TOI Finds A New Threat In Newspaper Inserts: It’s A Battle It Can’t Hope To Win

‎A major newspaper chain today warned guerrilla advertisers that “newspaper inserts are unethical”, not to speak of being “illegal and an unfair trade practice prohibited by the laws of our country.” For good measure, it added that such inserts may damage the brand, since readers may perceive the companies or businesses doing these illegal insertions as “fake” or “fly-by-night”.

Full marks to the newspaper group for trying to warn readers against those daily slips of paper we get asking us to order food from local restaurants, buy cheap properties, get a haircut or facial done at a new Unisex salon, or some such everyday appeal for custom. The warning, issued by The Times of India (TOI),‎ will be watched with great interest by rival newspaper chains, who too have been quietly gnashing their teeth against illegal inserts that cost them advertising revenues.

But these efforts will probably fail. The TOI, remember, is probably the world’s most profitable newspaper brand, and if it is worried about small-time advertisers who try and get hawkers to insert slips of glazed paper or handbills to reach out to potential customers, it must be worried.

It should be. The fact that TOI has a near monopoly in the major advertising markets of India cannot blind us to the fact that newspaper readership in general is under pressure from digital media, and print advertising costs are unaffordable to most businesses that need localised exposure.

Just as piracy is the market’s answer to overpricing, clandestine inserts are the advertiser’s answer to unaffordable advertising costs. So while the TOI can chase these guerrilla advertisers and take legal action against some of them, the real war it will be fighting is with its own distribution network – the hawker base.

Today, the principal value in a newspaper is not necessarily its content, but its distribution network. The main reason why people buy newspapers in the digital age, where news is instantly available on your smartphone anywhere, may well be inertia and the fact that it is delivered to your home.

Ask yourself: how many people, whose lives or careers don’t depend on being up-to-date on news, will buy newspapers if they had to pick it up from a vendor instead of the vendor delivering it at home? Most people may prefer to read newspapers in offices.

The reason why we have illegal inserts in newspapers is because hawkers find this to be an additional source of income, over and above the commission given by newspapers for deliveries. Without this additional moolah, hawkers may need more commissions, which would skew the costs further against publishers.

Today, a TOI costs around Rs 4.50 a copy, excluding the hawkers’ commission and other distribution costs, but the printing and paper costs alone may range from Rs 15-20 per copy, depending on the number of pages printed on any given day. This loss can only be made up with high advertising rates, which again are counter-productive, since this drives potential advertisers to other media or towards casual inserts.

To sum up, the reasons why newspapers are on a losing wicket with inserts include the following:

One, to defeat the inserters, a newspaper company will have to take on its own hawkers, who make money from it. The only way they can win is by raising commissions, but even then they will have a tough time policing inserts. Higher commissions will not guarantee hawker compliance.

Two, newspapers are very bad at microcasting advertising messages. Even though TOI and other print publications have lower rates for urban localities and suburban areas, the rates still don’t make sense for, say, a new beauty salon which focuses on 30 building complexes in a metro town for business.

Three, advertisers also worry about the fact that TOI is almost a monopoly in many markets. Its private treaties and market share agreements with big advertisers ensure discounts for loyalty, but the small advertiser is usually left out of this largesse.

Four, TOI is also in a bind. It cannot cut rates too much unless it also raises its subscription rates. But doing that means losing out on readership, which is what delivers the advertising. It is a Catch-22 situation from which there is no easy way out.

The real message from the rising incidence of insert advertising to the newspaper industry is simple: your ad rates are too expensive.