Corona pandemic has come as a double whammy for the media industry. It has crippled the business model of print and electronic media thus affecting circulation, which in turn has led to widespread job loss. At least this is how the management is justifying the lay-offs, salary cuts and leave without pay for employees.

However, experts believe

that the big Daddies in the media are using the pandemic ‘as an opportune time for the media houses, which were waiting to trim the staff and remove deadwoods.’ Meanwhile, some of the journalists have accused that performance was never the criteria because there had not been a complaint against them and removal was sudden. “I am one who had raised voice along with others against management’s dictatorial attitude and was shunted out,’ a senior journalist said.

You name a top media house and you will find from The Times Group, Hindustan Times Media Limited, the Indian Express Group, Business Standard Limited , New Indian Express and the Quintillion Media Private Limited, which runs the website The Quint to leading channels like Aaj Tak,; News Nation – the media persons either lost jobs or went in for heavy pay cuts.

The Times of India in Kerala laid-off seven reporters (three in Thiruvananthapuram, two in Kozhikode and one each in Malappuram and Kannur respectively) and three desk editors. Ironically these employees were asked on a WhatsApp call by the HR and the Assistant Resident Editor to tender their resignations for personal reasons. The Times Group paywalled E Papers of all its English titles — The Times of India, The Economic Times and Mirror —on 15 May, 2020. The Economic Times cut jobs in Kochi, Chandigarh and Kolkata on 6 May.

For journalists it is definitely a testing time as jobs are scarce, especially in the traditional print/electronic space, while for the media management it is equally turning to be a tipping point as they are putting their heads together to come up with a new business model that would help them survive. Shekhar Gupta, editor-in-chief and chairman, The Print, and a veteran journalist says “Big Daddies” are in trouble because of their dependence on advertisement.

Explaining media economics through his YouTube Channel presentation Gupta further adds, ‘One should try and understand the business model as to how much these organizations depend on advertising.’ Look at the leader in the industry, The Times of India, which sells the most number of English newspapers in the world. Even after being the largest organization, its turnover is just over Rs 10,000 crore. In 2018, its profit was Rs 681 crore. This profit is minuscule compared to the market leaders in other industries. Even Havells, a fairly new electronics company, makes a larger profit than the The Times of India, and this has consequences.

A newspaper like The Times of India has 48 pages in its metro editions like Delhi and Mumbai. The newspaper is sold for around Rs 5 and about 40 per cent is taken by distributors. The media organisation gets around Rs 2.40. Now, each page costs Rs 0.25 to print and printing 48 pages costs Rs 12. A very conservative cost of paying employees and news agencies etc is Rs 3. So if newspapers are produced at Rs 15, how are they sold at Rs 5 and how is profit still generated? The answer is ad revenue.

Since Samir Jain of Times of India based the company’s business model on ad revenue, it has become the industry’s standard. His company became the market leader and everyone had to follow his model to survive. Newspapers are sold cheaper and cheaper, and revenue is earned from ads. The Hindu does not follow this model and has kept the newspaper price high, Gupta points out.

The situation is equally bad for English TV news channels if not worse as most of them run in losses. They are either subsidized by Hindi channels or they are not run for profits but for some other reasons. News channels are very cheap, so they are even more dependent on ad revenue than newspapers. A channel subscription is Rs 2 or 3 a month, whereas a single newspaper costs more than that.

Advertisers primarily use entertainment and sports channels to show their products/services and hence a very small chunk is left for news channels. Then distributors take a large share of the ad revenue. This leaves news channels small and unprofitable and they are hit very hard when businesses cut their advertising budget.

So the question arises, who are running these channels and how they can sustain it? The answer is not so simple. Most media houses are gradually being managed by mining barons, real estate owners who either acquired a media property or diversified their business for political gains. Based on the ad revenue model when the economy is good, the flaw in it doesn’t show but when the downward spiral begins the structures start collapsing, Mr. Gupta points out.

Speaking about the digital portals he said, “This industry is an even more extreme version of print newspapers and news channels. Here, the reader doesn’t pay anything at all. The organization is solely dependent on ads. Distributors like Facebook and Google take most of the ad revenue and a very small fraction is left for the organization. The model cannot work and companies who have adopted these will be most stressed at these times. This business model is broken.”

Good articles have to be paid for and people in the West are realizing this. Even in India, The Hindu focuses on quality and doesn’t keep cutting their prices. In fact, Hindu has consistently raised the price of their newspaper and yet has done very well.

So what’s the solution? Post-Covid, media houses will have to come up with a new revenue model that should be subscription based primarily in the digital space, which newspapers like Washington Post and New York Times have done way back and as a result are not facing the double whammy even though their circulation has declined during this pandemic.