Apply 5 forces Model to identify how competitive the printed media industry is and will be? If you are potential investor, would you invest in such industry based on your analysis findings? If you are

Individual Assignment - Due on 14 October, 2021

Industry Analysis – Does Printed Media Industry in Hong Kong have future?

Print media, once was a powerful promotion mean with extensive coverage and significant pass along effect, is at a critical stage when its business models need to be transformed and re emanated in view of the rise of digital media, evolving advertising models and changing reader behavior. While reading newspapers is something Hong Kong people cannot live without, a significant increase in the digital newspaper has resulted from the current pandemic and the fast growth of digital platforms

One needs to wonder if print media will one day lose its edge or even disappear in digital age — and if not, how it should transform its business models in order to survive and growth in the era of new world of technology.

Hong Kong has over 4.4 million Facebook users, more than half of the city’s population, according to a report from market research firm TNS last year. The explosive power of social media brings excitement as well as challenges to print media. As at May 31, 2020, there were 86 daily newspapers and 517 periodicals (including a number of electronic newspapers)

While social media allows print media to engage its readers and intensify messaging in ways previously considered impossible, these social platforms generate a massive amount of free content and a range of digital advertising alternatives instantly which could surely reduce newspapers’ subscription and advertising revenues.

Should print media be seriously worried about the future in the digital age?

Statistics suggest online media have yet to overtake paid print media among local audiences. Social Media is not as significantly as we assume to replace printed media as a promotional mean or as an informed source. According to research conducted (2019) by the Chinese University of Hong Kong’s Centre for Communication and Public Opinion Survey, 63.1 percent of respondents read paid newspapers, compared to 56.5 percent who read news from the Internet. For the older generation, printed media still a preferred choice over social media. Apple Daily circulation was around 1M copies per day prior to its closure.

Having said that, the boom in online media, which mostly publishes free content, marks mounting competition with paid newspapers for readers’ time and attention. Given readers’ limited time, the longer time they spent on online media reveals a threat to print media.

Hong Kong is of no exception, like the developed newspaper markets in US and Europe, there has been a steady decline in the circulation and readership of the newspapers’ print editions. As the papers’ revenues are heavily dependent on paid advertisements, the decline in readership and advertising revenue has not been fully matched by the revenue produced by the online outlets.

The web is not a problem in itself for the traditional print media. It is the readers and

audiences who needs to be considered - and the publishers themselves. They have been relying on having enough readers to maintain advertising revenues on the web, but, at the moment, this does not generate enough money, even with the millions of monthly unique site visitors.

What is also worrying is the increase of paper cost in recent years, prices for all grades of paper have been on the rise thus far in 2021. Production capacities have been significantly reduced since 2019, and higher costs for pulp, energy, chemicals, and freight have eroded mill margins on paper. Price cost increases 4-9% per year. Are the media companies now experiencing a temporary downturn, with layoffs and cost cutting in the newsrooms? Or is it the worst-case scenario, where advertisers will never return to the printed papers, and the downturn will drive them into the electronic media, the web? Also, how are the media agencies rethinking their business models? Will the poor economy turn advertisers back to the most traditional forms of media? Or vice versa?

Globally, the printed media is still in a growth stage, with the help of developing media countries, like the markets in India and China. New York Times, a leading newspaper Group in US, reported US$499M revenue with $93M operating profit in first half up to end of June 2021. (Source: Company report) Contrary to many people predicted, local newspaper Group (Oriental News (0018) reported HK$235M profit before tax in the first half of this year. (Source: Company report)

Hong Kong Economic Times, which takes pride in being rated as Hong Kong’s most credible Chinese newspaper in another CUHK survey last year, has approximately 99,000 followers on Facebook. a listed company in Hong Kong, reported a sharp decline of advertising revenue (85%) in 2020 due to Covid 19 but also posted a slight profit HK$10.57M. (Source: Company report)

Many publications are aware of the threat and are willing to catch up with the competition in online space.

A research piece entitled “New media – a game changing challenge for Hong Kong newspapers” by the Hong Kong Trade Development Council interviewed a local major newspaper which had made an investment of US$15 million to develop and expand its website.

