Media Convergence Asia-Pacific
Issue 13 | October 2004
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Media Convergence Asia-Pacific is happy to send you this CONFIDENTIAL newsletter about recent developments in the region. This regular newsletter will be sent to media companies' CEO's and senior executives.

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Didier Guérin
President

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Copyright 2004


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Inside this issue:

  • 2005 Asia-Pacific Magazine Advertising Forecasts
  • Country by Country Projections for 2005
  • China to Become the Region’s Largest Ad Market in a Decade
  • Media Convergence Opens Beijing Office
  • M & A: Multiples of Media Earnings on the Rise
  • 104,723 dead …. 494,174 injured
  • Magazine Developments
  • Famous Quote
  • IMF World Economic Outlook

2005 Asia-Pacific Magazine Advertising Forecasts
  • Sustained Growth to Reach 6.6% in Main Markets
  • Asia-Pacific to Grow Twice as Fast as Europe
  • Japan’s Outlook Positive (finally)

Look forward to another wave of increased magazine advertising spending in the Asia-Pacific region in 2005, maintaining its status as the fastest growing global market ahead of the US and Europe. ZenithOptimedia’s recently released annual Advertising Expenditure Forecasts presents a review and projections market-by-market, including the media expenditure breakdown. ZenithOptimedia predicts an average 6.6% growth in magazine advertising spending across the major Asia-Pacific markets excluding Japan (China, Australia, South Korea and Taiwan), while the US market will expand by 6% in 2005 - the same rate of growth as this year. But the four largest markets in Europe (Germany, the United Kingdom, France and Italy) are expected to expand by no more than 2.5%.

Magazine Advertising Expenditure Year-on-Year % Growth in the Largest Markets

The booming magazine market in China is expected to lead the growth across the Asia-Pacific in 2005, with advertising spending increasing by 12.5%. Korea is next with projections of 7% growth, Australia is forecast to rise by 4.4% and Taiwan by 4%. And magazine advertising spending in Japan finally appears to be coming out of the negative growth it has experienced since 1997 (with the exception of 2000) to return to positive territory (+1.2%) in 2005.

Growth rates are expected to vary substantially in the mature markets – with Greece forecast to jump by 7%, while magazine advertising spending in the UK is likely to be sluggish with predictions of a 1.6% increase.

2005 Magazine Advertising Spending in
Mature Markets (in current prices)

 

Magazine Ad. Spending
(in millions)
Growth
(2005 vs 2004)
US
Germany
France
UK
Italy
Greece
Spain
 $18,953
 € 4,756
 € 3,637
 £ 1,616
 € 1,336
 € 866
 € 729
6.0%
2.7%
2.4%
1.6%
3.8%
7.0%
2.0%

ZenithOptimedia is one of the world’s leading global media services agencies, with 162 offices in 59 countries. The annual Forecasts report is based on the company’s tools (ZenithOptimedia Optimisation of Media) which have been designed to add value and insight. The following analysis has been prepared by Media Convergence Asia Pacific, which has isolated the magazine industry data from ZenithOptimedia's Forecasts.


Country by Country Projections for 2005

Click on the flags below to be transferred directly to the country of your choice.

Japan
Japan
+1.2%

Australia
Australia
+4.4%

China
China
+12.5%

Korea
South Korea
+7.0%
Taiwan
Taiwan
+4.0%

Hong Kong
Hong Kong
+4.4%

India
India
+6.6%

New Zealand
New Zealand
+5.6%

Thailand
Thailand
+30.0%

Indonesia
Indonesia
+11.2%
Singapore
Singapore
+2.3%

Malaysia
Malaysia
+5.0%



China to Become the Region’s Largest Ad Market in a Decade

Just five years ago, the scenario would have been unthinkable, but now there’s a real chance magazine advertising spending in China will be larger than in Japan by 2016.

A short walk from Tiananmen Square - five years ago, no one could have predicted Rolls Royce would open a showroom in Beijing.

Based on its market analysis and projections (see related story on China), Media Convergence believes magazine advertising spending in China will grow between 20% and 30% every year in the foreseeable future (while the actual growth rate was 60.3% in 2003, our projected 20%-30% could even be higher if China’s magazine industry slightly increases its share of market among all local media). Therefore, if we combine this growth pattern with the actual growth rate of the other large markets, as reported by ZenithOptimedia for 2003 (details below), the projection shows that China’s magazine advertising spending will reach about US$4.3 billion in 2016, while Japan will be at US$4.1 billion. Along the way, China will surpass Australia by 2007, Greece and Spain by 2010, Italy by 2011 and the UK by 2014.

