Often referred to as the industry’s “cold winter,” the year 2005 proved a very difficult one for the traditional newspaper industry in China. As Wu Haiming, publisher of Jing Hua Times, said at the traditional media forum held by Beijing’s Tsinghua University on April 12, 2006, “Here comes the winter for the newspaper industry. And it doesn’t mean that spring is just around the corner. Rather, it is the beginning of a gradual decline.”
Since the establishment in 1996 of the first newspaper group in China, the Guangzhou Daily Newspaper Group, there have been 39 such companies in the country. In the past, the industry was known for its huge profits, with a 30% increase every year in ad revenue over the past two decades. But according to market researcher CTR, in 2005, newspaper ads declined 1% and newspapers’ market share dropped 3%. The lost share went to TV, radio stations, the Internet, cell phones and other new media.
Beijing Media Corp., the first media company in China to sell shares, offers a good look into what the industry has gone through. It booked 814 million yuan ($101.5 million) in ad revenue in 2004, compared to an estimated 590 million yuan in 2005. Its net profit margin dropped to 11.1% in 2005 from 28.8% in 2004. Also, net profit at Beijing CCID Media Investment Corp., owner of China Computer, slumped more than 50%. Many profitable newspaper companies booked losses in 2005.
According to Cui Baoguo, a communications professor at Tsinghua University who spoke at the forum, “the media industry is undergoing a huge structural change, with newspapers declining and the new media growing. The biggest challenge facing the media industry is the transition toward digital.”
Newspapers are not just competing among themselves. More and more, the competition is from operators of building ads, mobile ads, Internet ads and cell phone ads. In particular, Internet and cell phones are encroaching on the traditional media’s turf.
Hu Meng, CEO of Shanghai’s Jie Fang Focus, noted that “as people’s reading habits change, the Internet and other new media are increasingly becoming the choice of the young, while the traditional media is becoming less and less influential. The impact of the new media is even stronger than that of the marketplace. In the next three to five years, new media may be able to squeeze the traditional media out of the business.” Added Wu Haiming: “The traditional newspapers industry is facing strategic and structural challenges. A newspaper group won’t just comprise newspapers, but also other multi-media venues, such as audio and video.”
”The Slave under the Pyramid”
In an article entitled, “Challenges and Opportunities for China’s Newspaper Industry,” Yu Guoming, a journalism professor at the People’s University, wrote that “to a certain extent, newspapers have become the basic content providers for the Internet.” On January 12, 2006, at a newspaper forum held in Guangzhou, Ying Minghua, publisher of the Shanghai Jie Fang Daily Newspaper Group, admitted that “every year, it costs tens of millions of yuan to publish a newspaper, while the income from supplying content to the Internet is almost negligible. With the squeeze caused by the Internet search engine and the web, traditional media like newspapers have become ‘the slave under the pyramid.’”
It is the “selfless support” from the traditional media that spurred the development of the new media, Ying suggested. However, much to the ire of the traditional media, the competitive pressure from the Internet has caused the value of the traditional media to plunge. “We only know how to create content, but have no idea how to add value to our content. That’s why we are at the lowest point in this information age’s food chain,” Ying said.
Having provided the web with “free lunch” for many years, the traditional newspaper companies have finally started to counterattack. Jie Fang Group, the biggest newspaper company in Shanghai, called for the nation’s 39 newspaper groups to establish their own alliance to compete with the new media. The key goal: “To set and regulate the price at which web sites pay for the content produced by the traditional media, to protect the traditional media’s intellectual property, and to realize the true value of journalism.”
In response, Chen Tong, vice president of www.sina.com.cn, told China Youth Daily that he would hold a “wait and see” attitude toward the newspapers’ alliance, adding that he doesn’t agree that web sites underpaid newspapers for their content. “Is this alliance going to have any substance? In the past, the color TV industry also had experimented with some kind of pricing alliance, but it just vanished without exerting any kind of impact. in such a multi-media age, newspapers should think about how to be more creative to meet the competition.”
Newspapers’ New Media Strategy
As Chen Tong said, the traditional newspaper groups on the one hand have staged counterattacks on the new media, while on the other hand, they have started to remodel themselves by venturing into these same new media. Focus Media, founded in 2003 and listed on Nasdaq two years later, is China’s first pure advertising play in that market. In 2005, Jie Fang Group teamed up with Focus Media to form Shanghai Jie Fang Focus Advertising Co.
Jie Fang Focus is only part of the newspaper group’s reform strategy. Beginning this year, Jie Fang has been actively moving toward the new media model. On January 3, it launched a services web site named www.highai.com; on January 16, it partnered up with China Mobile to roll out i-news; in February, it spent at least 50 million yuan buying stakes in www.imook.com; and on April 14, it unveiled I-paper, an electronic newspaper. In September, it plans to introduce i-street, a type of TV screen displaying news on the streets. Such a “4I” strategy, which includes I-mook, I-news, I-paper and I-street, will convert the company from a newspaper group to a new media group.
Jie Fang Group is not alone. On December 15, the Chengdu Daily Newspaper Group launced Digjoy, including four multi-media magazines and six electronic books. On January 11, the Southern Newspapers Group spent more than 100 million yuan developing www.oeeee.com, a news data source. Shanghai Media Group spent a huge amount of money in establishing the “No. 1 Finance and Economics” brand, which covers TV, advertising and newspapers.
Reforms in the Media Industry
Wu Haiming, publisher of Jing Hua Times, predicted that “the traditional newspaper industry must choose to go digital, and must do it quickly due to the limited amount of time left.” Han Guoqiang has been involved in the traditional media for many years. In 2005, he left China Business News to become vice president and editor-in-chief of Shanghai Netsky Information Technology Co., which is a multi-media magazine company backed by venture capital. He said he had dreamed about creating a multi-media magazine for a long time, and he believes that a multi-media magazine has a very profitable business model.
“The traditional media is being marginalized, and the new media is turning it upside down,” Han Guoqiang said, adding that “it is the platform — not information — that is the most valuable. The traditional media has to form an information platform to survive. That’s the future for the media world.” He thinks that the newspaper groups should try to establish an open platform first, which provides information not only from their own resources but also from others. Then, they should try to improve the value of the information through analysis. Lastly, an interactive model should be used to distribute the information.
Jin Pei, publisher of China Management, told the Tsinghua forum that “the restraining factor in the future is not the amount of information, but the amount of time people have to read the information. So information analysis, filtering and selection should have a lot of commercial value.” Added Cui Baoguo: “The traditional media can only survive by competing with the new media.”