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:

• Asia-Pacific Advertising Revenue Forecast 1998-2002
• The (profitable) Internet model for Asia-Pacific: PCs, Mobile Phones or TV sets?
• The gap between Australia's 1st and 2nd largest magazine publishers widens
• Increased opportunities in China high-end advertising budgets
• Magazine Development in Asia Pacific

Every year Zenith Media produces for its clients the well-known forecast of worldwide advertising expenditure. The extensive report has become the equivalent of the "Guide Michelin", the bible of French gastronomy, to international advertising and media executives around the world. Just like the Guide Michelin's inspectors who do not reveal the standards for granting their valuable stars, Zenith Media does not disclose its methods and principally relies on a global macroeconomic model associated with the skill of its local media executives, located in 69 offices in 39 countries around the world.

Zenith Media, (www.zenithmedia.co.uk) which is equally owned by Cordiant Communications Group and Saatchi and Saatchi, forecasts worldwide expenditure up 8% in 2000 and a further 6% in 2001. Coming out of its most severe economic crisis, Asia Pacific is expected to grow 5.7% this year to a total advertising spend equivalent to $64.8 billion. This is about half of the total advertising spend in the US and equal to the 2000 spending in Germany, the UK, France, Italy and Spain combined.

For a detailed analysis, country by country, click here.

Asia Pacific already provides an attractive diversity of means for using or subscribing to the Internet.

Japan leads the world in mobile-Internet services delivered by cellular phones, with a population of subscribers expected to reach 14 million by the end of the year. Besides the high cost of local connections, one of the reasons PCs have not penetrated households as well as in the West is because Japanese people spend relatively little time in their small homes where space is restricted. Unlike PC Internet users, Japanese consumers do not object to have a small fee added to their phone bills every month. The result: Japanese wireless Web companies are frequently profitable, just a few months after inception. According to e-marketer, the internet statistic provider (www.emarketer.com), Hong Kong and Singapore boast cellular phone penetration rates in excess of 30% and China already has a 33.1 million wireless population.

Australia leads the Asia Pacific region in PC household penetration, which should be over 60% by year-end. About 9.2 million Australians (66%) use a computer either at home or at the office, says the Australian Bureau of Statistics (www.abs.gov.au). Yet, only 6% of Australian adults use the Internet for shopping indicating their reluctance to pay for Internet services. Meantime, all the B2C recent start-ups are burning cash fast and follow the Western model. New Zealand seems to be going the same way.

Taiwan and India may go in the third direction of Internet access through TV. Taiwan already leads the way in cable television penetration with 75% of all households subscribing to cable TV. India already has a cable television population of 37 million subscribers. China already has a cable subscriber base of 80 million (TV sets outnumber PCs 25 to 1). As far as consumers paying for the service, no one ever expects to be connected to cable television for free. For a detailed survey of Internet consumers in Korea, China,Taiwan, Singapore and Hong Kong, please go to global Internet research company, Net Value.

However, the current debate will take another dimension once high speed internet infrastructures are in place in each country.

Last month saw a series of publication of companies' results in Australia, where the standard fiscal year ends June 30. The leading magazine publisher Australian Consolidated Press (www.acp.com.au), part of Kerry Packer's controlled Publishing & Broadcasting, announced an 8% growth in operating income to A$113 million ($65.5 million) on revenues of A$540 million ($313 million). Meantime, PMP's magazine division (www.pmpcomm.com.au) delivered a A$31 million EBITDA ($18 million) or 12% below last year despite a revenue increase of 3% to A$303 million ($175.7 million). While ACP's increased earnings were generated mostly by a robust advertising market and some cost cuttings, PMP announced an increase in its advertising revenue by 35.3%. However, PMP's magazines in Europe fell by 43.6% and delivered only a A$6.7 million profit (3.8 million) due to the softening of TV Hits and Sugar in the UK and the unsuccessful relaunch of Hit Stars in Germany. The results fueled more rumors on PMP as a cheap takeover target. With total revenue of A$1.48 billion ($858.4 million) PMP's share price is now around A$2 and the market capitalization about A$515 million ($298.7million).