Assumptions: Actual magazine advertising spending for 2003 for Japan (US$3,481 million at 1.2%), Australia (US$581 million at 4.3%), Spain (US$729 million at 2%), Greece (US$866 million at 7%), Italy (US$1,248 at 3.8%), UK (US$2,545 at 1.6%) and China ($295 million at 25%).

Along with these assumptions, this analysis is based on China’s historical GDP growth over the last 13 years. Two factors could alter this growth pattern - a reduction in US consumer spending (which continues to fuel China’s manufacturing industry) and an uncontrollable oil price crisis, forcing prices up to $60 per barrel.


Media Convergence Opens Beijing Office

Sirena Liu In line with the booming magazine market in China and to ensure the best service for our clients, Media Convergence recently opened an office in Beijing. Experienced magazine executive Sirena Siru Liu has been appointed Media Convergence’s China Representative. Ms Liu has a business and editorial background in Beijing, Shanghai and Shenzhen. She holds a BA in Journalism from the People’s University in Beijing and an MBA from Claremont Graduate University in California.

Please, check our Chinese website on www.mediaconv.com


Checkout how many magazines Media Convergence Asia-Pacific has launched . . .


M & A: Multiples of Media Earnings on the Rise

Three interesting media purchases have been completed in Australia and South-East Asia, showing multiples of earnings of between nine and nearly 14.

Ok! MagazineThe biggest of the three was News Corporation’s acquisition of Queensland Press Ltd., the newspaper company owned by Rupert Murdoch’s family, which was based on a valuation multiple of 12 times 2005 projected EBITDA. At A$2.45 billion (US$1.75 billion), the total value of the company was based on an expected EBITDA of A$245 million, compared with actual earnings of A$178 million in 2003.

Men's HealthSeparately, Matt Handbury – Rupert Murdoch’s nephew – sold his Murdoch Magazines company to the Seven Network’s Pacific Publications for A$77 million (US$55 million), representing a multiple of nine times 2004 actual fiscal year EBIT of A$8.5 million. Murdoch Magazines owns the license for the Australian editions of marie claire, Men’s Health and a 50% share in a joint-venture which publishes Better Homes and Gardens.

And in Singapore, SPH Magazines – the wholly-owned subsidiary of Singapore Press Holdings – bought Blu Inc (publisher of nine local magazines and also the licensee of Seventeen, Men’s Health and marie claire Malaysia) for S$32.9 million (US$19.2 million), or 13.7 times EBITDA based on the 2004 fiscal year actuals.


104,723 dead …. 494,174 injured

Tiananman TrafficMore than 104,000 people dead and nearly half a million injured in one year … but barely a whisper in the world’s media. Those are the grim road accident statistics from China in 2003, published by the Xinhua News Agency. Compare this with the sensational headlines about SARS, which killed 349 people and paralyzed most of the Asian economies for several months last year.


Magazine Developments:  

OK! In Australia, the British newspaper and magazine publisher Northern & Shell, has established a local wholly-owned subsidiary which will launch OK! as a monthly magazine in late September. The initial print order will be 130,000 copies, with expected average sale of 70,000 copies. In China, OK! launched in June under license to Shanghai-based Cinezoic Media. It’s published fortnightly and has an attractive cover price of RMB9.8 (US$1.20). The magazine is expected to publish weekly from the middle of 2005, the same strategy adopted in the UK when the magazine debuted in 1993.

Shape In Singapore, in July SPH Magazines launched Shape - with a cover price of Sin$5 (US$3) and a targeted circulation of 40,000 copies a month. Singapore is the second Asia-Pacific market for Shape,after Taiwan. It’s also the first international deal signed by Weider Publications since it was acquired by American Media in November 2002. The choice of Singapore – where the total magazine advertising spending in one year is slightly less than Shape’s US edition’s advertising income in six months – probably indicates a careful strategy of international expansion by American Media under Chairman, President and CEO David Pecker. Also, SPH Magazines will launch Maxim in October, under a licensing agreement from Dennis Publishing. The local edition is expected to sell 45,000 copies a month.

