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Didier Guérin
President

Inside this issue:

Another consecutive double-digit growth expected: + 10.5% China still leads the expansion of the industry India is next Watch for Indonesia In its latest Advertising Expenditure Forecasts, ZenithOptimedia* predicts the four largest markets in the region (excluding Japan), China, Australia, South Korea and India - will again experience significant growth in magazine advertising spending in 2007. The Asia-Pacific markets are expected to see an increase of 10.5%, compared with a growth of 5.9% in the US and 1.4% in the four largest magazine markets in Europe. As usual, a good portion of the growth is fuelled by China, which is forecast to see its magazine advertising market expand by a massive 20% in 2007. *ZenithOptimedia is one of the world’s leading global media services agencies, with 170 offices in 65 countries. The annual Advertising Expenditure Forecasts report is based on the company’s tools for strategy development and implementation (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. All figures are in current prices.

Click on the flags below to be transferred directly to the country of your choice. Japan +3.4% Australia +5.0% China +20.0% South Korea +3.0% Taiwan +2.9% Hong Kong +3.0% India +17.7% New Zealand -4.2% Thailand +10.0% Indonesia +20.0% Singapore +0.7% Malaysia +2.5%

Media Convergence Asia-Pacific has developed a simple matrix to predict the growth rates for magazine advertising in 19 countries in the region. How did we do it ? Using this methodology, the magazine industry in the Asia-Pacific region can be segregated into four main market categories, reflecting their existing size and the expected growth in magazine advertising spending from 2005 to 2008: The Mature Markets – countries expected to experience a modest average CAGR from 2005-2008: click here for more details The Growing Markets – countries expected to experience a robust growth of more than 10% annually from 2005-2008: click here for more details The Small Markets – countries whose growth is constrained either by a relatively small population or restricted expansion of advertising spending: click here for more details The Long Term Opportunities – countries which currently have annual magazine advertising spending of less than US$10 million: click here for more details For a more complete analysis: Read Didier Guérin's article in FIPP's World Magazine issue – December 2006: www.fipp.com

In China, Sports Illustrated was launched in September 2006 by SEEC under a copyright agreement with Time Inc. The bi-weekly magazine, which retails for RMB10 (€1.00 or $1.25), is expected to increase its frequency to weekly before the 2008 Olympic Games. Earlier in May, SEEC also launched a local edition of Better Homes and Gardens, under another copyright agreement with Meredith Corporation. This is the second of the seven sisters US mass market magazines to enter China (after Hachette’s Woman’s Day - launched in 1994).

Still in China, Focus was launched in September 2006 by Gruner + Jahr China. The local edition follows the concept of the popular science and technical, but easily accessible, magazine – also known in Germany as P.M., in France as Ça m’intéresse, in Spain as Muy Interesante and in Italy as Focus. The Chinese Focus-Xinzihe retails at RMB10 (€1.00 or $1.25) and expects to deliver a circulation of 200,000 copies. Separately SHAPE was launched in China in September 2006 by a joint-venture between Singapore Press Holdings and Mediasky, under a licence agreement from the US-based Weider Publications: cover price of RMB10 (€1.00 or $1.25).

In Indonesia, the local edition of Shape was launched in November 2006 under a direct licence agreement between Weider Publications and Super Silver Media, with a cover price of Rupiah 32,000 (€2.75 or $3.50). Earlier in April, Velvet Silver Media drove the controversial launch of the Indonesian edition of Playboy, the first appearance of the famous men’s entertainment magazine to be published in a Moslem country. With a cover price of Rupiah 50,000 (€4.00 or $5.50), Playboy Indonesia – which carries no nudity or no erotic content – has reached a local circulation record in excess of 100,000 copies.

