Digital news organisations were beginning to find ground in establishing credible avenues of revenue but were hit by not just the pandemic, but also changes in government regulations.

Inside the shift emerging at Indias digital newsrooms
Delve Digital News Monday, January 04, 2021 - 17:47

When the lockdown was imposed in India towards the end of March 2020, news websites and apps saw a spike of over 40% in time spent on them, as the world scrambled to understand and learn more about the pandemic. With no newspapers being delivered, everyone turned to news websites for their information. While this may sound like good news for the industry, it hardly lasted. In less than a month of the lockdown, the Indian media saw a bloodbath in the form of layoffs, furloughs and pay cuts. From the biggest media groups such as the Times Group and Hindustan Times Media, to digital news organisations, scores of journalists lost their jobs as the media was hit by the COVID-19 pandemic, which brought economic activity to a near standstill by the end of March.

Many of the new-age digital media organisations that were just beginning to find ground in establishing credible avenues of revenue, were hit harder by not just the circumstances brought about by the pandemic, but also changes in government regulations.

Pandemic impact

Digital news organisations are predominantly dependent on advertising revenue – both direct and indirect. Advertising may not be the biggest source of revenue for all, but it is a sizable chunk for almost all organisations. With the onset of the pandemic, advertising revenue fell by over 60%, with brands cutting down on marketing and advertising spends, thus eating away a significant chunk of revenue.

Ritu Kapur, CEO of Quintillion Media, which runs The Quint and BloombergQuint, says that advertising took a hit in the first few months of the lockdown, especially revenue from programmatic advertising. This, she says, was because advertisers didn’t want their brands next to COVID-related content, which at the time was what every newsroom was entirely focusing on.

Karma Paljor, editor-in-chief of EastMojo, that focuses exclusively on news from the states in the north-east, says that for a new organisation like theirs, advertising was still the main source of revenue, which dried up completely during the lockdown. “We used to get a lot of advertising from colleges, educational institutions as well. That also completely dried up, and this was just when our numbers had started to increase in the months prior to that."

Organising events was another credible revenue stream that took a hit during the lockdown. "We also had some events planned that we had to immediately cancel since everyone was trying to understand the situation,” Karma says. Mithun Kidambi, product and revenue head at The Wire says that the pandemic resulted in a direct hit on events, which was not only a sizable source of revenue for the website, but also added value to the brand. For The Quint too, this was a revenue stream that was beginning to grow, and took a big hit.

And with two significant revenue streams taking a hit, digital newsrooms now had to look at various new avenues to bring in earnings.

Many started charging for their content. Some organisations started subscription programmes and put their content behind a paywall; some started membership programmes with some value-added benefits. Several newsrooms also opened up for donations from users to support the journalism they were doing.

As advertising began to recover slowly from August as the economy opened up, some newsrooms also began offering advertisers unique propositions to bring back that revenue source.

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User-led revenue streams become buzzword

With there being a visible shift away from the dependence on advertising revenues, most digital newsrooms believe that the way forward would be user-generated revenue.

“Globally, there has been a reset on what it means for a news organisation to have a revenue stream that is primarily user-led. The idea that advertising cannot underwrite your journalism is something everyone didn't want to confront, but it was the reality,” Mithun of The Wire says. User-led revenue stream, Mithun says, is far steadier and more predictable, and is something organisations can grow.

The Quint’s Ritu also agrees that the biggest change this pandemic will bring is getting readers to pay for content, and for that to work, Ritu argues that your content offering needs to be distinct. “Why should people pay for your news? There is no point putting commodity news behind the paywall. Therefore, editorial strategy is something digital newsrooms need to think seriously about,” Ritu adds.

Abhinandan Sekhri, the co-founder and CEO of Newslaundry, also says that the quality of content suffers when a newsroom is dependent on advertisers for revenue.

“When you go for an ad-revenue model, the metric you have to sell is traffic, which is linked to sensational/masala news. And this is true anywhere in the world. So quality of content suffers when traffic is your metric. Whereas when readers, subscriptions, are your source of revenue, it makes your model more robust and you can focus on the quality of your journalism rather than quality of your sales pitch,” he adds.

Samir Patil, the founder of Scroll says that the way forward would be to become a pure platform or take a marketplace approach like Scrollstack. Scrollstack is a content marketplace for creators.

“Another viable approach is perhaps of a diversified media company like Vox or The Quint in India. That will need big ticket investments. And the second is perhaps attractive niches paid directly by readers like The Ken that can grow to be big organically,” Samir adds.

