Reducing govt ad expenditure and more priority to state media may result in Bhutan with no private media: DoIM report

The report also proposes some new solutions which are finding traction with the private media


The private newspapers have been voicing out on the business downturn due to the reduced government advertisement revenue and the priority given to the state media over the last few years. But nothing was done about it. Now a private newspapers sustainability report, commissioned by the Department of Information and Media (DoIM), confirms the worst fears for media diversity, and as a consequence, media freedom in the long run.

The report states, “It is not an exaggeration to say that the financial crisis is of a magnitude that threatens the survival of all private newspapers in Bhutan. If left unattended, it may result in Bhutan being left without any private newspapers.”

It points out that the direct culprit for the current paralysis of the private newspaper market is the dramatic drop in the amount of advertising available to private newspapers over the last three years. It points out that the 90 to 95 percent of revenue of most private papers are through government advertisements.

The report found that in 2011-2012, nine newspapers in operation including Kuensel reported receiving Nu 124.3 mn in government and private advertising. In 2012-2013, the government  budgeted Nu 64.56 mn. However, in 2013-2014, the government only spent Nu 43.8 mn. It says that between 2011-2012 and 2013-2014 fiscal years, the government spending on advertisement declined by a staggering 32 percent. This does not even include the dramatic decline in the previous years.

The report also looks at the dominant role played by Kuensel, which is 51 percent owned by the government and currently receives the lion’s share of advertisements compared to other private newspapers.

It points out that Kuensel has the highest circulation because it has the best paper distribution network and owns the highest quality printing press, not only in Thimphu, but also in eastern Bhutan, allowing it to reach all districts of Bhutan on the same day, an ability no publication can match.

Kuensel was given free government land on which it was built and its high tech printing presses were given as grant from DANIDA, according to the report. Kuensel clarified that the land was on lease from the government for a lease fee, and in addition to the initial grant machines, it had also bought addition printing presses.

The report also says that Kuensel being the owner of the highest quality printing press in the country is in a position to indirectly set the ‘standard price’ for printing all newspapers in the country, and Kuensel in effect sets an “upper price benchmark.” Currently, around half the private newspapers print in the printing press owned by Kuensel. The report says that as a result printing costs for all private newspapers in Bhutan are inflated.

It says that though the Kuensel management said their revenues were declining in the last three years, however, ‘the financial situation does not look that difficult at all’. The report points out that since 2008, Kuensel has made profits every year including in 2013 and declared and paid out dividends except in 2013.

It was also found that journalists working in private media were paid far less compared to their colleagues working in the state owned media. The quality of content of private newspapers also suffered due to the crisis.

In the meeting held to present and discuss the report, it was pointed out that it was not only Kuensel which played a dominant role, but also increasingly the Bhutan Broadcasting Service (BBS) which is increasingly soaking up advertisement revenue in huge volumes through increased rates and more aggressive marketing. It was proposed that once BBS gets a public broadcaster status with full funding from the government, it should not maintain a commercial profile.

The report says that the government does not have an obligation to assure that all private newspapers currently on the market should survive, but the existence of a vibrant, diverse, well regulated and competitive private newspaper market, providing high quality journalism, is in the best interests of the Bhutanese society.

The main solution proposed by the report to help the private newspapers is reengineering the distribution of government advertising funds.

It points out that the current system of distributing advertisements is so de-centralized and un-coordinated that no one can monitor it, making the system appear convoluted, non-transparent and exposed to possible abuse.

The report says that there should be a pre-allocation of advertising funds, whereby, the government should announce the budget available for advertising. Following this, an Advertising Placement Board (APB) would decide how much funds should be allocated for electronic media, like BBS and others versus print media.

Then APB should decide how much funds should be kept for Kuensel and the rest reserved for private newspapers only.

The report says this should be done as Kuensel being government owned is the biggest player in the market with machines and facilities that no one in the industry can match. Therefore, Kuensel should be limited in the amount of funds it gets.

The precise allocation of funds between Kuensel on one side and all private newspapers on the other side should be decided after careful financial analysis, according to the report.

The APB, itself, would be an inter-governmental Advertising Placement Board, endowed with the authority to make all ad-placement decisions on behalf of the government.

The report proposes that the board may have three permanent members as media specialists from the government while it would also have ad-hoc members representing the specific government agency giving the advertisements.

The APB’s decisions would be published on a website which would include the list of media companies getting the advertisements and the amount of funds allocated to each media house.

The APB website would also have a section in which APB will regularly announce its ‘advertising needs’ in advance and based on this individual media houses could bid for those advertisements.

However, only newspapers which are subject to the circulation audit and publish regularly are eligible to compete for government advertising funds.

The report says that the current draft “Government Advertisement Guidelines”, which is being discussed by the government, is fiercely opposed by the private newspapers who feel it unfairly favors Kuensel. It goes on to say that if the above proposals are approved, if APB is created and advertisement funds for private newspapers are protected from Kuensel, then private newspapers are likely to abandon their opposition to the proposed criteria.

It points out that the once a new market condition is created, it will ensure a level playing field and it will also ensure that only private newspapers that become more competitive and increase the quality of their products reach financial sustainability.

According to the report, soft loans would only make the problem for the media worse, and instead says that the main issue to be solved is the distribution of advertisement.

Other structural problems, like the small readership and difficult terrain of the country increasing distribution costs have also been pointed out. According to most publishers that the makers of the report talked to, the final price of printing and distribution is much higher than the price at which publishers sell their papers.

The report also highlights non-market measures to improve the media environment as it says that no media environment operating solely on free market principles will ever develop to be as sophisticated and as diverse as it needs to be to fully meet the information needs of its audience.

A ‘Content Creation Funding Facility’ (CCFF) has been proposed to provide financial subsidies or substantial co-financing for creation of high quality and highly specialized journalism. It says CCFF could have a Board of Directors with representation from Journalists Association of Bhutan (JAB), Bhutan Media Foundation (BMF), prominent intellectuals, NGOs, former journalists and international experts.

According to the report, for the long term sustainability of private newspapers, it would be extremely important that a proper way be found to partially subsidize their transition from newspapers to digital publications.

The report also highlights some general measures which would benefit all publishers. It says to lower the high printing costs private newspapers could pool resources together and create an alternative printing facility of the same quality as Kuensel has.

To address the issue of high distribution costs for private publishers the government should subsidize costs of delivering papers outside Thimphu and Paro, according to the report.

The report also recommends lifting the mandatory rule of private newspaper having to also print in Dzongkha, and instead, special subsidies be given to those producing content in Dzongkha.

It finally recommends an annual survey of private newspapers be conducted for the government to measure the state of health of the private newspaper market and also as an efficient way for the private media sector to communicate its needs, ideas and expectations to the government.

Nearly all the private CEOs and MDs of the 11 private newspapers that this reporter talked to unanimously supported the report and its proposals. The general consensus among the private papers was that the only viable long term solution would be to fairly distribute government advertisements.

Meanwhile, Kuensel management staff had a different take on the matter. They felt that their printing costs were competitive, that advertisements cannot be segregated at source for the private media, and that it too was suffering from the effect of declining government advertisement revenue.

The report compiled by QED Consultancy Group is currently with the Ministry of Information and Communications and will eventually be sent to the Cabinet.




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