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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

Inside this issue:

Zenith Media's last December projection for the region (excluding Japan) is maintained at 9% despite the US economic slow down. Yet, it is less than the robust 15% experienced last year in Asia. Zenith Media also is keeping its 4.6% projection for advertising growth in the US in 2001. The reason is the US downturn is objectively not worse today than Zenith Media (www.zenithmedia.com) estimated it, when it made its projection at the end of last year.

The recently announced purchase of 42% of the Groupe Marie-Claire by Hachette Filipacchi Medias (www.lagardere.fr) plans to "increase and harmonise the (two groups') growths" outside of their domestic market. On the operating level, it appears to be a challenging task in the region where Hachette-Filipacchi has a consistent network of wholly owned subsidiaries and joint ventures, while Groupe Marie-Claire has two joint ventures and four licences (including the successful - and very profitable - Australian edition). Hachette Filipacchi should be able to bring rapidly production synergies. Later on, the deal might be beneficial to Groupe Marie-Claire who will find with Hachette an established structure to launch new editions in countries where it has no presence as yet.

Hachette Filipacchi		Groupe Marie - Claire
	The presence of Hachette Filipacchi and Group Marie-Claire in the Asia Pacific region
Wholly owned subsidiary	Japan	Licence
Co-Publishing Agreement	China	No presence yet
Joint Venture	South Korea	Joint Venture
Wholly owned subsidiary	Taiwan	Joint Venture
Wholly owned subsidiary	Hong Kong	Licence
Joint Venture	Thailand	No presence yet
Joint Venture	Malaysia	Licence
Joint Venture	Singapore	No presence
No presence yet	Indonesia	No presence yet
Joint Venture	Australia	Licence

Unlike in the US, the distribution system in Asia is developing tools and mechanisms, which are helping publishers to improve their single copy sales. This is the case in Japan and especially Taiwan, where the retail chain 7-Eleven has increased the number of its outlets selling magazines. Although small magazines still experience difficulties to enter the network, 7-Eleven is now offering weekly and even daily sales reports from their Point Of Sales system. This situation appears to be going in the opposite direction to the US, where the concentration of magazine wholesalers (from 250 down to 50 in the last 20 years) has reduced newsstand sales by 100 million copies of magazines in the second half of 2000. While sales efficiency is improving in Asia, the average sell-through for a US monthly is now 34% of the print order.

By 2005, half of the adult population in Japan will be 50 and older. As Japan ages rapidly, the seniors - they spent US$752 billion last year - are becoming a driving force in high-end items and services. They are now getting the attention of Dentsu and Nikkei. The largest advertising agency in Japan (www.dentsu.com) has created a special in-house 30-member research team to monitor the consumption patterns of a sector identified as a "spending boom". Separately, Nikkei BP (www.nikkeibp.co.jp) is launching a series of "mooks" about PC computing for people over 55. The "mooks", which are printed with larger font size, aim to familiarize the readers with the use of PCs.

China's entry this year into the World Trade Organization (www.wto.org)raised speculations that the largest market on the planet is going to become easily accessible to international publishers. Not so, but things might change.

The WTO charter has no specific requirements for the media industry and China cannot be put under pressure to relax its current barriers of entry. In fact, China made it clear from the beginning that the "traditional" media industry would not be part of the WTO discussions. One year ago, a Chinese official told us "the media will be the last industry to open to foreigners". However, China has a great ability to evolve fast and a more flexible spirit and language seems to have appeared recently in Beijing. The three sensitive topics - politics, sex and religion - will no doubt remain under close scrutiny. However, the recent publication of official directives on the approval process for international licensing arrangements confirms that the authority is accepting the idea that foreign magazine brands and editorial content can be beneficial to the growth of China's market.

Such an idea would have been unthinkable two years ago. Yes, China is changing.

Different from the US where circulations have dropped recently, the young women's magazines are becoming hot properties to launch in Asia. Hence, Primedia (www.primediainc.com) is in negotiations in several markets to licence Seventeen and is about to make a series of announcements regarding probably India and Indonesia, where PT Gaya is the leading contender. Also, Hearst (www.hearst.com) is working on local editions of Cosmo-Girl, which could be launched this year in Hong Kong, followed by Taiwan and Thailand.

 

The Reader's Digest (www.readersdigest.com) is launching in China. Following an agreement with a local publisher and a license granted by the Chinese authorities, the Hong Kong subsidiary of the Pleasantville, New York, publisher is opening an office in Guangzhou from where it is launching an English tutorial edition with the Reader's Digest logo.