In India, Men’s Health was launched by the India Today Group with a print run of 50,000 copies. This is the 37th edition of the US-based men’s magazine. Separately India Today Group launched a local edition of the Harvard Business Review. And from its joint-venture company with Sorabjee Aviomotive Communications (SAC), Haymarket has introduced What Car? India and What Hi-Fi? Sound & Vision India. The two titles, which retail for Rupees 30 (€0.50 or $0.65) and Rupees 100 (€1.70 or $2.25) have a circulation of 60,000 and 50,000 copies.

OK! was also launched as a monthly in India in May 2006 by VJM Media at a cover price of Rupees100 (€1.70 or $2.25) and with an expected circulation of 25,000 copies. This is the 12th edition of the British magazine. In September 2006, Australia’s OK! switched frequency from a monthly to a weekly, just two years after its successful launch. This is the first example of an international magazine which was adapted to a monthly from its original weekly concept and then reverted to the mother magazine’s original frequency.

In India, Condé Nast wholly-owned subsidiary will launch a local edition of Vogue in September or October 2007. The magazine, which took more than two years of intense development, received an authorization from the Indian Government in June 2006, along with Glamour.

In Korea, the local editions of Men’s Health and Arena were launched in March 2006 by Design House and Seoul Cultural Publishers. Retailing at Won5,000 (€4.15 or $5.45) and Won6,000 (€4.95 or $6.55), the licencees from Rodale and Emap reported a circulation of between 40,000 and 60,000 copies a month. Both magazines received a substantial support from advertisers, including the new comer to Asia, Arena, which published 1,039 pages of advertising in its first ten issues.

In other markets, Haymarket has licenced its monthly soccer title, Four Four Two in three countries. In China the licence is held by Guanxi Fly Media and the magazine has established a circulation of 30,000. In Hong Kong, the magazine is licenced to Soccer Asia Interactive, with 10,000 copies sold each month. And in Indonesia the licence is held by Silver Sport Media, with a circulation of 45,000 copies.

In China, Hachette Filipacchi Media also launched a local edition of Psychologies. The monthly magazine carries a cover price of RMB 20 (€2.00 or $2.50). Separately, Hachette Filipacchi Media relaunched its younger women title Xuanse launched in 2004, as a more mature and affluent magazine under the name 25 Ans Xuanse.

Also, Hearst Magazines International will launch Esquire in Indonesia in February or March 2006 with its local licensee Media Esquirindo International and at the same time, in the Philippines, Town & Country will be launched by Summit Media, also the licensee for Cosmopolitan.

Other magazines launches in Asia were: Maxim by ABS CBN in the PhilippinesDisney Adventure by Infomedia in IndiaArena by Mediacorp in SingaporeGramophone by Haymarket in ChinaTop Gear by the JV between BBC Worlwide and the Times Group in India.

CHINA IS HOT

After an investment of about €50 million ($66 million) and two years of negotiations in China, Gruner + Jahr has concluded an agreement for the merger of the successful fashion and beauty magazine Ray Li Fushi Meirong, along with three other monthly titles under the Ray Li brand (a women’s title, a living magazine and a young women publication) with the G+J/CLIP portfolio of four titles: Parents, Fitness, Car & Moto and Focus. When all these entities are merged, G + J should become the second largest magazine company in China.

Launched in September 1995 in a copyright agreement from Japan’s Shufunotomo (owner of Ray, the successful young women magazine in Japan), Ray Li is one of the most established fashion magazines in China. The company also operates a powerful women’s portal with six million unique visitors a day.

PRIVATE EQUITY PUSHES MULTIPLES UP IN AUSTRALIA

More than A$10 billion (€6 billion; $8 billion) was spent on media mergers and acquisitions in Australia following Federal Parliament’s decision in October 2006 to dramatically change the local media ownership laws. Restrictions on foreign media and cross-media ownership have been relaxed. But the two-out-three rule will apply. Foreign companies will be allowed to own TV stations or newspapers, but no group will be allowed to own more than two of the old media (TV, newspapers and radio) in metropolitan and regional markets.

