Internet now subsidising struggling newspapers
As Hong Kong's integration with China deepens, there has been a growing concern that press freedoms are eroding. Meanwhile we have heard less discussion on another, perhaps greater threat to Hong Kong’s tradition of a vigorous and vocal media: economics.
The internet has been ruthlessly disruptive to traditional newsgathering businesses. In the United States, for example, advertising revenues garnered by newspapers have fallen by nearly two-thirds since 2000, to US$16 billion in 2014, according to the Pew Research Center. To put the number in perspective: Google made $59 billion in ad revenue in the same year.
Newspapers are migrating to digital formats, but few have figured out how to make money out of the model. Consumers are reticent to buy content when so much of it is free on the web; advertisers have a digital ocean of choices.
Proper newsgathering is an expensive undertaking. Some fear that general news will never be profitable again – that the industry will come to rely on investors who are willing to take losses to “support the cause.”
Already we see this happening. The Boston Globe and The Washington Post in the US, and The Guardian in the UK, are examples of expensive, investigative news operations that are loss-making, but have made other arrangements to stay afloat. In short: rich people are helping to plug the holes.
Amazon’s Jeff Bezos bought The Washington Post in 2013 for $250 million, a fraction of what the famous news group – whose Watergate investigation brought down the Nixon White House – was once worth.
Robert G Kaiser, a retired former editor of the newspaper, sees a silver lining. “For [Bezos] to cover the Post's losses now costs the equivalent of lunch money for an ordinary mortal—something Bezos could easily afford for decades to come, if he chooses to play the angel's role indefinitely,” Kaiser wrote in an essay for the Brookings Institution last year.
The New York Times is barely profitable – Kaiser notes that running its news operation would only cost Google 2 percent of its annual profits. He names the cash-rich Facebook as another potential white knight investor for legacy media. It says something of the bleak outlook that spokesmen for traditional newsgathering are hoping for a perpetual subsidy from the very industry responsible for its demise.
Hong Kong is an interesting case because in this city, newspapers still actually make money despite cutthroat competition. Hong Kong supports one of the world’s most vibrant newspaper markets, with quite a few dailies.
Many top operators remain profitable. Yet revenues in this sector have plunged over the years, and the market has fragmented, with free dailies adding to pressures exacted from digital competition.
Earlier this month Next Media, which publishes Apple Daily, issued a profit warning for 2015 fiscal year, saying it is “expected to record a considerable decrease” in earnings.
It would be easy to see Apple’s problems as all political. According to report published by the Hong Kong Journalists Association in December, titled “Press Freedom Under Siege,” the popular newspaper has never earned ad revenues from Chinese companies, and is the target of a de facto boycott from Hong Kong developers. Last year the home of founder and high-profile Beijing critic Jimmy Lai was raided by Hong Kong’s anti-corruption watchdog, the ICAC, who were investigating his political donations to pan-Democrats.
Yet newspapers in the pro-Beijing camp are also facing disruption, and like Next Media, have cited the digital threat. “Budgets of the advertising market obviously flowed into online and mobile platforms, posing pressure on the print media,” the Oriental Press Group said in its last annual report.
All of Hong Kong’s media groups have invested in digital platforms, and slashed budgets for traditional editorial activities.
The future profitability of Hong Kong’s newsgathering industry goes beyond dollars and cents. After all, the media is not like any other industry. It is called the Fourth Estate because of its traditional role in advocating for good governance.
As the Washington Post’s former editor Kaiser put it: “News as we know it is at risk. So is democratic governance, which depends on an effective watchdog news media. Both have been undermined by changes in society wrought by digital technologies—among the most powerful forces ever unleashed by mankind.”