Bennett Associates is a Hong Kong based executive search firm specialized in recruiting for the communications & media industries. Corporations seeking senior executive talent in Asia, click here.Website

The Chinese government recently announced its decision to lower custom duties on several imported products like textiles, perfumes and alcohol. Import taxes on cosmetic products will drop from 30% to 10%, while wines and spirits will see a sharp reduction from 65% down to 10%. China's upcoming WTO membership should positively impact the bottom line of imported goods and increase local advertising and promotional spending by foreign companies. For a recent and fairly comprehensive analysis of the publishing market in China, enquire about the 50 page report published by China Concept Consulting: "China's Publishing Industry: An Overview for Foreign Investors" (info@chinaconcept.com).

Hearst chose South Korea to launch the 100th foreign edition of one of its magazines. The local edition of Cosmopolitan is published by a joint venture with Joong Ang M&B, an affiliate of the Samsung Group. The amount of equity was not released, however Korean laws now allow foreign companies to own up to 49.9% of a print media company. The local edition of Cosmopolitan has a first print run of 80,000 copies and a cover price of Won6,900 ($6.20). It carries 137 advertising pages.

Separately, the American communication group (www.hearst.com) has formed a joint-venture in Hong Kong with its former licensee, the South China Morning Post (www.scmp.com), which publishes the local editions of Cosmopolitan and Harper's Bazaar.

After Japan and Korea, The National Geographic will launch in January 2001 a "Traditional Chinese" edition from Taiwan with Earth Geographic, which has been publishing a similar concept for 13 years. The National Geographic Channel has close to five million subscribers in Taiwan. The prestigious American magazine (www.nationalgeographic.com) has not made a decision yet as to when and how to publish a simplified Chinese edition in Mainland China. However, negotiations are on going for a local edition in Thailand.

Seventeen, Primedia's flagship, chose the Philippines to launch its first edition outside the US. The monthly young women's magazine has a cover price of 95 Pesos ($2.10) and expects a circulation of 20,000 copies. The licensing partner is Summit Publishing, which already publishes the local editions of Cosmopolitan, Good Housekeeping, FHM and Prevention, along with several local titles. With $1.7 billion in revenue last year, Primedia (www.primedia.com) also announced the creation of an international division with a ten-person team and offices in New York, Sao Paulo, Hong Kong and Europe to open soon.

Emap announced it will launch an Australian edition of Empire, its movie magazine which has a 170,000 circulation in the UK (www.emap.com). The new magazine will start in December with a bi-monthly frequency, a 40,000 print run and A$6.95 ($3.95) cover price. This is the first edition of Empire, outside of its domestic market. It is also the second time - after Minx - Emap uses Australia as a test market for international expansion.

Nikkei Business, Japan's largest selling weekly magazine, has formed an "editorial licensing arrangement" with The Economist in London. Under this arrangement Nikkei BP's flagship (www.nikkeibp.co.jp) will be able to run selected stories from The Economist. With a circulation of 335,884 copies sold (ABC Japan, December 1999), Nikkei Business already has similar arrangements with Business Week, The Wall Street Journal and Barron's.

GQ Korea is stongly rumored to be Doosan Group's next magazine project. In a country where corporate discretion is nonexistent (at least in the magazine industry), the Condé Nast licensee in Seoul should make an announcement as soon as it is ready to sell advertising.

ELLE Cuisine was recently relaunched in Australia as a monthly magazine. It is the second magazine published by the joint venture between Hachette Filipacchi and PMP. It gave itself an attractive cover price of A$4.95 ($2.90) positioning itself between Text Media's mass market Good Taste and ACP's high end Gourmet Traveller, which sell respectively 171,568 and 86,308 copies (ABC Australia, first half 2000).

Please contact us in Sydney, either before you arrive or when you are here. We will be very happy to assist you with any contact or information you may need during your visit.