Sharply Higher Newsprint Pricing Hits Hard In China And India, The World’s Two Largest Newspaper Circulation Nations

Philip M. Stone Novermber 12, 2008

China and India, the world’s two highest newspaper circulation countries, continue to enjoy print prosperity, increasing their daily circulation by 18.4 million last year. But somewhat surprisingly their newsprint pricing is higher than in the US and Europe and that is taking its toll.

Both countries are considered media powerhouses – Rupert Murdoch who has major investments in both countries --  said just last week, “In sheer numbers, the emergence of India and China as economic powers and the wealth that they are creating is accompanied by a rise of a new middle class. Over the next 30 years or so, two or three billion people will join this new global middle class. The world has never seen this kind of advance before. These are people who have known deprivation. These are people who are intent on developing their skills, improving their lives and showing the world what they can do.”

This is the first of a two part series on the effect of newsprint pricing hikes in the world’s two largest newspaper  circulation countries – China and India. Thursday’s article deals with newsprint pricing in the US and Europe.

So, let’s take a look at what such growth means in newspaperland. Last year China’s daily newspaper circulation rose by 8.3 million to 107 million copies sold daily – that’s more than double newspaper  circulation in the United States.  In India  circulation rose by nearly 11 million  to 99 million, very close to double US circulation which the World Association of Newspapers (WAN) puts at 51 million.

Both countries, however, are being hit hard by large newsprint price hikes. In India imported newsprint today costs between $950 - $970  a tonne,  there are reports it even hit $1,000 a tonne – and that compares to about $600 a tonne at the end of December. The Indian Rupee depreciating some 26% this year has not helped in making those US dollar payments, and for good measure there is a 5% customs duty which the government seems reluctant to lift. By reference newsprint in the US is at around $740 a tonne, so India is paying some 30% more.

In China, the world’s largest newspaper market, even though many of its cargo ships are returning home full to the brim with paper for recycling, the cost of newsprint has broken through the $900 a tonne roof, the highest price in more than five years.  Most daily newspapers in the five biggest cities have recently doubled their newsstand prices accordingly –  that means up from seven to eight cents a copy to around 15 cents a copy. In China it is said newsprint accounts for around 60-70% of a newspaper’s overall expenditure.

For many Indian newspapers newsprint is by far the largest expenditure – it can be up to 80% or so  since labor costs, unlike the US or Europe, are relatively cheap. India gets most of its newsprint from China and North America, but early this year China reduced its exports because it feared it wouldn’t have an adequate supply for the Olympics, and North America  simply reduced supply, and it didn’t take long for those twin market forces to really squeeze. That means that this year newsprint pricing in India has risen more than 50%. And domestic suppliers in turn increased  their prices to around $800, although there are reports that in the last quarterly renegotiations that price had softened a bit but, still, India imports around two-thirds of its newsprint.

As if the 50% imported newsprint price hike isn’t enough, there is the country’s raging 11% annual inflation. It is said that it now costs on average the equivalent of about 12 US cents to  produce each copy of a daily newspaper in India yet the average selling price ranges usually from three US cents to six US cents. So, what are Indian publishers doing?

For one thing they have reduced the number of pages printed and they put the launch of some new editions on hold. Sound familiar? In August the Indian Newspaper Society urged its members to reduce newsprint consumption by 20%. In Q2  Indian newspapers raised  newsstand prices by 10 – 12% but because of fierce competition publishers are very wary of going to that well too often. They have also instituted two rounds of commercial ad rate hikes. 

Now, who do you think is the largest advertiser in India? Well, it’s none other than the government’s Directorate of Advertising and Visual Publicity that holds the purse strings for public notices and other such advertising. According to one of India’s largest media buying agencies,  the government is responsible for fully 20% of India’s advertising market. So early in the year newspapers asked the government for a 50% increase in its fixed advertising rates, effective April 1. That got turned down but at the end of September newspapers did get a 24% rate increase backdated to September. 

Now this is substantial. For instance The Times of India, the largest daily circulation English language newspaper in the world with about 2.4 million copies, gets some 15% of its ads from the Directorate. At TheHindu, another big national newspaper, the Directorate accounts for some 10-15% of all ad revenue. Thus a 24% rate  increase is substantial for those bottom lines.

And to give an idea of the Indian newspaper market’s health, for this year through September print advertising revenues were 6% higher than the year before – yes, up not down – and in India print advertising is 95% newspapers and 5% magazines. That 6% increase compares, for instance, with an 8% decrease that Canada’s newspapers reported for the same period.

Incidentally, the real growth area for India’s newspapers are local language business newspapers. The conventional wisdom in India used to be that English was the language of business and while this may be the case in the major centers there now  seems to be a market for business newspapers in local dialects.

Even with high newsprint pricing, it seems hardly a week goes by without announcements of new newspaper launches. Foreign media owners are investing strongly, such as the British Associated Newspapers,  and the Irish Independent News & Media  -  and let’s not forget the Wall Street Journal’s collaboration with the Minit newspaper – it’s actually edited by a former managing editor of the Wall Street Journal Europe; Dow Jones has also said it plans to increase its editorial staff  in India from 25 to 70. 

What holds big foreign investment, however, is India’s foreign ownership rule that restricts newspaper foreign ownership to no more than 26%. Rupert Murdoch has said, for instance, he doesn’t really plan print  investments  in India because of that although recently he did invest $100 million in six regional TV stations.

Why are China and India thriving so much in print? It could well have something to do with their low Internet penetration. Whereas in North America  and for much of Euope  Internet penetration is well over half the population, in China, according to ITU statistics,  it is just 19% and in India it is only 5.2%. No wonder foreign media companies are scrambling to get into India and lobbying the government hard to change that 26% rule.

Incidentally, according to WAN, 74 of the world’s best selling daily newspapers are published in Asia with 62 of them in three countries – China, India, and Japan.