Digitization of Content a Bane for the Paper Industry.

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Evolution of technology and growth in the penetration of the world wide web has swung and shifted the consumer preference from accessing content in a tangible form (Books, Magazines, Journals, etc.) to retrieving it on the internet, in a digitized format.

Over the past decade, this trend has adversely impacted the paper industry, specifically the companies which produce grades of printing paper (newsprint, coated, un-coated, thermal, etc.). In the initial phase the impact of digitization on the paper industry was not as adverse, but over the span of the last five years of the past decade, the industry has seen a substantial decline in the revenue, in the segment, at around 3 to 5% CAGR (Televisory Research).

Changing consumer preferences has led to a lower demand of the printing paper.

Nowadays, people are less dependent on their morning newspaper to keep them abreast with the global happenings. Similarly, few individuals carry books or notebooks and mostly prefer to use their e-readers and smartphones for the official assignments. The adoption of Internet and its penetration has shot up considerably and has created new modes of communication. This can be gauged from the fact: that from the year 2009 to 2015, internet users have grown at a pace of around 10% CAGR with the smartphone and e-reader shipments have swelled at a whopping 43% CAGR during the same period.

Increase in Internet Users and Shipments of Alternative Devices

( Source: Bloomberg, Televisory Research. )

A continuous shift hampered demand, utilization rates and prices

Over the years, the shift in consumer preference from print to online media has led to a significant drop in demand for various paper grades used for printing. The overall demand for Printing and Writing segments have declined at 1% CAGR, Newsprint segment witnessed a higher weakening at rate of 4% CAGR between 2009 to 2015.

Demand for Newsprint and Other Printing Segment Declined Leading to Lower Operating Rates

( Source: Bloomberg, Televisory Research. )

Faced with a low demand and operating rates the print segment continued to decline for last 6 years. This has also led to flat/range bound prices for various grades of print paper.

Fall in Operating Rates Keeps the Paper Prices Range-bound

( Source: Bloomberg, Televisory Research. )

Declining demand and stagnant prices have adversely affected the top line

Televisory examined - Printing and Reading, Newsprint and related segments with a sample set of 13 companies which represented a well-distributed revenue range from USD 275 mn to USD 6,658 mn (FY2015).

Company wise performance of the newsprint and printing paper segment

( Source: Bloomberg, Televisory Research. )

During the past ten years, a fall in demand for printing and the related paper segment has brought about a 3% to 5% CAGR decline in the revenue of the printing and related segments of the paper industry. The impact was severely felt during the last five years when the revenue decline was at its highest rate of about 6% to 8%. The exponential growth in the digitization of the content has affected the functioning of companies and has compelled them to look for the alternative channels and means of surviva