Maxim Thailand In Thailand, a local edition of Maxim will appear in mid-December, with a January 2005 issue and a cover price of 80 Baht (US$1.90). The monthly men’s magazine licensed from Dennis Publishing is published by GMM Times, a joint-venture between Singapore’s SPH Magazines and GMM Media Plc, which also publishes Her World. Maxim Thailand will be the fifth edition of the “beer and babes” magazine in Asia. It already is published in Korea, Hong Kong - where it was launched in April by the South China Morning Post’s magazine division - and Singapore (see above).  A new edition in China is expected before the end of the year.

Variety Soft In China, Variety soft launched a test issue in June before starting fortnightly publication in September. The entertainment industry magazine is published by China Media Group Publication Administration in a strategic alliance with Reed Business Information and International Data Group (IDG). And ESPN The Magazine is expected to launch in October, or as soon as Vertex Communications & Technology Group - who acquired the license for China - finds a local partner. ESPN is indirectly owned by The Walt Disney Company (80%) and The Hearst Corporation (20%). Vertex also formed a joint-venture with Sino-World Media to launch Newsweek Select, a monthly concept combining articles on lifestyle, science, health and arts.

Autobild Thailand Also in Thailand, the wholly-owned subsidiary of Burda signed a license agreement with fellow publisher Axel Springer to launch AutoBild. The fortnightly magazine hit the newstands in July with a cover price of Baht 50 (US$1.20). It’s expected to sell 60,000 copies per issue. AutoBild originated in Germany in 1986 and currently sells 656,000 copies per week. The automotive magazine is currently published in 22 countries, including Indonesia. Separately, Axel Springer announced last February (after publishing its €197 million earnings for 2003) the establishment of a €50 million fund to expand in China, Russia and India.

Stuff Philippines In the Philippines, Stuff will publish a local edition at the end of September under a license agreement with Media G8way Corp. A Thai-language edition will follow in November published by Inspire Entertainment Co. Ltd. Owned by Haymarket  - who bought the title in 1999 from Dennis Publishing, who still publishes an unrelated men’s magazine in the US -  Stuff will have six editions in the region by the end of the year.  The consumer electronics and gadget review magazine is already published in China (by Shanghai Technology Products), in Taiwan (by Tom Group’s PC Home), in Malaysia and Singapore (by Catcha) and in Indonesia (by Gramedia).

 

Other News:
In Korea, Hachette Filipacchi Media negotiated an agreement with EIN*S International to become its new local joint-venture partner in the company renamed Hachette EIN*S MEDIA In Hong Kong, Advanstar Asia has taken over IDG’s license to publish the local edition of Computerworld as a monthly magazine.  In Thailand, a local edition of marie claire was launched in April by Hachette Filipacchi Post. Still in Thailand, The Nation Multimedia, publisher of the local English language newspaper, launched Hair under license from IPC Media. In China, For Him Magazine (better known as FHM, the EMAP flagship) was launched by Trends Publishing, the Chinese publisher owned by IDG (20%), Hearst (20%) and the Ministry of Tourism (50%). Finally, in the Philippines, Top Gear, the automotive magazine from BBC, will appear before the end of the year following a license agreement with Summit Media. Launched in January, Top Gear’s Chinese edition is published by One Media Group, the joint-venture between Ming Pao Enterprises and Media2U.


Checkout how many magazines Media Convergence Asia-Pacific has launched . . .


Famous Quote  

"The publishing business in China has barely scratched the surface of its potential. If you are willing to be patient and make the effort, you will prosper and be rewarded for it."

George GreenGeorge Green
President of Hearst International
Awarded the Chinese Government Marco Polo distinction
Beijing – May 20th, 2004

 

IMF World Economic Outlook  

 

Countries

 

China

Thailand

India

Malaysia

Korea

Hong Kong

Indonesia

Singapore

Taiwan

Philippines

Australia

Japan

 

United States

 

EUROPE       United Kingdom

Spain

France

         Germany

                 Italy

    Real GDP

2004

        2005

 

 

8.5%

8.0%

7.0%

6.7%

6.5%

6.0%

5.7%

6.0%

5.5%

5.3%

5.5%

4.5%

5.4%

5.4%

5.0%

4.0%

4.9%

4.9%

4.5%

4.2%

3.5%

3.6%

3.4%

1.9%

 

 

4.6%

3.9%

 

 

3.5%

2.5%

2.8%

3.3%

1.8%

2.4%

1.6%

1.9%

1.2%

2.0%

Source: IMF World Economic Outlook, April 2004

Copyright © 2004 - Media Convergence Asia-Pacific. All rights reserved.