Chinese newspapers mull Internet boycott
By Wu Zhong, China Editor
HONG KONG - The advertising market of China's print media is now threatened by
Internet portals, search engines and other websites, just like everywhere else
in the world, so much so that some large newspaper groups are trying to form an
alliance to boycott the provision of content to Internet news providers, in a
desperate tactic that most analysts see as doomed.
Thanks to China's fast economic development since the late 1970s, Chinese
newspapers and the print media in general enjoyed double-digit growth in
profits annually for more than a decade - until last year. A market research
report jointly released
by Tsinghua University and the Social Sciences Academic Press (China) has
pointed out that 2005 was the "turning point" for newspapers, when their profit
growth began to slow down dramatically as the Internet rapidly ate into their
market share in advertising.
In the first half of last year, the newspapers recorded an average 7.08% growth
in advertising revenue. This was the first time the growth rate was lower than
the country's overall economic development rate. According to the National
Bureau of Statistics, China's gross domestic product recorded 9.5% growth in
the first half of 2005.
In fact, advertising income for most of the 1,900-plus Chinese newspapers
dropped in the first half of last year, with some recording negative growth of
up to 40% year-on-year. This was in sharp contrast to the previous decade, when
newspapers' advertising income averaged 33% growth each year.
Take, for example, the Beijing
Media Corp Ltd, which published the mass-circulation Beijing Youth Daily. With
its immaculate balance sheets, Beijing Media launched its initial public
offering on the Hong Kong Stock Exchange in late 2004, becoming the first
Chinese newspaper to go public overseas. Its new shares were favored by
individual and institutional investors alike.
Last August, the company released interim financial reports announcing that its
profits in the first half of 2005 dropped 99.7% year-on-year to a mere 170,000
yuan (about US$21,200). Although its income picked up in the second half, the
company's profits for the whole of last year totaled only 10.09 million yuan.
By comparison, the firm made 194 million yuan in net profits in 2004.
Some blamed the central government's belt-tightening policy, launched in early
2004, for the drop in newspapers' advertising income in 2005. Property
advertising normally accounted for 40% of newspapers' advertising income, and
cooling down the property market has been a major target of Beijing's
macroeconomic control policy. Hence newspapers were victimized.
But such an argument is implausible at best. Beijing's austerity policy has in
fact failed to cool down the housing market in any lasting way over the past
two years. This is why Beijing has had to impose yet another round of cooling
measures in recent weeks. Moreover, China's advertising market as a whole was
estimated to have grown by 10% in 2005 from the previous year.
So obviously, the market share of newspapers has been gobbled up by others,
particularly the Internet. This is demonstrated by evidence that, in contrast
to newspapers, the online advertising market in China has been rising rapidly.
According to the Shanghai-based iResearch, China's online advertising market in
2004 totaled 1.9 billion yuan in 2004, up 75.9% from 2003.
Information technology, Internet services, the handset industry, the auto
industry, and real estate were the top five industries advertising online.
iResearch also estimates that China's online advertising market reached 2.7
billion yuan in 2005, a growth of 42.1% from 2004. And it forecasts the market
will grow another 48.1% to reach 4 billion yuan this year.
In fact, iResearch's projections may be conservative. According to a news
release on iResearch's own website, the latest statistics from advertiser
Ogilvy show that China's online advertising market grew 77.1% from 2004 to
reach 3.1 billion yuan in 2005, ranking fourth among all media channels, and
exceeding magazine advertising income for the first time. China's online
advertising market is predicted to reach 4.6 billion yuan in 2006, up 48% from
2005, and hit 15.7 billion by 2010.
By comparison, the newspaper advertising market in China currently is estimated
to be about 30 billion yuan. Media analysts in China believe the print media
will soon lose its dominance in the market with the challenge from new-media
channels such as the Internet.
According to statistics from the Ministry of Information Industry, there are
now 110 million Internet users in China. The number is expected to grow to 200
million next year and 400 million in 2010.
Media analysts say that nowadays few people under 30 years of age read
newspapers. They prefer to surf the Internet for news and information, as well
as for fun. And as most of the new users will be young, advertisers will give
progressively more weight to online advertising in their budgets.
Currently, online advertising makes up less than 3% of China's overall
advertising market, but this share is widely expected to grow very fast.
Inevitably, the print media will be the major victim.
Fighting back
Alarmed by the aggressive challenge, some newspapers want to fight back, and
are trying to form an alliance to ban Internet websites from using their
contents gratis. Since no Chinese regulations currently forbid reposting
of newspaper content, most Internet news services select material from Chinese
newspapers as they see fit, and payment for such reuse is typically symbolic or
entirely absent.
Last November, editors-in-chief of major tabloid-style newspapers gathered for
an annual meeting in Nanjing, the capital of
Jiangsu province. The conference concluded with a "Nanjing Declaration"
proclaiming they would no longer tolerate "the free use" of their content by
commercial websites.
And at a forum in Guangzhou in January, the Liberation Daily, the
Shanghai Communist Party's flagship newspaper, appealed to 39 major
Communist Party newspapers to form an alliance to "safeguard their intellectual
property rights". An angry Yin Minghua, Liberation Daily's publisher, said:
"The cost of running a comprehensive daily is in the tens of millions of yuan a
year. But when we provide our good-quality news and information to the Internet
media, we are simply given tens of thousands of yuan in return."
But so far other major newspapers appear to have remained lukewarm supporters
of the boycott call. And Yin's comments have even been ridiculed.
"What [was] not said [by Yin] is that all staffers in the print media are
fools. Wrong. No one is a fool. No one has been forced to cooperate with the
Internet. Certainly, [a print publication] could have refused to give content
to the Internet. But since [it] did give [content] and [is still doing so],
then there must be reasons for [it] to do so," said He Li, editor-in-chief of
the Economic Observer, a major business weekly, in an interview with Economics
monthly.
Indeed, newspapers have greatly benefited from providing their content to
Internet sites. Republications of their material on the Internet has made many
of China's newspapers, most of which are regional, widely known, and in turn
helped boost their advertising income over the past decade - when online
advertising was struggling for a foothold.
Moreover, nearly all major newspapers also set up their own websites, which
also "freely" take content from others. These websites are now benefiting from
the growth of the online advertising market. A boycott would hurt them too. And
even if major newspapers could successfully boycott other websites, which is
highly doubtful, the latter could still obtain content from other new-media
channels.
Whatever the ultimate fate of the boycott attempt, the aggressive challenge
from Internet sites will eventually force a restructuring of China's print
media. It can be predicted that in the face of this challenge, China's
newspapers will intensify competition among themselves and, in the end, some of
them will leave the market.
