Hong Kong Economic Times Case

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HONG KONG ECONOMIC TIMES
Global Strategy

LUCAS LOPEZ - FENWAY
Hult International Business School

1. Which factors have affected the profitability of the newspaper industry in general and in Hong Kong in particular over the last twenty years? 

The newspaper industry has been facing a different situation in Hong Kong compared to other countries. First, is important to know that the financial perspective of newspapers in the global scenario is not the best one, as they have been decreasing their “wallet share” in the advertising expenditure from 36% to 25% in 2015 and sales are almost flat with a total revenue growth of only 1% (See exhibit 1). On the other hand, Hong Kong has been experimenting a healthy advertising revenue growth of 7% during the last years, with some threats in the near future.

The key factors that have affected the newspaper industry are (See exhibit 2): a. Changes in consumer behavior
b. Substitutes: Online News Platforms
c. New Entrants: Free newspapers
d. Commoditization of some media products or categories

a. Changes in consumer behavior
Many of the changes that the industry has faced in the last 20 years have one responsible: the consumer. It is not a secret that people have changed the way they live and interact with others in many ways, and that includes the media (news) consumption. These are some of the habits of the “modern customer”: * Moves more

* Interacts with different platforms
* Skips advertising
* Prefers entertainment than just information
* Prefers visual and interactive content
Almost all the new habits are a threat for the regular newspapers, that don´t offer the features that the consumer is looking for, thus, they are getting the news from other platforms such as websites, apps, social networks, etc. Advertisers need to get their clients anywhere they are, and as they are not reading the newspapers, advertising money goes to players in the new types of media. On the other hand this seems to affect more the global industry than the Hong Kong one.

b. Substitutes: Online News Platforms
This factor is closely related to the last one. New technology has evolved into new platforms and consumers are eager to use them more. Computers, Cell Phones, Tablets, Interactive TVs, etc. are all rivals of the newspapers because they offer interactive, live, social, entertaining, mobile, free (many times) content, something that the “old fashioned paper” can not offer. This has negatively impacted the newspaper industry in the global scenario, but seems not to be affecting its counterpart in Hong Kong that still reports a 7% growing rate (see exhibit 2).

c. New Entrants: Free newspapers
This factor is not well explained for the global perspective in the case, but on the other hand, it seems to be the most crucial for the Hong Kong newspaper industry. These new entrants have a slightly different business model compared to regular newspapers. They are free to the public, so, all the revenues come from advertisers. They have simpler, easy-to-read, general information, so they don´t need a huge, very professional journalist staff and finally they are strategically located for commuters, taking advantage of that “free time” of the people. These features have given a huge reader base to these newspapers, attracting advertiser’s money and creating a difficult environment for regular newspapers that are loosing market share. It is known that many of the Hong Kong newspapers have had to cut their prices such as the Sun, and others as Apple Daily, Sing Tao and Ming Pao have seen their revenues decrease in more than 10% (See exhibit 2)

d. Commoditization of some media products or categories
Last, but not least, it is mentioned in the case that some newspaper categories such as gossip magazines are more fiercely competed (which erodes profitability) because the players are undifferentiated, so advertisers are paying less for...
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