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October 29, 2013

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Home » Metro » Entertainment and Culture

SUMG to rival digital media, others for share of ad revenue

By Ding Yining | October 29, 2013, Tuesday | Print Edition

The establishment of Shanghai United Media Group should provide a stronger competitor in a market where readers and advertisers are moving from print to digital media, analysts said.

The latest consolidation comes amid dwindling advertising revenue at newspapers. Chinese newspaper advertising income is expected to decline 3.4 percent this year and 2.4 percent next year, after experiencing its first drop in eight years in 2012, media investment management firm GroupM said in a report on the Chinese media last month.

Print was the only segment among media sectors such as television, outdoor and the Internet to show a drop in ad revenue. Advertising spending across all media categories in China is expected to grow 10.7 percent this year, reaching 429.5 billion yuan. Still, that pace of growth would be less than the 11.7 percent recorded last year, the report said.

Investors greeted the merger favorably. Shares in Shanghai Xinhua Media Co, the Shanghai-listed arm of the former Jiefang Daily Group, have risen more than 20 percent since talk of the merger first surfaced at the end of September.

The company’s shares ended 1.28 percent lower to 10.03 yuan yesterday after surging more than 5.5 percent in earlier trading.

In the first half of this year, its advertising income fell 32 percent from a year earlier to 192 million yuan. The company said in a stock-exchange filing that its business was affected by a general slide everywhere in domestic print media advertising.

Profit shrank 48.7 percent to 33.4 million yuan, while revenue dipped 0.23 percent to 812 million yuan, with about half of that coming from book publishing. Other businesses, including commercial property operations and other forms of investment, more than doubled from a year ago and contributed about 12 percent of overall income in the first half.

How assets will be handled under the consolidation and whether more profitable assets will be injected into the listed unit are tantalizing questions for investors.

More assets available

“It seems that the platform has been enlarged with more assets available to be made public,” said Liu Yu, a trader with Orient Securities Co. “Investors are interested not only in advertising revenue but also in long-term development plans. For example, does the new group have any plans to develop new media businesses or to team up with leading technology companies to develop entertainment businesses?”

If the advertising operations of the two old groups are merged, it could take a while for the effects to show up on the revenue side, a source at a leading media-buying agency told Shanghai Daily.

The source added that each publication within the consolidated group will need to stake out its unique position in the market in order to secure stability in readership and advertisers.

Many advertisers are moving their budgets toward the most eye-catching mobile applications and the most popular social networking sites, while keeping TV as their dominant ad platform. Newspapers are also moving into the digital realm with new websites and smartphone apps.

But their performance in the digital realm has been lukewarm at best, compared with other news applications operated by Internet giants of Sina, Tencent and Baidu.

“The new group will have a better capability because it can share technologies and talent to cover wider business sectors, like entertainment and culture,” said Yu Zhenwei, Party chief of the Journalism School at Fudan University. 

Yu recommended that the new group focus on grassroots efforts instead of chasing grandiose goals. It could learn much from the success of other media groups, such as Zhejiang Daily Press Group, he said.

Last year, the Zhejiang group, which is listed in Shanghai, acquired online gaming companies Hangzhou Bianfeng Network Technology and Shanghai Haofang for 2.5 billion yuan. The takeovers are expected to be a successful platform for the group to diversify its revenue streams.

The actual merger of the two Shanghai newspaper groups’ business operations could take as long as two years, said Wei Wuhui, a lecturer at Shanghai Jiao Tong University and a veteran media observer.

 

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