 

The international joint venture between Burda (www.burda.de), the third largest German magazine publisher, and Rizzoli-Corriere della Serra (www.rcs.it), the second largest Italian publisher, continues to move fast in Asia. Last November in Korea, they acquired 49.9% (the maximum now allowed) of Design House, a publisher of interior magazines and books, for Won 10 billion (US$7.9 million). However, a good portion of this amount stays in the company to finance an ambitious expansion program to start up two new magazines each year. The first launch is planned for the second half this year. Burda-RCS is also expanding in Indonesia where it launched its eighth edition of its young women's magazine, Lisa, In November 2000, with PT Media Massa Utama. The biweekly magazine has already reached a level of circulation second to the leader, Femina. Lisa was also launched in China last November where following its purchase of 50% of Vogel (www.vogel.de), the German IT publisher, Vogel-Burda now runs the successful Chinese edition of CHIP, launched April 2000.

 

In Thailand, it should be announced soon the 20th edition of The National Geographic (www.nationalgeographic.com) will be launched by Amarin Printing and Publishing (amarin.co.th). The local edition should appear in August.

 

In Korea, last year's opening to foreign publishers in the capital of media companies (under 50%) has been followed immediately by marie-claire (creation of MC Korea with Kaya Media (www.kayamedia.com) and Hachette-Filipacchi, who moved ELLE from a licensing deal to a new partnership with Next Media (www.nextmedia.com) (ELLE is estimated by Media Convergence Asia Pacific to be the second most profitable women's magazine in Korea after the local teenager title, Ceci). Hearst has also followed suit with its 49.9% ownership of the venture with Joong Ang M&B, which successfully launched COSMOPOLITAN last September (the print order has doubled since). Although Hearst is keeping its two other titles (Harper's Bazaar and Esquire), under license with Kaya Media, most foreign publishers are still comfortable with the licensing model in Korea, such as Condé Nast (www.condenast.com) (which has launched GQ this month with Doosan (www.doosan.com)), Reader's Digest (also with Doosan), Figaro Madame (with Woojin, which is about to launch L'Officiel), Newsweek (with Joong Ang M&B) and Ziff Davis Media (with Softbank Media).

 

In Japan, Nikkei BP is testing the new economy segment by launching its own local version of Gruner+Jahr Fast Company, or Ziff Davis Smart Business. It will be called Nikkei IT21 and will target the top and middle managers at small and middle-size companies, as well as the corporate non-IT specialists. Surprisingly, it will not have a subscription model and will be sold at bookstores for ¥680 (US$5.70). Only 54,000 copies will be distributed for the first issues in May.

 

In Taiwan, marie-claire terminated its license agreement with China Times to create Asia Press Publishing, a 50-50 joint venture with Citta Bella and Business Weekly. The new venture poached Wen Young, ELLE's editorial director. The change of partners caused a temporary suspension of the monthly magazine, which will resume publication in March. Meantime, China Times used the former staff of marie-claire to immediately launch Madame Figaro for the first time on the island. In a more quiet world, Ziff Davis Media (www.ziffdavis.com) has signed a license agreement with Arco Publications (www.arco.com.tw) to publish a Taiwan edition of Inter@ctive Week, the "Internet Newspaper", which is due to appear April 2001.

 

In Australia, the separation of Murdoch Magazine's two joint owners, Matt and Fiona Handbury, will not affect the day-to-day operations, but probably its style. Matt will remain CEO and Fiona will stay on the board of the company, which publishes local editions of marie-claire, Better Homes & Gardens, Family Circle and Men's Health.

Advertisement

Daum Communications Corporation, now the largest portal in Korea with 21 million subscribers, experienced its first operating profit. The portal, in which Bertelsmann (www.bertelsmann.com) and Gruner + Jahr (www.grunerandjahr.com) own 19%, earned 100 million Won (US$70,000) in the last quarter last year.

Famous Quotes:

"Internet business models based on revenue from banner advertising are f---ed. Many of our banner advertising campaigns have had no response. No one contacts you."

John Singleton Chairman and CEO John Singleton Advertising, Pty Ltd and (former) Guru of the Australian advertising industry.

The wireless population of Japanese users reached 58.7 million in January. NTT owned DoCoMo (www.nttdocomo.com), now the largest ISP in the country, keeps adding 40 to 50,000 new subscribers everyday to its established 34.6 million customers list. China already has a population of 85 million mobile phone users and in Japan there are already 29 million subscribers to mobile Internet services. Therefore, it becomes more and more conceivable Asia - with its current 160 million cellular phone users - is developing a new model in Internet access.

It has already been several years since the World Bank (www.worldbank.org) produced the index of Purchasing Power Parity, which is a more accurate measure of national wealth than the Gross Domestic Product. The Purchasing Power Parity takes into account price differences between countries and brings easier comparison of standards of living.

Source: Asia Week