Investors see 'gold mine' in China's media
A host of overseas investors and domestic media organizations are discussing plans jointly exploit the "gold mine" in China's media sector.
The two sides -- one hungry for foreign capital in order to expand, and the other seeking opportunities to cash in on the sector -- have recently taken a number of steps.
Hong Kong media giant TOM Group was reported at the end of last month to be in talks to form a joint venture with a leading mainland business newspaper.
TOM is considering taking a stake of 49 per cent in the non-editorial operations of Beijing-based Economic Observer, a weekly business newspaper, according to the South China Morning Post.
If successful, the deal would be TOM's first investment in a mainland mainstream media outlet.
TOM declined to comment on this latest development. And the business newspaper's owner, Shandong Sanlian Group denied the possible deal, according to www.icxo.com.
However, the paper itself has no such qualms. "We are keen about expanding our market, but capital is the major obstacle," said Zhang Zhong, general manager of the Economic Observer.
He told China Business Weekly that the firm aims to either establish a brand-new daily business newspaper or expand the existing weekly paper into a daily publication.
"We hope the paper could be the world's largest Chinese language business paper, just like the US-based The Wall Street Journal in the West," Zhang said.
His plan is echoed by the industry analysts.
There are three major market-driven comprehensive business broadsheets on the mainland -- two of them are weekly and one is published twice-weekly, said Zhao Xiaobing, president of the Global China (Beijing) Media Consulting Co.
"The one which first establishes its daily paper wins the market," said Zhao.
According to statistics from the consulting firm, China Business, which was founded in 1985, ranked first last year, with an estimated 140 million yuan (US$16.91 million) in advertisement income and a circulation of 400,000.
The three-year-old 21st Century Business Herald took second place last year, with an estimated 78.7 million yuan (US$9.51 million) in advertisement revenue and 300,000-strong circulation. The third position was taken by the Economic Observer, established in 2001, with an estimated 52.04 million yuan (US$6.29 million) in advertisement income and circulation of 200,000.
There are also three major securities newspapers in the market, which profit from publishing information about listed companies.
Zhang said the Economic Observer is among the fastest- growing business papers on the mainland.
"In the first half of this year, we have already overtaken our major competitors," he said, adding the income level of its readers is the highest among other media, which indicates the newspaper is apparently the leading mainstream paper.
"That's why the paper has attracted TOM's interest in terms of co-operation."
"We have an excellent management team, which can guarantee a consistent quality if the paper becomes a daily," Zhang said.
He declined to reveal what form the co-operation will actually take, saying "it is too early to tell."
But insiders say TOM may invest in the newspaper's operations of advertising and circulation.
Overseas investors remain technically barred from owning editorial operations on the mainland.
Zhang pointed out TOM is not the only partner at the current stage of negotiation. "We talked with leaders from the Singapore-based Lianhe Zaobao in July on similar issues as well."
Meanwhile, TOM's chief financial officer, Tommei Tong, said the firm is "in talks with a lot of companies, but nothing is concrete at the moment."
TOM's chief executive, Sing Wang, said late last month the firm would be more active in mergers and acquisitions in the second half of the year and is exploring potential acquisitions, ranging from publishing and outdoor advertising to sport and businesses, according to the South Morning China Post.
Experts welcomed the possible deal, saying attracting overseas investors is the major way in which the mainland media can expand.
"The management structure of many domestic media needs to be straightened out," said Guo Fansheng, chief executive officer of HC International Inc, a Hong Kong-listed search engine operator and directory publisher.
He told China Business Weekly the current property rights of the media sector are not clear, since many of them rely on partnerships with advertising agencies for their operations.
TOM has an excellent mechanism in assigning responsibilities, which will help its mainland partner to straighten out relevant relationships.
If the deal succeeds, it plays a positive role in the sector, no matter if the co-operation finally proves to be successful or not, Guo said.
"It will make way for more international media giants to enter the sector," he said.
Besides seeking overseas partners, domestic media is also looking at going public in order to raise funds.
Early last month, Beijing Youth Daily, China's second-largest newspaper group, was reported to be preparing for a public offering in Hong Kong in the fourth quarter of this year, aiming to raise about HK$1 billion (US$128 million).
The firm's president, Zhang Yanping, said in March that they will seek an investment of 1.5 billion yuan (US$181.2 million) in a two-step initial public offering (IPO), with shares first listed in Hong Kong and then on the mainland's A-share market.
If its IPO succeeds, it will become the first major State-owned newspaper to list overseas.
Earlier, two newspapers went public on the A-share market. They are China's largest computer newspaper, China Information World, and the Chengdu Economic Daily, a major paper in the capital of Southwest China's Sichuan Province.
Zhao said there are fewer risks to investing in the domestic media, compared with other sectors.
"Those which are seeking international investment are usually large-scale media groups, which, to some extent, win a market monopoly," he further explained.
"The sector's shift from the planned to the market economy has not been completed. Competition in the sector is not yet in full swing."
Meanwhile, there are still restrictions on foreign media giants publishing newspapers and magazines on the mainland, Zhao added.