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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:

Media Convergence Asia Pacific was asked to write the following analysis by the world association of magazine publishers, the FIPP (Fédération Internationale des Publications Périodiques).

Like in the US and Europe, magazine advertising spending this year in the Asia Pacific region will not be as brisk as last year. However, the growth will continue almost everywhere and generally faster than in the US and Europe. In the long term, the magazine industry should continue to experience strong growth in advertising spending in a majority of markets and especially a sustained advertising market share increase against other media.

These conclusions come from the analysis of the Zenith Media Worldwide Advertising Expenditure Forecasts published recently. The research occurred at the end of last year and some elements of the forecast may appear a bit optimistic in the near term, however long term trends should not be affected. The global media communications agency (with 88 offices in 45 countries) expects a better second half of the year and more advertising spending growth in Asia Pacific than any other region of the world. The same pattern for the regional magazine industry is also predicted for 2002.

For a detailed analysis country by country, click here

In its Worldwide Advertising Expenditure Forecasts, there is one element Zenith Media is unable to foresee: the impact of new magazine launches on the creation of advertising spending for the industry. Whereas, a new magazine coming to a mature market can only take spending away from existing competitors (as it clearly happened in the UK last year), new quality magazines in Asia-Pacific still attract new advertising revenues and increase the industry market share.

The above chart may help to identify opportunities. It is clear Hong Kong and Australia are fairly mature magazine markets already. This might also be true for Taiwan and Thailand, yet these two markets have some room to grow. However, all the other markets in the region still have great potential for expansion especially South Korea, China and even Japan. Overall, the entire region has not reached the level of magazine market penetration achieved in most European markets like France or the US.

Hence, magazine creation in Asia Pacific is still cheaper and less risky than anywhere in Europe or in the US.

28.9%

This is the average unsold copies for magazines in Japan last year (source: The Institute of Publishing Science – Tokyo). Yes, you read correctly, this is not the sold figure but the rate of returns from single copy distribution.

The richest man in Asia is looking at expanding his empire with media and magazine acquisitions.  In its recent cover story on The World's Richest People, Forbes estimates Li Ka Shing's wealth at US$12.6 billion, ranking him first in Asia and 13th in the world (www.forbes.com). The father of Richard Li (Chairman of Pacific Century Cyber Works) bought last year 50% of Yazhou Zoukan, the Hong Kong-based Chinese regional news magazine, which had been owned by Time Inc. for a few years. Last May, Li Ka Shing acquired 49% of a joint venture between Tom.com – the Internet service company he controls – and Cite Group, a book and magazine publisher in Taiwan. The transaction was valued at NT$1.3 billion (US$39.7 million). Cite Group, owns 16 publications, including one of the most successful magazines in Taiwan, PC Home, a step-by-step computer learning monthly. The new venture is to be used as a platform for more media expansion in the Greater China.

 

In Indonesia, VNU launched Komputer Aktif, a local edition of its successful Computer Active in a licensing agreement with PT Gramedia. The magazine (whose last ABC in the UK had a 327,962 copies sold) is VNU’s second magazine in the market, after Bobo, a weekly young children’s magazine, with a circulation of 185,000 copies. Komputer Actif is a practical bi-weekly title aimed at a large audience of non-expert consumers. Its launching cover price was Rph 10,000 ($0.88)

 

In Taiwan, the controversial Chinese publisher, Jimmy Lai, launched a local edition of NEXT, his successful weekly magazine from Hong Kong. Using the same recipe of sensationalism and paparazzi journalism, NEXT sold out its first issue 275,000-copy print order in a few hours, becoming the largest selling magazine on the island. Along with an attractive cover price of NT$75 (US$2.10), NEXT used a smart promotion campaign of NT$75 million (US$3.5 million), the most expensive budget ever used in Taiwan to launch a magazine. Although the editorial quality of the second and third issues seem to be far from the original edition, advertisers are not rushing to the title yet (advertising volume went from 84 pages in the fist issue, to 67 pages and 79 pages in the following issues). NEXT is apparently using the same Hong Kong marketing strategy of cheap advertising rates, which makes it an attractive product for many local mass market advertisers (and a challenge for the other local magazines).