As a result of the investment, the publication had increased its readership by roughly 50 percent including overseas readers. Nevertheless, as its online subscription pricing was much lower compared to the print version pricing, growth in readership did not guarantee revenue growth.

Take the South China Morning Post, for example: its retail price is HK$9, three times more than its daily online subscription (HK$21 per week). Although online subscription does not involve printing costs, the profit margin per subscription is still lower than print.

On top of subscription problems, advertising in newspapers is at risk of being overtaken by other digital advertising offerings in the market. Pricing is one thing; traceable return on investment is another.

For instance, the minimum daily budget for any ad set on Facebook is only US$1 and the platform allows a wide spectrum of filtering options ranging from geo-targeting to demographic segmentation and personal interest.

While most publications charge advertisers based on cost-per-impression (CPM) model, social media platforms use cost-per-click model (CPC). While the former highlights exposure, the latter emphasizes audience response, which is widely considered as a better indicator of the ad effectiveness than ad impression.

So, is print media losing its edge in the digital age?

“Content is king,” as the saying goes. It applies to both subscription and advertising. A dominant free content provider might overtake newspapers as a source of information, but the proven success of some international media indicates that readers are willing to pay for high-quality content.

Financial Times, for instance, is regarded as the pioneer of metered charging model, which allows registered users to have access to certain number of articles for free before requiring paid subscription. Financial Times is also available in Chinese versions to cater the middle-class target in China

According to FT’s 2019 results cited by The Guardian, the model helped FT achieve a print and digital circulation of 850,000, and two thirds of its readers have digital subscriptions, a 21 percent year-on-year rise.

Meanwhile, advertisers have started looking into shifting from traditional advertising to content marketing. Some may think that digital media has an edge as its content is sharable and engaging.

It could be true but there is also room for traditional media to stand out from other digital advertising alternatives by leveraging their thought leadership, the capacity to shape an audience’s thinking and to influence opinions.

Advertorial, sometimes known as sponsored content, appears the most common way to achieve that. Although it existed before the digital age, online and social media unlock tremendous possibilities to make newspapers’ advertising offerings more creative, engaging and “out-of-the-box” than other digital advertising alternatives such as web banners on search engines and social media platforms.

Monetizing print media’s online content need not be advertorial. Take The Economist for example: The publication runs regular online debates, which allows audiences to vote and comment, and some of these debates have a sponsor.

In this case, the publication retains its editorial independence and the advertiser benefits from brand association and being seen as an advocate, who supports intellectual dialogue around defining issues.

The question remains: should print media be worried?

According to statistics from media-monitoring agency adman Go cited by South China Morning Post, Hong Kong’s total ad spending had reached HK$56.9 billion in 2019 and HK$63.9 billion in 2020, a 7 percent increase compared with the year before.

And traditional media outlets — including television, newspapers, magazines, outdoor billboards and display — accounted for 90 percent. The figure gives a good reason for traditional media including print to stay positive.

After all, digitalization is a long winding road but there should be no fear for forward-lookers. High quality content with the right business model will pay off in the end.

Question:

Apply 5 forces Model to identify how competitive the printed media industry is and will be? If you are potential investor, would you invest in such industry based on your analysis findings? If you are looking for jobs, would you join newspaper corporations in Hong Kong

If you were CEO of a newspaper Group in Hong Kong, based on your analysis and findings in Question One, what strategies you would like to recommend to the Board of Directors? (of course, exiting the printed media industry could be an option)

Appendix:

According to the research done by the Chinese University of Hong Kong in 2019, the most popular printed newspapers is a free newspaper, followed by two paid newspapers, ranking is as follows:

Headline Daily
Apple Daily
Oriental Daily

In 2010, the printed newspaper occupied around 71.5% of the market, followed by 28.5% web version and there was no mobile version at the time. Until 2019, the respective ratio is already shifted to 40% (printed version): 25.3% (web version): 34.7% (mobile version) respectively. Such drastic changes mean that printed newspapers are no longer the dominating sources for providing news information and also the term ‘Newspaper’ no longer means ‘printed’ version but more responding to the digital version.

In 2019, only 21% of the citizens stated that they will still be reading printed newspapers. While most of the paid newspapers have shown a declining trend in 2019, the English newspaper South China Morning Post has against all odds and maintains growth in their readership.

Source: Ming Pao