Lessons from emerging markets

William PikeCEOThe Star PublicationsKenya

Radio Africa Group1994- We started Capital FM in Uganda, the first private

FM radio in sub-Saharan Africa

2000 – We started Kiss FM in Kenya, where we now have 5 radio stations and a TV station.

Group Managing Director Patrick Quarcoo was also keen to start a newspaper in Kenya

In January 2007, I left the New Vision in Uganda and moved to Kenya to start the Star

Newspapers in East AfricaThe New Vision was the government newspaper in Uganda

(now 60% privatised)

I was the MD and Editor in chief from its startup in 1986. By 2006 when I Ieft, it was making $2.5m annual profit on turnover of $18m from a negligible initial investment

Newspapers in Kenya are also very profitable – Standard $5m and Nation $25m in 2011

Standard is 100 years old, Nation 50 years old

Previous attempts to challenge the duopoly had failed

Star track recordStar now No 3 paper in the Kenyan market

Circulation 30,000 and climbing steadily

Advertising revenue of around $400,000 per month and climbing

Breakeven achieved with profit of $310,000 in 2011/12

Board of directors want Star to become the No 2 paper

Cost of investment 2007 Initial shareholder capital $1.3 million

Late 2007 share call ( to purchase press) $0.9 million

April 2009 share call (working capital) $1.25 million

2011 Share call (working capital) $1.13 million

TOTAL EQUITY investment $4.58 mil l ion

Bank loans

2007 loan Stanbic $0.66 million

2010 loan I&M $0.41 million

Profit in Shillings (red projected)

Newspapers have room for growth

Kenyan population is 38m; mobile phones 16m; Internet users 6m.

People in Kenya still believe in the printed word

Total newspaper circulation is around 290,000 copies for five daily papers i.e. one paper for every 140 people

Newspapers cost Sh50 (60 US cents).

Newspapers will become more affordable as economy grows (present growth 4.5%)

The Star strategyPrimarily it is to be a low-cost but high quality newspaper.

Running costs (inc depreciation) are now around Sh56m ($660,000) per month so it is not cheap as such

But it is much cheaper than our two competitors

Our calculation is that as they inevitably downsize in the Internet age, they will have to compromise on quality.

And as our revenue increases, we can increase quality, and therefore our competitiveness

Key investmentsWe bought a new Manugraph Cityline press with two

towers (16 pages) – just expanded to four towers.

Respected international designer David Billington created the template

Used open source database Converge for editorial functions

These key investments were all high quality but cost-effective

Star Front Pages

Target marketBreaking news in Kenya now comes through radio, TV,

SMS, etc.

So it is important to be an analytical paper.

We try to run more op-eds on a daily basis than our competitors

These op-eds follow a strong ‘reform agenda’ to differentiate ourselves from our more conservative competitors

News strategyWe also run more local news than our competitors as this

information may not necessarily be available through electronic media

As the ‘new kid on the block’, we shout louder than our competitors to get noticed

We are more aggressive in breaking stories, in pushing the boundaries on libel, in running investigation stories

Age demographicIn European markets, age is a problem

In Kenya and East Africa, young people still want papers

More young people (18-34) read newspapers than listen to CDs or watch DVDs

Only TV and radio have more penetration than print for young people (Ipsos Synovate)

Slogan ‘Smart People Read The Star’ targets opinion leaders and younger generation

Past 7 Days Media Activities

ConclusionThe shareholders have so far invested $4.5m and

accumulated losses are $3.65m over five years.

We need annual profits of at least $1m to repay their confidence. We aim to get there in 2013/4

But newspapers are not just profit machines, they are also a form of public service

We have been an active part of the ‘reform agenda’ over the last five years. This may prove to be our lasting value.