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Shalini Gupta (from Quantum Securities): “One last question. What is the problem that you are facing with respect to monetizing your readership online, because your readership in the newspapers, in the hard copies is well established, but what is getting in the way of you monetizing your readership online?

Sandeep Jain (Chief Strategy Officer, HT Media): Let me ask you this way, do you Shalini pay for news online?

Shalini Gupta: No, why would I pay for it?

Sandeep Jain: That is where the answer lies. That is the difficulty, and it is a phenomenon which is not only prevalent in India, but worldwide. The opportunity to monetize readership on digital is so much more difficult.

Shalini Gupta: So why not all of you get together and start charging for news online?

Sandeep Jain: At some point in time that would be the intention, but you know that some of these things are not that easy.

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HT Media is restructuring its business. For the quarter ended 30th September 2016 (Q2), and pre-demonetisation, some of the numbers:

– Overall print ad revenue de-grew by 3.6%
– English print business de-grew by 6%
– Hindi business (its Hindi newspaper Hindustan) had a growth of 1%. 

Circulation revenues grew at 2.4% to 75.6 Cr, largely driven by improvement in realization rates, offsetting a small drop in number of copies. Overall, the company reported total revenues of Rs 602.33 crore, and a profit after tax of Rs 51.2 crore.

Advertising in Print is down

Print and publishing accounted for 86.77%  of the company’s total revenues. Advertising in Print hasn’t done well during the quarter, down 2% to Rs 466 crore from Rs 475.5 crore in Q2 FY16.

Jain said on the call that “There are hardly any sectors actually which have done well. There are small gains that we have got in the durables sector. FMCG is mildly positive and DAVP showed some growth. However all the key sectors such as automobiles, real estate, BFSI, IT Telecom, and E-commerce have de-grown”. Ecommerce advertising contributes “Less than 3%. This quarter (ended September 30th 2016), even lower, at 2%”…”De-growth in English has been across, so both Delhi and Mumbai market have de-grown. Mumbai de-growth is about 8% and Delhi is about 5%.”

The decline in growth for Hindi is attributed to “Slowdown in the economy”, although the base is larger now, and “on the large base we cannot expect the same kind of growth rate. Also in our case, the growth was driven largely by UP, where there was headroom for growth but we now need to moderate our growth expectations.”

In fact, during the HMVL earnings conference call, the management said “we expect the Quarter 3 and Quarter 4 performance to be better because of the festival season, good monsoons, seventh pay commission implementation, as well as the upcoming UP elections. So, we continue to maintain that second half of the year should be a lot better than the first half of the year.” During the HT Media conference call, “for English, it is going to be the uptick in economy.”

This was before demonetization.

On Mint: Expecting more ads

The company also expects an improvement in revenues for Mint, given that it has been relaunched in a larger format. The cost of the paper is not dramatically different, but it expects more advertising revenue because earlier, “a lot of advertisers that they were not willing to resize their advertising to suit our format. ” HT’s management hopes to see “positive traction from Q4 onwards.”

On DNA: not much of an impact

“So I think while there has been some noise around the launch but effectively if we see the number of copies in the market, our estimates are that they started with about 30,000 copies and probably currently are closer to 20,000 – 25,000 copies. Not too much monetization happening on these copies as of now. So, as of now we do not see anything significant coming from this launch. I think it will continue to be a duopoly kind of the market.”

No battles over cover-price expected either: “I do not think the cover price is a matter of discussion. In fact it would probably be the other way, because as you know DNA in Delhi has launched at Rs.10 which is a much premium price point as compared to what the prevalent prices are for us and for competition.”

Losses are being restricted in digital

HT Media’s overall digital businesses grew at 10% versus last year, within which Shine (its jobs portal) grew at 40%. However, Q2 loss for Shine was Rs 5 Crores versus Rs 14 Crores in the same period last year. This, according to Jain, is because “We started to restrict the losses in Shine, so this trend that we see in Q2 is a continuing from Q1”.

HT Media has lost another Rs 13 crore in other digital businesses. HT Mobile Solutions has lost around Rs 2-2.5 crores (and de-grew by 25%), and other businesses, including the digital content businesses, have lost money. HT content business witnessed a 28% year on year growth.

HT also has investments (via ads-for-equity), in ecommerce company Koovs. The company plans to some of its stake in the coming quarter: “We also have to understand that we have a sizeable holding in Koovs and we cannot be selling the entire stock in the market in one go. We would certainly start selling some of this stock in the coming quarter.

Growth is coming from radio

On the other hand, Radio grew: “a healthy top line growth of 23% versus last year growing to around Rs 36 Crores on the back of new station launches.” However, reported margins in radio were at 19% versus 28% in last year Q2.

“On a like-to-like basis existing stations have grown by 8%, primarily led by yield, as our inventories on the existing stations were already sold out.”

“We are first trying to establish the right yields for these stations, for example, the daily yields on the new station is about 60% of what it is for Fever, while for Mumbai actually we are pushing for yields which are almost equal to Fever. So our strategy is here to hold the inventory tight, but make sure that we set a right base for the yields.”

Cost cutting and reorganization

Jain told analysts that the company is “working on a cost optimization project and it was kicked off about three months ago. The diagnostics of that project is going to be completed in a couple of months. We are looking at the entire organization and both the operating companies, so both in Hindi and English business. We see that the growth expectation have to be set right for this business and for us to maintain profitability, probably the only right option is to look internally at our costs, so we have embarked on this exercise which is pan-organization. We are hoping that by the end of this financial year we should be taking action on some of the recommendations.

The impact is going to be primarily on print, and not digital. “The digital businesses are at a different stage of growth. So I would say that primarily the focus is on print to begin with at least. You can imagine the reorganization exercises like these can be painful with a lot of decisions that need to be taken. So print is going to be our first focus and once we are done with print it is quite possible we would like to look into some of the other businesses as well.”

In response to an analyst comment that digital has been “hogging up cash for so many years and actually nothing is getting done about it”, Jain said that “While what you are looking at possibly is the losses, what I am looking at are the cost buckets. The cost buckets for print are so much larger and hence the opportunity is larger here. As far as digital businesses are concerned, Shine was the largest investment, but for the investment phase we are more or less seeing the end of it, as is being reflected in the trends of last few quarters, we are seriously cutting down on digital losses.”

Lastly

Shalini Gupta: What would be the impact of Reliance Jio on your newspaper readership, because we have a situation where data is going to be much cheaper and it is going to be much more widely available? So do you see any change especially in your Hindi business such as shifting of readership online?

Sandeep Jain: About Reliance Jio, firstly, the fact that data is going to be free is a bit of a misnomer, so we will have to see to what extent this data is actually free eventually. When you spoke about Hindi markets the people who are using the cell phones and who are accessing data are primarily accessing Facebook, Whatsapp or other social media, but for news everybody is still going back to the newspaper. So we do not think that there is going to be much of an impact at least in the near term as far as the Hindi business is concerned. As far as English business is concerned, to some extent it is being impacted by the digital wave and the growth rates to that extent would certainly be lower than they would for Hindi.

Sources: HT Media conference call and HMVL Conference call.