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In Hong Kong, the market for Chinese-language newspapers has become even more competitive over the past few years. Photo: Sam Tsang

Next Media heats up newspaper competition

With Jimmy Lai-led company pulling the plug on its Taiwan TV unit, a sharper focus on HK will deepen the rivalry in print

Next Digital
Sophie Yu

As the dust settled on the sale of Next Media's loss-making television business in Taiwan last month, its boss, Jimmy Lai Chee-ying, promised to focus on the print business, a move that looks set to intensify competition in the industry.

Investors have been hoping that the company, which publishes the Chinese-language newspapers and , will rid itself of the entire Taiwan operations and steer back to the Hong Kong market, where Lai started his media enterprise in 1990.

The Hong Kong-listed company issued a profit warning last week, saying a "substantial increase in loss" was expected for the fiscal year to March 31 because of operating losses incurred for its TV and multimedia operations in Taiwan and Hong Kong's .

According to the latest financial report, Next Media suffered a net loss of HK$928.39 million in the six months to September 30 last year, nearly triple the loss seen a year earlier, while revenue fell 3.3 per cent to HK$1.78 billion. It said the loss was mainly due to its television business in Taiwan, which it sold for NT$1.4 billion (HK$361.8 million).

However, in Hong Kong the market for Chinese-language newspapers has become even more competitive over recent years with the spread of free publications. is one of six free newspapers in the city, including one in English, jockeying for advertising dollars.

According to sources at Next Media, the company is bolstering its content and hit rates on 's online version and for .

The Hong Kong-listed Sing Tao News, which publishes and the free paper , said profit for its media operations last year dropped to HK$145.5 million from HK$181.3 million the previous year.

HKET Holdings, the publisher of and the free daily , reported that in the six months to September 30 net profit declined substantially year-on-year to HK$1.2 million from HK$50.2 million because of the "general economic slowdown" coupled with "development costs following the investments in ".

HKET said in the filing that Hong Kong's media industry, in particular print, "was experiencing an evolutionary change".

Sing Tao said intense competition in the free newspaper market has set off "a chain of repercussions which affected not only the incumbent free newspapers but also paid newspapers".

Lutz Kihm, an adviser at DJE Kapital, which holds 4.07 per cent of Next Media and is the second-largest shareholder after Lai, said: "Free newspapers have benefited from relatively low newsprint prices in recent years."

But free newspapers were facing increasing financial pressure on several fronts, he said. "Sales of ad space will be harder because of intense competition and a tight advertising budget," Kihm said.

The property market was slow and sales of luxury goods were sluggish, he said, but "on the other hand, the price of newsprint seems to have bottomed out."

Lutz expected "financial discipline" from management of listed companies.

"If their free papers are not making money after a certain period of time they should be shut down," he said.

HKET launched in July 2011 "to meet the challenge from the free Chinese dailies". Although the company said in its financial report that it was "determined and confident" to make a success, the investments in the free paper had put "short term" pressure on profitability.

Sing Tao's , launched in 2005, is the leader in the free paper market. Clement So York-kee, professor of the School of Journalism and Communication at Chinese University, said was in a very strong position. "It makes more money than , I think," he said. "It lures many advertisers because of its circulation."

The average daily circulation of topped 880,000 last year, exceeding that of its closest rival by about 50 per cent.

According to the media-monitoring firm admanGo, Hong Kong's total newspaper advertising revenue last year rose 9 per cent year-on-year. However, the increase was almost entirely accounted for by free newspapers; paid papers saw revenue fall 1 per cent.

"This is inevitable," So said. "The impact on papers like and which cater for the mass market, is especially palpable.

"The best way to counter the challenge is to offer in-depth and unique content that free papers can't provide."

So said Next Media set up in the hope of establishing a co-operative effect between and the free paper. But in drawing away some advertising, would have its own impact on the company's flagship paper.

"But you need to look at the market as a whole. If you don't launch your free paper, someone else will. You'd better have a presence in both the paid and the free paper market, to diversify your operation and to dilute risk," So said.

While the free paper was yet to make a profit, a longer view was required, he said. "When was launched, the market was already highly competitive. It will take time for it to be accepted."

Francis Lun Sheung-nim, managing director of Lyncean Securities, said he did not hold rosy views for media share: "The competition is too intense in Hong Kong as there are too many papers."

Next Media shares closed at 83 HK cents on Thursday before the public holiday, up about 30 per cent over the past 12 months. But the stock has dropped 38 per cent this year. Sing Tao has gained 4.7 per cent over the past 12 months, while HKET fell 21.1 per cent during the period.

This article appeared in the South China Morning Post print edition as: Next heats up newspaper competition
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