The war for scraps

Something is rotten in the state of Pakistan’s print media industry. Over the course of the past two years, away from the eyes and ears of those outside the news media, a seismic shift has occurred in one of the most basic aspects of how the newspaper business works: the way publications collect their revenue. That’s right, not how they make their money, but simply how they collect it. 

This is a story of bad business practices, wilful corruption in government departments, and a culture of kickbacks, favours, strong-arming and internal scheming and bickering that has brought an already embattled industry to its knees. At the core of it is a fundamental problem that journalists and media houses all over the world are facing more than ever — is it possible to ethically print the news and make money along the way? 

In today’s day and age, the print media has very few options to monetise and has turned it into a dying business, leaving advertising as its only real source of revenue. This is a problem. It is particularly so in Pakistan, where the biggest advertiser in the news media is the government. The federal and provincial governments both regularly launch marketing campaigns for different initiatives that they are working on. As part of those campaigns, they send advertisements in different newspapers. This is where our story begins. Because behind these ads, their placement, their payments there is an intricate web of middle-men, delayed payments, forced discounts, and internal politics that rule the roost.

There are four central characters. The first is the government, which both is the biggest advertiser and holds the purse strings. The second are the advertising agencies. These are the middle-men that the government hires to get their ads placed in different papers. And finally, there are the publications themselves. They are represented by two organisations: The All Pakistan Newspaper Society (APNS) and the Council of Pakistan Newspaper Editors (CPNE).

The payments landscape 

People don’t consume news the way they used to. Up until the turn of the century, printed newspapers and magazines were a major source of how people stayed informed. Yet from the mid-2000s onwards, the print media was hit by a double-whammy: the advent of private television news channels and the rise of the internet. The story from here on out is a global phenomenon: print media is dying. And with subscriptions in freefall, the only real source of revenue left behind is advertising. For Pakistani newspapers, the major chunk of that is government advertising. 

It sounds simple enough. The government wants ads printed for awareness or publicity, and newspapers are a good avenue to place those ads. Except this is where things start to get complex. Let us illustrate with an example, the system that was long in place. 

Say the prime minister announces a subsidy package for farmers. He will direct the ministry for food security to get the subsidy underway, and one of the first things the ministry will do is launch a marketing campaign. However, since the ministry neither has the time nor the will to individually seek out media organisations, and then finally send them the cheques. What they do instead is send their marketing campaign to the Press Information Department (PID) or the office of Director General Public Relations (DGPR) when it is the provincial government. The PID then hires an advertising agency which coordinates all of these details with the newspapers and makes sure the ads are printed.  

Now here is the real problem. Since the PID gets their cheques from the relevant ministries and departments, they are made out to the advertising agency that was given the contract. The standard practice is and has been that of the amount the government pays for advertising, the publication is given 85% while the agency takes a 15% cut. But since the entire amount was being paid to the agency, they can do what they want with the money and create a lot of roadblocks before releasing it to the newspapers. After receiving the payments from the government, ad agencies would delay and in certain cases entirely fail to pay the newspapers their rightful dues, understandably creating hostilities between the ad agencies and newspapers. 

And this is where the corruption kicks in as well. While the government is giving this much commission to the agency, to actually get contracts, agencies have to grease the wheels a little and pay off the necessary bureaucrats and politicians that need to sign off on such things. Just take the example of Midas — once Pakistan’s largest media advertising agency. During an audit of the accounts of Abdul Majeed Shahid, Punjab’s former director-general public relations in the tenure of the Pakistan Muslim League-Quaid (PML-Q) regime, Rs 632.59 million in fake invoices were unearthed, all of which were connected to Midas Pvt Ltd. 

Emboldened by this, the advertising agencies began another way of making money. You see, when the PID gives advertising agencies a budget to design and manage a campaign for them, they set a fixed rate for the newspapers. Different newspapers are divided into graded categories A, B, C, D, and E. A fixed rate is set for how much the front page of a category A paper would cost and what the front page of the others would cost. Normally, if there are 10 papers in category B and the government wants ads placed in five category B papers, the agency is supposed to pick the ones best suited for the campaign. Say, for example, Newspaper A has a strong presence in Karachi even though it lags behind in other cities. If the ad is from the Sindh Government, the agency should pick Newspaper A even though Newspaper B might have better overall circulation numbers. However, since the agencies were controlling all of the cashflow, they used this to their advantage and started negotiating with the newspapers off the books. 

Say, for example, the government gives an ad agency Rs5 lakh to get an ad placed on the front page of five B category papers. The advertising agency could go to a B category paper and tell them they will give them the ad for Rs3 lakh, and if they do not accept the offer, they will make it to a different paper in the same category. Since there are plenty of newspapers out there, the competition for ad revenue is tough. Newspapers are regularly strapped for cash, and that means when an offer comes for hard-money they accept it. In this way, agencies have been able to strong-arm newspapers into accepting less money and pocketing the forced discounts. The government still officially pays the papers the 85% and the agencies end up making more than their 15% share. 