However, Vignesh Vellore, the CEO of The News Minute, says that going behind a paywall is not an option for his organisation. “We are very bullish on the fact that we need to focus on getting more people to read our content. We are building a larger focus. And also, what is the point of journalism if not to reach more people. We are a product for the masses,” he says.

While some organisations are asking users to become members and are not going behind paywalls, there are others who give only a certain number of free stories a month. Many others have gone completely behind paywalls. 

A double whammy

But just as digital news outlets were leaning to reduce dependency on an ad-supported model, the government dealt a blow to the industry in the form of regulation.

In September, the Union government put a 26% cap on foreign direct investments (FDI) in digital media under government approved route, and in November brought all digital media, including OTT platforms and news and current affairs content online, under the purview of the Ministry of Information and Broadcasting.

While this brought about the possibility of regulation and censorship, the move was quickly followed by a larger blow where the Union government issued a notice to all digital news entities asking them to bring any FDI down to 26%, seek the approval of the I&B ministry, and said that entities that have foreign investment of over 26% will have to furnish details to the ministry within one month.

This essentially closed doors of all potential foreign investment into digital media. The first fallout was seen with sixteen journalists losing their jobs as Huffpost India shut down. US-based media houses BuzzFeed and Verizon bought HuffPost and because foreign companies aren’t allowed to control news organisations in India, Huffpost India had to shut shop.

The government’s policy interventions have attracted criticism from digital news organisations. DIGIPUB News India Foundation, a platform that represents digital-only news ventures, said in a statement in November that a restrictive regulatory framework could seriously inhibit the capacity of digital news organisations to grow, and limit their potential rather than provide a conducive growth environment to Indian companies and the Indian digital sector.

DIGIPUB urged the government to consult with all stakeholders, especially digital-only entities that will bear the strongest impact of these policies. It also said that it is working on guidelines for conduct and self-regulatory rules.

“We urge the Minister for Information and Broadcasting to give us a hearing. We are confident that we can together create a framework that will be nurturing to the digital media economy as well as set high standards on journalism, while addressing other concerns,” it added.

Investment impaired

Digital news organisations also believe that this will greatly impair the ability of newsrooms to raise funds, not just from foreign investors, but from Indian investors too.

“In the current environment, I don’t think any investor or individual will want to put their money here. It is not just regulatory scrutiny. There is still a lot of uncertainty, and exit options are limited. Who will you sell to? Who would buy a digital media company during this time? So, you don’t even know if the investment will give you good returns,” the founder of one digital news website says.

Vignesh Vellore argues that while scaling is already a challenge and hence a deterrent for investment, the 26% cap takes away any remaining investor interest.

“Why would a foreign player spend so much money for just 26%? They don’t have control, so exits are pretty much gone. So, when Venture Capital is eliminated, you're dependent on a handful of Indian fund houses who want to invest in media and who understand how media works. But the chances of an independent Indian investor investing in media is very, very low. So that level playing field is completely gone,” he says.

Digital newsrooms also argue that there is lack of clarity in the regulation itself.

“Where is news defined and how does the government define news? Are they going to restrict YouTube as well? What restriction will be imposed on those who are crowd funded… The word aggregator is not defined under law for news aggregators, news organisations are not defined,” Nikhil Pahwa, founder of MediaNama said, while speaking about the lack of clarity in the FDI norms during a recent panel discussion by the India International Centre.

Some organisations say that regulatory scrutiny combined with the pandemic-induced economic slowdown has brought ambitious growth and expansion plans of digital organisations to a screeching halt.

“It is about survival and sustaining because there will be limited capital to play around with. This is the time we could have spent in doing better journalism, but our need for capital has been stifled. I'm spending a lot more time thinking about survival, than about good journalism,” the founder who was quoted earlier says.

But the industry isn’t losing hope. While The Wire is looking to optimise its costs and focus on better journalism, The Quint is now looking at laying a larger focus on its own resources for more original reporting, while also trying out membership models and investing in tech to offer advertisers a better digital proposition. For news organisations that are focused on niche audiences, growth and innovation on the subscription front is bringing in some hope.

Viable models will emerge, Samir says.

“The pessimism is short lived since the audience for digital media has grown and unlike other tech disruptions where the ‘product’ itself is more, not less relevant. The path from here to stable models is still long and hard,” he adds.

(Disclaimer: TNM’s Editor-in-Chief Dhanya Rajendran is the Chairperson of DIGIPUB)

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