 

In Japan, Nikkei BP just launched a new consumer monthly magazine on Information Technology. Nikkei IT 21 is targeted to business executives of small to medium size companies who are not IT-specialists, but need to be aware of how the new information systems will affect their company (http://itpro.nikkeibp.co.jp/it21). With an expected circulation of 40,000 copies (which is a standard average in Japan), the first issue carries 81 pages of advertising for a total book size of 196 pages.

 

In Singapore, the joint-venture between Australian Consolidated Press (ACP) and Hearst will launch a local edition of Harper’s Bazaar in September. The same month, in Hong Kong Cosmo Girl will be published by the 70-30 joint venture between the South China Morning Post and Hearst. Hearst’s licensee in Indonesia, PT Media Insani Abadi, will launch Cosmo Girl in September as well. The following month, Primedia expects to launch Seventeen with its new Indonesian licensee, PT Gaya (which also publishes indirectly Lisa, a young woman’s magazine from Burda-Rizzoli). Small world.

 

In Korea, Burda-Rizzoli's new subsidiary, Design House, will launch a local edition of Dove, the Italian lifestyle (travel) magazine, which sells about 397,000 copies every month.

 

In China, Modern Bride is being launched in July, published by IDG’s local subsidiary under a licensing agreement with Primedia. This is the first edition of the bi-monthly bridal magazine outside the US where it sells 407,923 copies. In Beijing, heavy rumours circulate around a local edition of Marie-Claire expected to appear early next year. Finally, Hearst expects to be successful in winning regulatory issues in order to launch Good Housekeeping next Fall.

 

In Australia, Penton Media, the Cleveland-based BtoB publishing and events management company, bought DWR, the local IT publisher of Information Week, Computer Reseller News and Windows 2000 (under license from CMP, the US BtoB IT publisher). According to The Australian, Penton Media (turnover in 2000 was US$400 million) paid A$21.6 Million (US$11 million) representing a multiple of 12 times EBITDA.

 

In Australia, the Reader’s Digest wholly owned subsidiary is launching for the first time outside the US a local bi-monthly edition of The Family Handyman. While the parent edition sells 1.1 million copies a month, the Australian version has the same concept of “do-it-yourself” product-driven information to improve your home. With a A$5.95 (US$3.00) cover price, each copy of the Australian edition carries A$130 worth of coupons and discounts. The target reader is the 30-54 year-old home owners with children, and a 50 to 60,000 circulation is expected after one year.

 

Despite the dot com gloom and lay-offs, one of the most viable Internet business models appears to be the on-line travel services. In the US, on-line sales of air tickets doubled last year and are expected to increase by 180% in 2001 to US$14 billion (www.phocuswright.com). The same trend seems to be occurring in Europe, where the number of unique visitors to travel sites has increased by 33% in the UK, 44% in Germany and 71% in France last year (www.mediametrix.com). In Asia, which is predicted to experience the biggest growth of air travel in the next five years, the on-line business is still modest. Hence, 30% of Priceline, a US name-your-own-price service that lets consumers bid on unsold plane tickets and hotel rooms, was recently acquired by Hutchison Whampoa and Cheung Kong Holdings for US$109 million. These two companies are Li Ka Shing’s investment vehicles and also control Tom.com (see above). Although Priceline (www.priceline.com) currently provides services only in the US and Canada, it is likely it will start a Hong Kong subsidiary before the end of the year.

Famous Quotes:

"Joint-ventures are like tea bags ...
You never know how strong they are until you put them in hot water".

Chris Llewellyn
EMAP International Director
Rio de Janeiro, April 2001

After adjusting the differences in purchasing power between countries, the World Bank says China, Japan and India are the largest economies in the world after the US and ahead of Germany and France. The purchasing power parity (PPP) provides a more relevant comparative tool than the conversion of each country’s GDP in US dollar.

Source: World Bank