Updated (Rewritten)

q409-htmedia-fy09On the outset, Rajiv Verma, CEO, HT Media Ltd suggested that the company is “coming out of a commodity bubble, and such breakage of bubbles are always tumultous.” They’ve seen turbulence on the raw material and cost side, and the business environment during the last two quarters has been tough, with advertisers trying to conserve spends. The print industry has been declining: “During the last five years, the CAGR of the print industry was around 8%, with hypergrowth in the first three years at around 15%. During the last year, we saw the print industry decline by 2%.”

Ads for Equity

“We’ve been signing deals in ‘Participation for Growth’ model.” The total investment figure for 2008-09 is about Rs. 200 crores. The revenue booked in Q4 is about Rs. 19 crores. “We’ve taken a hit on that of around Rs. 6 crores as an extraordinary item.”

Cost cutting

— Pages: HT Media’s Chief Financial Strategist Vinay Mittal said that the company has cut pagination in both English and Hindi segments, in Delhi, Mumbai…across the board. This was done in Q3, and carried on in Q4. Pagination will not be rolled back unless advertising picks up or competition picks up. The Ad-Edit ratio is around 55% in Delhi, and in Bombay it is around 45%.

— Newsprint Credit Period: “We’ve ensured that the credit period avaialble to us for the purchase of newsprint has been extended. 

— Overheads and Workforce: The overheads have been tightened, and lowered expenses. We’ve rationalized ourworkforce. The effect of all these will start showing in Q1-10. Update: In an interview with Impact, Editorial Director Vir Sanghvi has said while there have been cuts in editorial budgets, and no pay raises, Editor in Chief Sanjoy Narayan has ensured that there are no salary cuts and sackings.

Internet Business

The company believes that Shine did very well in first year of launch, but “unfortunately the job market went through a tremendous decline because of cost cuts. Last year was a tough year for the labour and employment market – these events are very hard to predict. From a long term standpoint, we feel Shine is a great investment, much like Fever (Radio). We’ve crossed 2.2 million registered users within 6-8 months of launch.”

q409-htmedia-fy09-internet

Internet had an EBITDA loss of Rs. 48 crores for the full year, and HT Media has forecast a loss of Rs. 35 crores for the business in the 2009-10 fiscal. “We’d like to see Shine stabilizing before we start scaling up online business – a year or a year and a half – before we look at other verticals like Matrimonial and Real Estate.”

At the same time, HT Media remains keen in the Internet business – “the classifieds business has to migrate to the Internet. We have to be ready for that. Online businesses are the future of any media company. You’ve seen in the west how one after the other newspapers businesses have come under pressure because of their lack of online strategy. For a company to adapt to the online business also takes time, so we are on a learning curve.”

When asked about the issue of the monetization of the Internet business, Verma said: “There’s going to be a huge paradigm shift in how the content is sourced on the net. There’s talk of NYT going paid. The consumer will switch online, and the monetization model will hopefully have emerged by the time the Internet market in India matures, wherein the content starts getting charged.” 

Newspapers: Hindi vs English

Slowdown in print industry was more accentuated in English than in Hindi. The Hindustan brand has grown. In Q4 the ad growth in the Hindi business has been round 38%. Growth was flat in English: “We did not fall with the market for Display, and we picked up in DAVP and tenders.”

Mint

“We will launch in Kolkata in the next one month, then in Chennai within two months. Mint which was launched 2.5 yrs ago, has grown, and it ahs become an ackknowledged #2 in the country. For a young brand, it has grown well. Mints readership is skewed in favour of Delhi over Mumbai according to the latest IRS 2009 survey. “It is a function of circulation and brand salience. The circulation and brand salience in Delhi is very strong,” Mittal said.

Radio Yet To Break Even

Radio business performed very well – has become #1 in Mumbai and Bangalore, and has improved its #2 position in Delhi. The merger of Fever 104 FM with HT Media contributed Rs. 74 million to the topline. The Radio business came very close to a break even during the last quarter of this year, but it fell slightly short. “I’m very confident that it will create prositive value going forward. We will cherry pick and launch in more markets in FY10.” The company will look at participating in the next round of FM auctions. 

Average Newsprint Cost

q409-htmedia-cost-raw-materials

About 147,000 tons of newsprint at Rs. 35,000 per ton for the full year was consumed by HT Media, including both domestic and imported newsprint. The lost cost inventory is expected to kick in Q1-10. Newsprint prices are down to Jan-2008 levels. In October newsprint costs were at $930 in October, and they’re down to around $600-620 now. The newsprint costs in Q1 were around Rs. 29,000, 35,000 in Q2, and around Rs. 38,700 in Q3. Low cost newsprint helped us in Q1 and Q2. quantity of newsprint consumed this year.