e-newsletter

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.

Please let us know your reaction and if you do not wish to receive it.

Didier Guérin
President

Inside this issue:

• Wealth Creation Grows Faster in Asia Than in the U.S. and Europe
• Bertelsmann in Asia
• Recent Magazine Developments in the Region
• Japan's Magazines Circulation
• Internet Stock Valuation in Asia To Rise
• Women in Japan and Korea to Outspend Men on the Net
• Germans Plough Money Into the Asian Recovery
• OECD Forecast: China to Expand Further and Japan Finally Joins the Asian Growth

Last year's economic recovery increased the number of Asian millionaires by 31% to 1.7 million individuals, compared with 1998.

In its annual World Wealth Report, Merrill Lynch/Gemini, who has been tracking the high-net-worth individuals (HNWI) for the last four years, points out Asia as the region with the most rapid creation of wealth in the world. The number of HNWIs - defined as the individuals who hold more than US$1 million in financial assets - grew to a total group of seven million people worldwide with US$25.5 trillion in financial assets. This gigantic figure is larger than the December 31, 1999 market capitalization of the combined Amex, Nasdaq and NYSE.

The growth rate of Asian HNWIs is such (almost twice as fast as the rest of the world) the report concludes, "if this growth continues, the number of Asian HNWIs will soon rival those of North America and Europe." Separately, Forrester Research reports millionnaires use the Net more actively than any other wealth segments from high-ticket purchase to managing their money.

Until now Bertelsmann AG and, its magazine publishing unit, Gruner+Jahr have had a discreet - but not insignificant - presence in Asia-Pacific.

In June 1999, Bertelsmann (and Gruner+Jahr) took a 19% equity in Daum Communications, the second largest portal in Korea (after Yahoo), whose market capitalization was in excess of $2 billion before last April. In January, Bertelsmann Multimedia (equally with Gruner+Jahr) acquired 10% of Yam Digital Technology Co., a Chinese-language portal operator based in Taiwan. In March, BOL (Bertelsmann Online) established modest on-line shops in Hong Kong, Singapore and Malaysia. Since the German giant has recently decided to abandon efforts to become a global Internet service provider to concentrate on content and e-commerce, the investments in Korea and Taiwan might no longer be strategic.

However, Japan appears to be a more focused target. Bertelsmann is about to acquire 3% of Kadokawa Shoten Publishing and create a joint-venture on-line company to sell Japanese language books and music over the Net. Kadokawa is a large book publisher and distributor in Japan, but also an important magazine publisher, who has been successful with several weekly city and television magazines (Tokyo Walker, Kansai Walker, The Television) along with marie-claire Japon.

Naturally, there are growing rumors in Tokyo, Gruner+Jahr has found a good platform to launch its magazines in the Japanese market. As logical as it appears, the reality is different. Gruner+Jahr's mission is to expand its magazines and Internet business in Europe and especially in the US, where it wants to double its business in the next five years. It wants to become one of the top five publishers in the market. In Asia, Gruner+Jahr concentrates its efforts in China with Shanghai-based publishing house SSTP who has obtained a license to publish Car & Motor which has been published monthly since last January.

FHM is launching in Taiwan on June 27. EMAP has entered into a licensing agreement with King's International, who is also the Playboy licensee in Taiwan. Priced at NT$180 (US$5.90), the first issue is launched with a NT$99 (US$3.20) introductory cover price and an announced print order of 50,000 copies. The local edition intends to use a substantial amount of editorial material from the British magazine, including the covers with Western models. It will be interesting to see how Chinese men receive the original "beer and babes" British concept. This is the fourth edition of FHM in the region, following Singapore, Australia and the Philippines.

In Australia, the homemaker magazine competition is becoming larger than ever. Last month, Lachlan Murdoch launched INSIDEout, the first product of News Magazine Pty. Ltd., the recently created magazine division of the largest newspaper publisher in the country. A week later, ACP - under a joint venture agreement with Hearst - started She Living. The next title to be launched is Live This! from Matt Handbury's Murdoch Magazine. This new title will bring to 25 the number of magazines in the homemarket category, which generated a total advertising revenue of A$40 million (US$23 million) last year.

