MANY in the publishing industry have dubbed the price war among local, popular Chinese-language dailies as cut-throat. The metaphor suggests the fight will be swift and bloody. Others describe the price cuts as suicidal and say papers will find it difficult to sustain the heavy subsidies for long. A paper with a circulation of 100,000 will lose more than $350 million in revenue a year if it continues to reduce its cover price from $5 to $2 a copy. However, the unprecedented price cuts are likely to drag on for more than a year. So far, the papers which have reduced their prices are all downmarket titles with large circulations. The Oriental Daily News, which sparked off the price war, claims to have a circulation of 400,000. The Apple Daily said it was printing up to 320,000 copies a day before last week. The three other papers in the ring - Sing Pao Daily News, Tin Tin Daily News and the Hong Kong Daily News - had an audited circulation of between 198,000 and 110,000 early this year, before the Apple Daily was launched. Although the financial losses sustained during this price war are likely to be substantial, papers seem to be willing gamblers with a considerable number of chips on the table. A newspaper publisher used to earn about $2.90 for each copy a vendor ordered. But now papers are selling at just $2 or $1 each, publishers are held responsible for making up the difference to ensure that distributors, their agents and the vendors still enjoy their normal share of just over $3 a copy. The more the price war goes on, the deeper publishers will have to dig into their pockets. This simple arithmetic has led some observers to predict that none of the antagonists in the fray will emerge winners. Yet, those engaged in the price war are the five best-selling papers in town and it seems inconceivable that any of them could be driven out of the market in the next year or so. No one in the publishing industry has witnessed such a price war in Hong Kong before. Who knows how it will unfold. The British market, however, may offer some clues. In September 1993, The Times, owned by Rupert Murdoch, took on The Daily Telegraph. The latter waited for nine months before it made a reluctant decision to lower its cover price from 48 to 30 pence (about HK$3.60) a copy. The move put the Telegraph on the same footing with The Times as far as cover price was concerned. The Times and The Independent then responded by cutting their price to just 20 pence a copy. But once the Telegraph felt confident enough that it could climb back to the one million copies a day threshold, it revised its price to 40 pence. The Times, on the other hand, has kept its price at 30 pence, which is even cheaper than most tabloids. More than two years after the British paper wars started, the Telegraph has managed to hang on to its position as the dominant quality paper - but at a price. Meanwhile, there remains no sign of The Times raising its cover price back to its pre-1993 level now that its circulation has increased to about half that of the Telegraph. The paper seems to have turned its cut price strategy into a long-term policy. At the same time, the total size of readership has grown. Both papers appear to have achieved their goals in the price war. The Telegraph is still the dominant player, whereas The Times has boosted its circulation significantly. Like the Telegraph, the Oriental Daily's bottom-line is apparently to retain its long-established position as the dominant paper in the market. There were genuine reasons for the group to feel threatened. While neither the Apple Daily nor the Oriental Daily have any audited circulation figures, anybody going to a Chinese dim sum restaurant in the morning will come to the conclusion that the Apple Daily has seriously threatened its competitors. Copies of it can be seen in readers' hands all over the territory. One setback for the Apple Daily is its admission that due to its press capacity, it cannot print as many copies as it would like to meet market demand. Newspaper vendors are undoubtedly the most sensitive to the readers' preferences. However, it was not uncommon for them to tell buyers that the Apple Daily had sold out early in the morning, while they still held some copies. What they wanted was to persuade buyers to take away other popular papers first. The vendors would only sell their remaining copies of Apple Daily later in the morning. The reason is simple - because the Apple Daily is the only paper which will take back any unsold copies. Even so, the signs are good for Apple Daily. A lecturer in politics at the University of Hong Kong asked all his prospective students during admission interviews which was their favourite newspaper. Eighty per cent said they preferred the Apple Daily. The paper seems to be appealing to a broad spectrum of readers - across all age brackets. If the Oriental Daily does not wake up to reality, it will perhaps find itself playing second fiddle to the Apple Daily soon after the New Year. Yet, if the Oriental Daily feels secure enough, the group may well raise its price again, perhaps to somewhat lower than the pre-price war level. Others may choose to keep their cover price cheaper than the market leader to ensure their title stays competitive. The price war may be cut-throat, but it does not mean somebody has to bleed to death.