It is a vicious cycle. The government has money to advertise. To get that contract, advertising agencies have to bribe bureaucrats and sometimes even junior government officers. Since they spend money on bribing these officials, they then have to recoup those losses. How do they do that? By shortchanging the newspapers. Since the advertising agency controls all of the money coming in from the government, they have the benefit of hanging on to that money longer than they need to. Because the ad agencies are the ones picking which papers the ads are placed in, they then pit different newspapers against each other to see which one will offer thMedia owners also have employees to pay, and so they cave in. 

The system was in place for a long time. But over time, the newspapers also started to get sick of the agencies easily pushing them around. So they decided to hit back. The All Pakistan Newspaper Society (APNS), along with the Council of Pakistan Newspaper Editors (CPNE) started pushing for the government to implement a method by which newspapers would get paid their advertising dues directly by the government instead of having to rely on the advertising agencies. It is a simple solution to a pretty straightforward problem. Or at least that is what one might think. 

The 85-15 equation 

In April 2020, after persistent lobbying by different newspapers as well as the APNS and the CPNE, the federal government’s Press Information Department (PID) devised a system by which the government and its various departments and corporations began paying the 85% share directly to publications and only 15% to advertising agencies. 

Earlier, the agencies controlled the flow of money. Under this new system, different newspapers send their invoices to PID for verification and it forwards the bills to the various liable government ministries, departments and organisations. So as we mentioned in the earlier example, in the old system an agency would get ads placed in the newspaper and then ask the PID for money. The PID would then request the relevant ministry to release the money to the agency, which would pay the newspapers after this. Under the new system, the agency has been cut out from between the payment that the government makes to publications. 

This solves both the problems. If the government pays newspapers directly, then they will no longer face delayed payments from the agencies. And on top of this, the agencies will no longer be able to pocket a portion of the set rate by pitting different newspapers against each other for advertisements. Since the government will be writing cheques to the papers directly, they will be written for the full 85% amount. 

The system has been implemented successfully almost all across the country, with Punjab being the only hold-out. Just last week, on the 29th of December 2022, a joint statement issued by the All Pakistan Newspapers Society (APNS), Pakistan Broadcasters Association (PBA) and Council of Pakistan Newspaper Editors (CPNE) urged Punjab Chief Minister Chaudhry Parvez Elahi to implement the 85-15 payment formula of advertising dues as implemented by the federal government and other provincial governments. 

“This demand is not a new one. We had also pitched the Nawaz government before the Imran government for the 85/15 rule. We believed that newspapers were the only industry in the world in which the one who got 85 percent of the money had to beg from the one who got only 15 percent. When the newspapers received money through agencies, then the agencies did not pay the newspapers for years, and with the money of the newspapers, they also settled their businesses, built houses and took foreign nationalities, while the payments of the newspapers were delayed”, says Aijaz ul Haq, a member of the CPNE. 

“We were looking for a solution to this problem for a long time. Now the situation is that the federal government has a rule of 85/15, and the Khyber Pakhtunkhwa and Sindh government have also adopted it. Punjab also adopted this rule but a regional organisation of Punjab went to court against it. In Punjab, the law of 85/15 has been passed but it is still not being implemented,” he added.

While the new policy was implemented, it has not been without its problems. According to some involved in the matter, while the old system of payments coming through ad agencies was a corrupt and inefficient system it still worked while the new policy was making things worse than before. Others have claimed that the opposition is coming simply because it negatively impacts the bottom lines of these critical voices. 

Internal politics — was corruption the glue that held it all together? 

Here is the thing: on the surface the demand of the 85-15 policy makes complete sense. Publications have faced severe cash flow issues and bad debt because of the advertising agencies. It is the logical solution that if the government paid the newspapers directly, the entire matter would be gone in the snap of a finger. 

Except the government operates through the bureaucracy, and the bureaucracy is less the magical snap of a finger and more death by a thousand signatures. You see, with the old system, officers in the PID, DGPR offices and the various government departments had a reason to process payments quicker. Apparently agencies would regularly bribe officers, something they could afford since they were flush with cash and withholding it from the newspapers. Without that incentive, payments have stopped being processed through government offices. 

And while the APNS was part of the earlier mentioned joint statement given just a few days ago demanding Punjab implement the 85-15 system, there is reason to believe that the APNS is starting to have serious doubts about the new system. “Ever since the government introduced the 85/15 system, the liability has shifted from agencies to government and we (APNS) have not been in a position to suspend advertising agencies for non-payment or delayed payments.  It does not mean that we oppose this system but we believe that it has created frequent delays in payments. Under this system I do not know when my payment will be made by the government, it is like a payable, when able sort of a system”, says Sarmad Ali, President of the APNS. 

Ali denied the implication that the APNS may be turning its back on the system, but did express his reservations. “We are not against this system at all.  Many media organisations and bodies had raised this issue because there was a perception amongst newspapers that some advertising agencies take payments from the government and do not pay newspapers on time. In the case of some agencies, this impression may have been correct, but it was by no means the norm. Our concern is with the payment liability passing on from the advertising agency to the government. In this system we do not have control to suspend the defaulting advertising agency.” 

