period that saw an explosion in the number and sophistication of newspapers and magazines. Today, for example, readers in Mumbai and Delhi have a choice of eight English-language dailies. The focus of expanding market share, therefore, shifted from the quality of editorial content to price as major newspapers started cutting price to expand circulation. Negative pricing was a gamble that paid off handsomely in terms of building circulation — but it also signalled a little-noticed shift in the way newspaper managements started viewing the business. It is worth noting that newspaper prices have been virtually unchanged in the past two decades — indeed, in some cases, they have actually fallen. This even as newsprint prices and salaries — the two biggest cost heads — have grown exponentially. Clearly, static or falling subscription rates could no longer pay for production costs, which meant that the advertiser had to pick up the slack. Again, with competition restricting the premiums the print media could demand, the advertiser willy nilly became the centre of the business.
The initial technique for accommodating advertiser demands was to clearly demarcate paid content through distinctive designs, fonts and labels such as ‘sponsored feature’ or by that curious hybrid word ‘advertorial’. That trend endures but growing advertising power has subsumed it with such innovations as ads-for-stories deals or equity-story swaps that are far more revenue-friendly than credible information. In most industries, conventional wisdom would dictate that a product that customers will reject products that do not meet their needs. But the media business is a different animal in the sense that it depends on self-regulation more than any other. Since such deals are not declared in the public domain, readers have no inkling of the lack of veracity in a story or otherwise. That and the ever-growing demand for information ensure that circulations grow steadily. Also, the increasingly fleeting and fragmented nature of media consumption (newspapers, TV, radio, internet) has meant relative reader indifference to the issue. Many are vaguely aware that their daily papers may have paid content but the product is too low priced and their engagement too low to motivate them to change. In a sense, then, paid editorial content is embedded in the business dynamics of the modern media industry. And since nobody’s losing, the impulse to reform is weak.
Your statement that "the media business has always been unique in that it serves two sets of customers: readers and advertisers" excludes the "raddi" market! It has been held that, while sale of newspapers is tax-free, its sale as raddi by a newspaper establishment is subject to tax. More importantly, perhaps for the reason that it wants to claim a higher subscription base, the annual subscription rate of a newspaper (name withheld) is lower than its disposal proceeds as raddi.
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