Times Mirror continues its expansion in the region with more licenses: in Korea, Popular Science Magazine starts publishing this month under the auspices of Korea Times and The Seoul Economic Daily, subsidiaries of The Hankook Ilbo who currently owns the license of ELLE Korea. In Japan, Popular Science will be launched in the fall by Transworld Japan, publisher of the Japanese edition of Times Mirror Transworld Snowboarding and of WARP, launched as a licensed edition of the former Times Mirror teen title. In Taiwan, Popular Science will be published later in the year by Classic Communications, publisher of TIME Express and TIME for Students as well as other book and magazine products. In China, GOLF Magazine will begin publication early next year under the aegis of China Prosperity Culture Media in association with the China Golf Association.

In Singapore, Star TV's music channel, Channel [V] Networks, has teamed up with Gnomadic Publishing to publish en[V], a music and lifestyle entertainment magazine. Targeted at readers aged 13 to 27, the premier issue was launched June 17 with an initial print run of 30,000 and a newsstand price of Sin$1.50 (US$0.87).

The audit figures from the Japan Audit Bureau of Circulation for the period July-December 1999 have just been published.

It is a short report, with only the 123 magazines which are members of Japan ABC (there are more than 2,500 consumer magazines published in Japan). The members are mostly business magazines or computer magazines with levels of circulation which can appear modest - by Western standards - for the second largest consumer market in the world.

The largest selling publication is Nikkei Business (published by Nikkei BP) with 319,000 copies sold weekly, followed by Nikkei Personal Computing (303,000 copies bi-weekly), Time Inc's President (250,000 copies monthly). The two year-old Japanese version of Yahoo! Internet Guide (ZD Net and Softbank) is already selling 153,000 copies a month.

According to Zenith Media, Japan's magazine industry is expected to receive this year a 9.9% market share of the US$33.2 billion local advertising spending.

"We expect the market capitalization of Internet stocks in Asia ex-Japan to expand 10-fold in the next three years" says Morgan Stanley Dean Witter who just published its Asian Internet Primer.

This report also predicts Internet advertising spending in Asia ex-Japan will reach US$2.5 billion by 2004 from a US$10 million in 1997. This guide to Internet Investing in Asia Pacific is one of the first reports published since the stock market technology stocks valuation correction in April.

About the debate dot com companies are a different breed and none of the traditional old economy financial and valuation standards apply, the report concludes "The true value of an enterprise is the present value of future cash flows". And, adds the report, with a touch of arrogance, "always has been, always will be".

Below are IDC recent projections of on-line users for the next few years. While the business of making Internet projections (even short-term) is a risky one, Korea seems to be off the chart already, as the Korean government announced 11.3 million Koreans (25% of the population) were using the Net at the end of January.

The five largest countries of Internet users in Asia ex-Japan

Source: IDC Data and Forecasts

According to Women's Wear Daily, on-line retailers are recording an exploding growth of women consumers in Japan. As in the US, where women are already outnumbering men on the Net, the same phenomenon is likely to appear in Japan and Korea.

Furthermore, since women in these two countries traditionally manage the household finance, they are bound to shift some of their current purchasing power onto the Net and, to not only outnumber, but to outspend men on-line.

The German Government is increasing its diplomatic contacts in the region with successions of various Ministers heading business delegations to Korea, Thailand, Singapore and Malaysia in the next few weeks.

Meantime, Dr. Jüergen Strube, Chairman of the US$54 billion chemical giant, BASF AG, has set the goal to increase sales in Asia from the current 13% of group total sales to 20% by 2010. For the first three months this year, the electronic concern, Siemens AG, reports a 61% increase in Asian orders, while fashion group Hugo Boss saw its turnover from the region surge by 65%.

The Organisation for Economic Cooperation and Development (OECD) published its annual Economic Outlook and confirms Japan will finally join the club of the Asian economic growth with a 1.7% expansion of its economy in 2000.

All the OECD 24 members worldwide are expected to grow by 4% this year. Among the non-OECD members, Korea is expected to remain the leader in the Asia-Pacific expansion with an 8.5% GDP growth, or a cooling down from last year. China will be increasing its growth to a solid 7.7% rate. Taiwan, which is not reported by the OECD, expects a 5.7% growth in 2000. Finally, India (another non-OECD member), which is benefitting from an expanding industrial sector and a booming New Economy, is on track to register a 6.5% growth this year. All these figures are slightly below each local government projection.

OECD Economic Outlook