Printed Media Strikes Back?

Ben Kwok - Freelancer

[中文][Jan 2011 - The Journalist A former editor of mine, now a prominent stock commentator, once said the media industry should be a "long-term sell". Fewer readers, fewer advertisements, but longer working hours all pointing to one conclusion - employees (and probably shareholders too) should get out as soon as possible.

Interestingly enough her comment, made some 10 years ago, was before Google even started its business. To date, I suppose no one in the industry would deny the internet has almost killed off the media, costing hundreds of millions of dollars from the pockets of your media bosses but more importantly explaining why salaries of our practitioners have been stagnating in past years.
With so many people buying newspapers,
we know that the profit of the media should be good.

Well, time has changed. Evidence shows that the print media is looking up again this year, possibly reversing the curse of the last decade.

Rebound on the Way

Based on the interim results announced last November, three of the four printed media (Oriental Daily, Hong Kong Economic Times and Ming Pao) recorded substantial improvement in earnings (Table 1). Coupled with the results of the English-language South China Morning Post and Sing Tao Daily, it is easy to conclude that all printed media were making money as their turnover was almost back to the pre-financial crisis level.

Media has always been a proxy for economic recovery, no matter how lagging it has been. More advertising spending was seen in this recovering period, as evidenced by Apple Daily, a paper which rarely attracted local big corporations, which saw its sales up 26 per cent to HK$346 million, or about 57 per cent of the paper's total revenue.

In anticipation of further economic rebound, printed media companies are changing to a hiring, rather than firing, mode. I was under the impression that almost every newspaper had advertised in its own paper for hiring. Friends told me it was especially difficult to hire journalists with five to 10 years of experience because other non-media industries were willing to offer more for talent.

Because of expansion, Hong Kong Economic Times recently bought a floor at its Kodak House headquarters while Next Media planned to acquire a new building in Kwun Tong.

The positive outlook is also reflected in the firm's dividend policy. Four out of six printed media companies raised dividends this year. Only Oriental Daily and Apple Daily chose to save money for new media development. Raising dividend is the most direct way to show its confidence and return to shareholders and we shall expect more dividends from a colourful report card next year.

  Table 1: Interim reports of printed media in HK
% change
% change
share gains
Media Chinese International
1720 m
12.2 cents
Oriental Daily Group
Sing Tao News Corp
back to profit
3.5 cents
Next Media
HK Economic Times
4.1 cents
back to profit
2 cents
 (source: listed companies' financial statement)
 ^ at the end of November
 # Ming Pao Hong Kong made HK$14.8 m, up 322% on sales of HK$275m, up 8%
In fact, profits of many printed media companies are no less than fast food chains or retail apparel companies. The six newspaper companies are all expecting a strong second half growth, although growth rate might be slower.

Newspaper profits are quite predictable. Just buy a copy and count the ads and you get a fair idea. However, I am not sure how the welfare our journalists will be improved on this positive trend. Will most of our colleagues enjoy a five-day work week that is not at the expense of training and promotion? Staff benefits, training and promotions were the luxuries of the difficult times we had in the past decade.

Internet: a Money-making Business?

The online business, however, is more unpredictable. First, most of the newspapers we mentioned above offered free iPhone, or even iPad versions which attracted many users. However, because of its free subscription nature, the online business has not been making much impact on these companies' top line. To put it simply, it benefits more to Steve Jobs of Apple than Jimmy Lai of Apple Daily.

In the interim results announcement, we were glad to learn that Oriental Daily had attracted some 30 million page views a day. Apple Daily also said it had set up an animation department in New York with owner Jimmy Lai vowing to spin off his animation business for a separate listing. However, only few of them cared to show its business in numbers.

The only data I have is Next Media, which announced a HK$7 million turnover for its internet business (animation news and Vdonext) at its interim report ending September 30, 2010. The figure was down 72 per cent because it included revenue from other departments in the previous year. We wonder if new media ad pricing, which is said to be about one-tenth of the traditional one, may still be a bit optimistic.

That is why new media is a money business, although one can't probably do without it. A poor revenue stream means printed media companies are not going to put sufficient resources in the new business but always demanding ideas to generate revenue. One can imagine how much pressure it means for the new media team because they know once the start charging, they will lose at least 80 per cent of viewership.

So I doubt the notion of the new media as the next growth engine that the print business can count on is a self-fulfilling prophecy.

(Disclaimer: The author who spent 15 years in financial journalism owned almost all the media stocks he mentioned above. Please write to him at