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SCMP Reporter

ON the record, the standard answers prevail. The price war that has broken out between rival Chinese-language newspapers is a battle for readership.

  The five major players decided one by one to slash cover prices and, before you knew it, battle lines had been drawn and war had been declared.

  Off the record, a different scenario emerges. War there is - but between two parties, not five.

  One is a fighting machine: well-equipped, technically advanced and tactically mature. The other is a guerilla outfit: small, effective, surprising and with a groundswell of popularity.

  'This is more Apple Daily versus the cartel than it is everyone versus everyone else,' one media analyst said.

  According to some analysts, the way the war has been presented gives the impression that Oriental Daily News conducted a pre-emptive strike, slashing its cover price to $2 from $5.

  This was closely followed by Sing Pao and Hong Kong Daily News which matched the cut, then by Tin Tin Daily News which also cut its price to $2.

  Apple Daily hung back, slicing just one dollar off its cover price to $4 from $5.

  This all happened rapidly and looked for all the world like a disorganised scramble in reaction to Oriental Daily's move, with each paper playing chicken with its cover price.

   But media analysts suspect another explanation. Asked to speculate on the cause of the war, one word emerged more than any other: 'cartel'.

  'It is no secret that the proprietors of the main Chinese-language newspapers have participated in a price-fixing cartel for many years in order to maintain stability in the market as well as earnings streams stemming from issue sales,' one analyst said.

  The strength of this cartel was well demonstrated after the entry of Apple Daily into the local market.

  Proprietor Jimmy Lai offered readers an introductory discount which reduced the paper's price to $3 for one month, after which it would revert to $5. His competitors, in the words of one analyst, went 'apoplectic'.

  He was denounced in the press, the editorial content of his paper was pilloried and, on a less savoury note, copies of Apple Daily ended up floating in Macau harbour as the paper suffered certain 'distribution problems' with batches mysteriously going missing.

  'Are we being asked to believe that having co-operated so closely in the past, the Chinese-language proprietors suddenly start acting off their own backs without consulting their fellow cartel members?' a research director said. 'It seems far more likely to me that the price war was fully agreed upon by all members of the cartel beforehand.'   Another media analyst said: 'When they act, they act together.'   Far from being a publishing free-for-all, the war takes on a different hue when looked at in this light.

  While individual members are undoubtedly competing for market share, analysts allege there is also a concerted effort to undermine the growing strength of Apple Daily.

  Why is the cartel so nervous about Apple Daily ? The reasons are simple: it has been remarkably successful; it has stolen advertisers and poached readers. It is, basically, a threat.

  According to Mr Lai, its circulation has already hit the 300,000 mark, a figure that would make it the second-best-selling daily in the territory.

  The worry for papers such as Oriental Daily and Ming Pao is that it only took six months to get there.

  'If its current growth rates are maintained it will be streets ahead of the competition within months,' a media analyst said. 'When it first launched, the other proprietors were apoplectic. Now they're scared.'   A research director said: 'Any cartel seeks to protect itself when it is challenged. Trying to squeeze the competitor out of the market is the classic reaction of a price-fixing cartel to a potential threat. It would be too much to ask that this is not what we are witnessing.'   The cartel's choices were limited when it came to squaring up to Apple Daily. Newspapers can compete in areas such as production quality, editorial content and reader competitions, but nothing has quite the impact or the pressure of a price war.

  But while the cartel allegedly puts the squeeze on Mr Lai and consumers benefit from the reduced cover prices, investors are being hammered.

  The share prices of the participants in the war have all come off significantly, and the longer it goes on, the further south they will head.

  'I wouldn't touch any of the Chinese-language stocks - not now,' the managing director of an international house in Hong Kong said, adding that a peace treaty would have to be signed by the warring parties before he made any further investments.

  So how long is the war going to last? Estimates vary from a month to two years.

  Mr Lai has said he is happy to put Apple Daily out at $4 until 1997, a move that could prolong the war and force his rivals to further slice their bottom lines.

  But the real determinant as to when the war ends is whether Apple Daily sees its circulation fall significantly to the benefit of papers such as Oriental Daily and Ming Pao.

  Unfortunately, the word from the streets is that the whole thing could have backfired. Consumers are apparently using the extra small change to buy the papers of both sides.



Cartel aims to upset Apple cart