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'IF people think this is a personal fight between myself and [Oriental Daily News proprietor] C.K. Ma, it is a fight of his making, not mine,' says defiant Apple Daily publisher Jimmy Lai Chee-ying.

  As the price war among the Chinese-language mass market dailies enters its second week, already two innocent victims have been claimed in the crossfire.

  South China Holdings' Express News yesterday announced it was suspending printing and the Taiwanese-backed United Daily News said it was closing down.

  However, it is Mr Lai's six-month-old Apple Daily which is widely believed to have been the real target in this battle.

  The Oriental Press Group's flagship Oriental Daily , the biggest of the Chinese papers, upset the apple cart by slashing its cover price from the standard $5 to $2 just over a week ago.

  Other big players - such as Sing Pao Daily News and Tin Tin Daily promptly followed suit. Hong Kong Daily News went one further and cut its price to a basement $1.

  The Apple Daily , held back, trimming just $1 off its cover price to $4.

  Oriental Daily claimed its price cut was to 'reward' readers as it marked its 28th anniversary celebration. But the real reason was believed to have run deeper than that.

  Mr Lai believed it to have been a simple reaction to his newspaper's ballooning market share.

  Market analysts also feel Mr Ma may be trying to kill off the Apple Daily , or at least seriously wound it, before Mr Lai manages to float his weekly magazine Next on the London Stock Exchange next year.

  It was believed the listing of Next would make Mr Lai more financially secure. Mr Lai said if that was what Mr Ma was thinking, then it was wishful thinking.

  'To him, the price war is about money, but for me it's about quality,' Mr Lai said.

  'It would be very stupid for me to react as if I was in a personal war. Anyone conducting business personally in an impersonal market is going to fail.

  'My job is to please the readers of Apple Daily.'   While two other papers had closed, Mr Lai said his paper had suffered only a modest cutback in circulation.

  Apple Daily claimed it was printing 310,000 copies a day before the price war broke out.

  On Friday, Mr Lai said he was still printing 300,000 copies, and in an interview with Sunday Money bullishly claimed he would increase this to 310,000 within a couple of weeks.

  Mr Lai said it was a simple reaction to his newspaper's ballooning market share.

  By making a modest cut to the Apple Daily's price, Mr Lai said his paper had yielded to market forces, while also giving some value to readers.

  'Remember that if Apple survives at $4 a copy, it becomes a premium paper to advertisers,' Mr Lai said.

  'It has all the demographics that its rivals don't have when people are buying them for their price rather than quality.'   At $1 or $2, readers have found papers a bargain, with many people using the opportunity to snap up two or more of the cheaper publications.

  With demand for the discounted papers soaring at the expense of those that stayed at $5, Oriental Daily said it had increased its print-run from 300,000 to 800,000 copies a day.

  Mr Lai said when he dropped his paper's cover price by $1, it was as if nothing had happened. But once the price war gained momentum, the number of return copies of Apple Daily increased to about 8 per cent, showing that some readers were buying the paper's cheaper rivals.

  Not only have cut-price papers lost out on cover sales revenue, but their expenses have shot up too. Newsprint costs have soared 70 per cent over the past year.

  An industry analyst said a paper with a circulation of 100,000 would lose more than $350 million in revenue a year if it reduced its cover price from $5 to $2 a copy. Previously, all the Chinese papers offered the same cover price of $5, as if their was a cartel. The market leaders imposed the prices and everyone followed.

  By tradition, Chinese papers got $3 for each copy sold, with the remaining $2 split between distributors and news vendors, the vendor earning about $1.70 per copy.

  Times have changed, Hong Kong is a free market, and Jimmy Lai is a happy man.

  When Apple Daily was launched it was offered with an introductory cover price of $3. The paper was sold at $5, but readers got a $2 voucher.

  This caused uproar as it was the first paper to break the line. However, from the start Mr Lai said this was a special offer launch price, and the price was later put up to $5.

  'We wouldn't have gone to $5 a copy if it wasn't for the cartel. As a new paper, we had to break traditional reading habits and give incentives to attract new readers and persuade newsstand vendors to place us in a prominent position.

  'After the first month, we increased to $5 because everyone else was at $5. If we had undercut our competitors at that early stage, we might have provoked even more resistance,' he said. 'We would have been under long-term pressure from our competitors and we didn't know how loyal our readers would be.' 



This is Ma's war, says Lai