Cross-border Publishing in Asia : Opportunities and

Challenges

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Cross-border Publishing in Asia : Opportunities and

Challenges

Tom Gorman

Chairman

CCI Asia-Pacific Ltd.

Some Key Issues Facing Magazine Publishing in Asia

Regulatory impediments and market entry barriers slow the pace of investment and growth

Forging enduring publishing partnerships across lines of national and corporate cultures is very challenging

Asian regional and national markets are experiencing extremely rapid change

More investment is needed in professional training

Regulatory Environment Needs Further Improvement

Notable recent market opening initiatives in India , Korea , China

High entry barriers remain in key national markets

Protection of local industry and national/cultural identity

Uneven , weak enforcement of copyright piracy and trademark infringement cases

Regulations often lacking in transparency and consistency of implementation

Partnerships Need Vision and Flexibility to Succeed

Forging enduring partnerships across lines of national and corporate culture is very challenging

Requires flexibility , adaptation , “out of the box” thinking

Requires long-term vision and commitment Standard partnership business models may

become obsolete as respective partners’ needs change

Asian Markets : Very Rapid Change

China’s and India’s wealthier classes growing fast; major demographic shifts underway

English as a regional language facing pressure Demand for local content rising quickly Growing emergence of big local brands Advertising agency consolidation plus localization

of buying decisions continues apace Magazine licensors less likely to be able to

deliver major assistance to licensee on advertising sales

More Investment in Professional Training Required

Professional standards improving , but more widespread training efforts needed

Editorial , circulation , market research in particular

More journalism and media departments need to be established at university level

True for media owners as well as advertising agencies and market research service providers

Becoming a more important element of licensor-licensee relationships

Strategic Issues to Consider

Many Asian publishers are eager to partner but find Western media owners pre-occupied with short-term goals , intimidated by lack of local knowledge

Asian publishers and regulators need to work harder and smarter to attract new investment and explain their markets

Magazines sharply lag other media in share of adspend in most Asian markets

Significant growth would be helped by more joint industry-wide efforts to promote higher standards , better audience research , circulation audits , training programs , etc.

Thank You !

Cross-border Publishing in Asia : Opportunities and

Challenges

Cross-border Publishing Opportunities : China

Tom Gorman

Chairman , CCI Asia-Pacific Ltd.

Political-Economic Overview : Positive for Business

Pro-reform , growth-oriented new leadership First year of WTO membership went smoothly International relations on positive track

Economic growth outlook : very robust Average annual growth of 8%-plus for past 20 years Hard currency reserves of $286 billion as at 1/2003 Record foreign direct investment of $52 billion in 2003 National savings rate of 40% ; low external debt Private and non-State sectors growing very rapidly SARS is a serious threat but manageable in due course

Catalyst for more open and accountable governance Economic impact significant but relatively short-term

Economic Growth Outlook

7-8% average annual growth probable in medium term

World Bank estimates that Greater China will overtake the EU in purchasing power parity by 2007 with a combined GDP of $12 trillion

Foreign direct investment estimated to exceed $100 billion per year by 2006

Heavily concentrated in Shanghai and Guangdong delta areas to date

FDI ventures account for nearly half of China’s fast-growing exports

World Bank estimates 80% of China’s growth comes from her cities ADB estimates China’s urban population will swell from 360 million to

700 million by 2010

Recent policy changes encourage migration into cities

China’s Surprising Urban Consumers

Per capita income in top Chinese cities now higher than some S.E. Asian countries

Also ten or more times higher than in rural areas of China Strong consumer credit

450 million bank cards but very few credit cards ; 40% savings rate

Mortgage loans account for 90% of consumer credit Regional variations in style , taste , attitudes

WTO spurring development of true ‘national’ market Young consumers : 600 million Chinese under the age of

30 Mobile consumers : 200 million-plus cell phone users

48 million internet users 17 million went on overseas holidays in 2002 ; estimated 85-

100 million will travel abroad each year by 2020

Urban Consumers’ Dreams : Moving Upscale Very Quickly

Consumer dreams in 1983 Color TV , refrigerator , washing machine , camera ,

stereo

Consumer dreams in 1993 Air conditioner , microwave oven , VCD , fully

automatic washing machine

Consumer dreams in 2003 Car , apartment , home decoration and furnishings ,

overseas holiday , higher quality PC and mobile phone , digital camera , designer fashion , premium watch

Chinese Magazine Industry

9000 magazines in total About 4,000 of them are scientific journals Only 25 magazines with claimed circulations in excess of

1 million

Magazines get only 2% of total advertising spending International magazine brands with local language editions or

co-operative ventures number about 100 Chinese publishers very keen on cooperation with international

publishers Regulatory environment is opaque and confusing

WTO has had little direct impact on reform to foreign investment in magazine publishing

Promising Opportunities Ahead

China’s magazine sector offers many unexploited market segments

Advertising spending has been growing in high double digits for more than 15 years and will continue rapid growth

More and more advertising decisions are localized Customers will pay for quality and value-added

Increased focus on brand marketing Appetite for innovation Appreciation of circulation audits

WTO reforms pushing improved national distribution networks More emphasis on marketing support for increasingly extensive

and effective consumer and business product distribution chains More emphasis on national rather than local advertising

Common Elements of Success

Long-term view Sales , circulation , editorial presence in

China Ongoing commitment to research Grooming an in-house “China market

champion” at head office Flexibility and lateral thinking

Adopt , adapt , and adapt some more

Possible Business Models

Business Arrangement Options Licensing your brand and/or content

- Easiest from regulatory viewpoint but offers limitedcontrol and revenue

Alliance -- e.g. contract publishing arrangement

- More attractive from control and revenue viewpoint

Joint equity venture

- Not permitted within China ; some possible Hong Kong and offshore options

Acquisition

- Effectively prohibited under current regulations

Thank You !

Cross-border Publishing in Asia : Opportunities and

Challenges