According to Sarmad, to ensure the efficiency of this system, the government should set up a revolving fund with the PID so that there are no delays in payments even if the ministry makes delays. “We believe this needs to be improved.  If the release order to place the ads is being issued by PID then it must assume its liability as well. This means that PID must be given the authority and autonomy to make payments. We have suggested that funds of the various ministries, departments and corporations should be placed at the disposal of PID to enable them to settle media invoices on time.”   

Ali has a point. While there was corruption, under-the-table money being given, and agencies treating the industry like the wild-west — newspapers were still getting most of the payments. For the large part the corruption worked. It did not work well, since newspapers were regularly shortchanged by advertising agencies. But it worked. The government paid for ads, the newspaper owners were able to pay the bills, and advertising agencies pocketed their commission and then some. At the same time, officials in the agencies and in the government departments responsible for disbursing payments benefited from taking under-the-table cuts.

Under the new system, with the PID, DGPR and other government departments entirely lethargic and apathetic towards the payments of newspapers, things have gone down significantly. Newspapers are reporting a slowdown in payments according to the APNS. But there is more to the story. The APNS itself has some vested interests against the 85-15 policy. Largely because as an organisation, the APNS is in the business of accrediting advertising agencies which register with them for a fee and get access to their members. If agencies are out of the picture on the payment front, the APNS will basically be left with just the business that comes from commercial advertisers – for which they will remain the organisation to tackle payment problems. 

The CPNE also says that the reservations about the incumbent system have less to do with the technicalities and more to do with the internal dynamics of the APNS. Out of the two bodies, the APNS has been very directly involved in clearing out payment issues between agencies and newspapers. In fact, for years now, this has become one of its primary functions. Under the new system, the APNS is suddenly without much of a job to do. “The role of APNS is that of a clearing house and when they are not able to do their work properly, the members of the society also recognize it but are not able to express it openly”, says Aijaz ul Haq, a member of the CPNE. “There is politicking going on within the organisation and everyone is looking out for their own interests.”

“The impression is correct that there is a propaganda against this rule but there is no truth in this propaganda. Newspapers will only suffer in rolling back this rule, while the need is now to strengthen this system. Our 85% should be received directly and all the organisations should pressurise the government for direct payments. The process of this system is not mature enough and it causes delays in payments. But despite this, the federal government is also paying for advertisements while the payments have been regularised in the Sindh government too”, he concludes. 

The APNS vs the CPNE? 

This is a factor. Over the years, the APNS and the CPNE have emerged as two very different kinds of organisations with very different interests as well. Both founded in the 1950s, over the years the APNS has become a sort of mediator between newspapers and the rest of the world looking after the financial interests of different publications. The CPNE, on the other hand, has been more involved in issues such as free speech. 

And this actually worked out for both organisations for decades. Until the emergence of new players in the market. During the 1990s, the Express Group backed by the Lakhani family entered with an urdu daily, and launched their product from multiple stations. Over the years, they grew and others also joined the fray. Many more Urdu papers entered the market, and the English press also saw a new entrant in the form of Daily Times in 2002. In fact, in 2010, at a time when the business was dwindling, two new English daily papers were also launched. 

Both Express Tribune and Profit’s parent publication, Pakistan Today were launched that very year. At the same time, as other media groups entered the picture, a number of new Urdu and regional newspapers also flooded the market. 

Worried by the decreasing size of the pie and the increasing number of hands wanting a piece, the APNS responded by closing ranks. They closed off some voting rights for new members like Tribune and Pakistan Today for example. 

The decade since Tribune and Pakistan Today were launched has been a near-fatal one for print journalism. The government did what everyone feared and used its patronage of papers through advertisements to try and censor them. Continued fall in readership led to many papers not being able to pay their staff and laying off their teams. Despite it not being their domain, in the past few years the CPNE started becoming more active in trying to solve problems with advertising agencies. 

As a result, they were front and centre in the implementation of the new 85-15 rule that is now also being fought for in Punjab. While the APNS has been standing by this, largely because there has been a big demand for the policy among newspaper publishers and journalists, they will be concerned about a diminished role if the roll out of the policy is successful and it takes off. 

What really is it all worth? 

Print media, particularly news media, has always found itself in an awkward position. Newspapers are not just an important record of history, but generally aspire to high journalistic standards. On the other hand, to keep a newspaper running there needs to be a sustainable business model behind them that makes money. Journalists need to be paid salaries, which means people need to pay to stay informed. Until the turn of the century and even after that, this worked because people would pay to get a newspaper or a magazine at their doorstep.

That is what it comes down to. This may be a business with a bigger purpose, you can call it the fourth pillar of the state if you like but it boils down to the same simple reality most things in life boil down to: it has to be financially viable. As it stands, print media is dependent entirely on advertising revenue. While this was just about government advertising, advertising by the private sector is not much better — especially since they see media as a commodity. 

The reality is that the only way out for the print media is to report the news in a way that is true to a publication’s editorial vision, and also in a way that the reader of this day and age will be willing to pay money for. Without a return to this fundamental model where your readers pay you for good journalism, the future of the newspaper business in Pakistan is bleak, much like it is everywhere in the world right now.