Just a few days after the final vote in the Federal upper house, major transactions with private equity companies were announced across all sectors of the Australian media landscape:

James Packer James Packer’s PBL put 50% of its TV, magazine and Internet assets in a new company with private equity firm CVC Asia Pacific in exchange for A$4.5 billion (€2.5 billion or $3.5 billion) in cash. The PBL CVC deal was done at a multiple of 11.5 times historical EBITDA (earnings before interest, tax, depreciation and amortisation).

Rupert Murdoch In mid October 2006, Rupert Murdoch’s News Corp spent A$385 million (€230 million or $300 million) to acquire 7.5% of John Fairfax Holdings (publisher of The Sydney Morning Herald, The Melbourne Age and the Australian Financial Review, plus magazines like BRW). News Corp paid a multiple of 20.2 times price earnings ratio. Almost at the same time, Kerry Stokes’ Seven Network purchased about 3% of Fairfax, which reacted in December by spending A$2.9 billion (€1.7 billion or $2.3 billion) in a friendly takeover of Rural Press (publisher of 240 regional newspapers). The move reduced News Corp’s stake to about 5% and increased Fairfax market capitalisation to A$7 billion (€4 billion or $5.5 billion) but it created the most expensive direct transaction at a multiple of 14.5 times Rural Press expected 2007 EBITDA.

Kerry Stokes Meantime, Kerry Stokes’ Seven Network bought 14.9% of West Australian Newspapers (owner of the leading newspaper in Perth, along with various radio stations and regional newspapers) for A$343 million (€204 million or $270 million). Seven paid a multiple of 17.5 times price earnings ratio. Furthermore, Seven created a joint venture with Kohlberg, Kravis, Roberts & Co (KKR), Seven Media Group, which will own 50% of Seven’s television, magazine and online businesses. These assets were valued at A$4 billion (€2.3 billion or $3.1 billion) representing a multiple of 13.3 times Seven’s historical EBITDA. The purpose of the transaction was clearly presented to develop a new vehicle to pursue further media opportunities in Australia and New Zealand.

AND MORE TO COME

How will these private equity firms unlock value? By selling off pieces or making drastic operational changes? Although it is uncertain when the Australian Government will proclaim the new media laws – probably not before March 2007 – James Packer and Kerry Stokes are sitting on a war chest of respectively A$4 billion (€2.3 billion or $3.1 billion) and A$3 billion (€1.8 billion or $2.3 billion) to acquire media assets.

Still in Australia, News Corp's local subsidiary, News Magazines, has purchased Michael Hannan’s Federal Publishing Company (FPC) for A$170 million (€101 million or $134 million). FPC publishes 23 magazines including Delicious, Notebook, Super Food Ideas and owns the Condé Nast’s licences of Vogue, Vogue Living, Vogue Entertaining & Travel and GQ. News Magazines - with its newspaper-inserted magazines - becomes the third largest magazine publisher in the country with a 7% market share.

TWO DISCREET DEALS

Separately, in China, Media Convergence believes that Kerry Stokes' investment company, Australian Capital Equity, has acquired indirectly a substantial holding (but less than 50%) in The Shanghai Daily, the powerful daily English language newspaper, from the Wenhui-Xinmin United Press Group.

In Hong Kong, Next Media’s Chairman and majority shareholder, Jimmy Lai, sold 12.1% of his share in the company he founded for about HK$750 million (€73 million or $96 million). Earlier, the publisher of Apple Daily and Next Magazine – whose Taiwan operation is now profitable – announced that in its last financial year (ending in March 2006), Next Media earned HK$440 million (€43 million or $57 million) on revenue of HK$3.32 billion (€323 million or $427 million). Jimmy Lai still owns 74% of Next Media.

"Magazines are the most personal form of mass-communication." Christie Hefner Chairman, Chief Executive Officer Playboy Enterprises International Inc. Phoenix, Arizona, October 23, 2006