SUPPLEMENT: WORLDWIDE ADVERTISING; The future of Hong Kong’s free media

How will the free press fare when Hong Kong is returned to Chinese rule next year? Steve Shipside says the media must prepare for the challenge ahead

How will the free press fare when Hong Kong is returned to Chinese rule

next year? Steve Shipside says the media must prepare for the challenge


Forget the Bay of Pigs, the Berlin airlift, Korea, or Vietnam. If you

really want to witness a stand-up slogging match between hard-core

Marxist-Leninism and old-fashioned, two-fisted capitalism, then you

should turn your attention to the media market in Hong Kong.

With just over a year to go before the colony reverts to Chinese rule,

all bets are off as to the future of the free press. In the People’s

Republic of China, the term has no meaning - all media are owned and

controlled by the State. In Hong Kong there are more newspapers per

capita than any other country in the world, with at least 16 dailies,

(although identifying and assessing them is made difficult by the fact

that very few have any kind of audited circulation). When Hong Kong’s

new masters roll into town, it’s unlikely that this many independent

voices will continue to be heard.

Feeling the hot breath of Communism down their necks, even the most

highly respected titles have already begun to tone down their criticisms

of the mainland regime. A full year ago, the Hong Kong Journalists’

Association issued a warning that ‘an increasingly pervasive culture of

self-censorship’ was the rule with regard to reporting on China. Moves

such as the dropping of a political cartoon strip from the South China

Morning Post, and the more pro-Chinese attitude of its new owner, Robert

Kuok, are seen as proof of this.

But Hong Kong’s unique brand of free-market capitalism doesn’t die

easily. In the financial feeding frenzy of the Hong Kong economy, nobody

passes up an opportunity to seize markets and make money. The clock may

be ticking, but with around 400 days to go, the rival publishing groups

have turned to that classic weapon of unreconstructed capitalism, the

all-out price war.

Last December, the Oriental Daily News announced that it was going to

cut its cover price from HKdollars 5 to just HKdollars 2 (about 16

pence). The cut, a particularly dramatic one in view of rising newsprint

prices, was explained as a gesture ‘thanking readers for their support’

over the 27 years of the newspaper’s existence. More cynical observers

have attributed it to the growth, in both circulation and influence, of

the English-language title, Apple Daily.

Whilst the Oriental Daily News is the undisputed leader, Apple Daily,

which was only launched last year, now occupies the number-two slot in

the colony.

Its proprietor is the maverick tycoon, Jimmy Lai, who came to Hong Kong

as a refugee from China, and is a considerable thorn in the side of the

Chinese authorities. Apple Daily was launched as the paper that would

stand up against the Chinese, and it has proved to be so. Lai attacked

the Chinese Prime Minister, Li Peng, for defending the Tiananmen Square

massacre, describing him as having ‘a zero IQ’ and calling him a

‘turtle’s egg’ (it loses something in translation but it is a

particularly blunt insult). Beijing’s reaction was swift - the closing

down of Lai’s chain of Giordano fashion shops in China on the grounds

that ‘their franchising licence was not approved’. Lai has since been

forced to sell them off.

It is widely thought that Apple Daily faces the same fate next year, so,

with only a year to go, Lai would have little interest in fighting an

expensive price war to win market share.

Time to think again. Apple Daily replied to the Oriental Daily News by

dropping its cover price from HKdollars 5 to HKdollars 4, and guaranteed

to hold it at that price until the handover. Others were forced to join

in. Sing Pao matched the Oriental Daily News cover price, Tin Tin Daily

News (the name comes from a Cantonese word) cut its price from HKdollars

7 to HKdollars 5.The Hong Kong Daily News surpassed them all in a brief

blaze of glory at the end of last year when copies were sold for

HKdollars 1 on Sundays. At that rate it was effectively paying vendors

75 cents to sell each copy.

Carol Leung, the associate media director of Leo Burnett Media in Hong

Kong, reports that the price war wages on. The Oriental Daily News has

had to lift its price to HKdollars 3, the Hong Kong Daily News now sells

for HKdollars 5, and Tin Tin and Apple Daily have held their ground at

HKdollars 5 and HKdollars 4 respectively. Sing Pao has settled for a

rock bottom HKdollars 2. Hong Kong’s newspaper readers have never had it

so good.

Not surprisingly, the price war has shaken up the whole market, with the

United Daily News, TV Daily News, the Express, the Huanan Jingni Journal

and the Leisure Times all going to the wall.

Unlike the UK market, however,the colony’s business community is so

hungry for information that most of the cover price combatants have seen

a rise in sales. The Oriental Daily News claims a 350,000 rise in

circulation to 800,000. The Hong Kong Daily News, last rated at 127,712

by ABC, now claims around 300,000, and the Tin Tin Daily News says its

ABC has risen from a figure of 173,777 to 250,000. Sing Pao’s pricing

policy has seen it rise from an ABC of 187,477, to an impressive

500,000. All of these claims have yet to be audited. Indeed the Oriental

Daily News has never been given an ABC figure, and seems reluctant to

submit itself for one now. Even allowing for the inevitable posturing

and marketing hype, however, the emerging picture seems to show that the

price war has triggered a market explosion.

Now the price war has spilled over into the magazine market as well,

where the magazine Eastweek (from the publisher of the Oriental Daily

News) has cut its cost from HKdollars 18 to HKdollars 8. Its rival, Next

magazine (from the publisher of Apple Daily) has dropped from HKdollars

18 to HKdollars 12.

With prices more than halved, readers appear to be buying two or three

publications where once they bought one, and this should bring a smile

to the advertisers’ faces. Media buyers could also rejoice over the fact

that the Oriental Daily News’s publishers started to offer exclusive

packages whereby anyone using Eastweek, and Eastweek alone, could get a

rebate on ad space in the Sunday edition of the newspaper.

Unfortunately, the celebrations didn’t last long. Apple Daily, the

catalyst of the conflict, and rising star of the market, put a bomb

under the buyers by introducing a rate hike last June, followed by three

others, culminating with an announcement in March that it was going to

put up rates by 30 to 100 per cent, depending on insertion type.

Furthermore, according to McCann-Erickson in Hong Kong, no rate

protection is offered during negotiations, which makes a nightmare of

planning. Agencies were up in arms, and instigated a boycott of the

paper, cancelling all client ads for four days in April.

However, Apple Daily is arguing from a position of strength. According

to Leo Burnett Media, while paid-for circulation is around 280,000, ‘the

total daily readership of Apple Daily has already passed one million

readers per day’. Tess Caven, the head of media at McCann-Erickson in

Hong Kong, agrees, saying: ‘In 11 months Apple has risen to the position

of second-highest circulation title, so I don’t think that they’re

chastened. Jimmy Lai is an astute businessman and he has a product that

is in demand and exceeding expectations. Who wouldn’t want to make the

most of it?’

The big question is what happens next July? Is Lai just turning a fast

buck before packing and running? Is the circulation war and price hike

merely intended to up the ante when he comes to selling the title?

Speculation is rife, but when Campaign contacted Lai, the answer was

unequivocal. ‘First off, no-one can make the HKdollars 500 million that

we have ‘lost’ in the year to ’97. Secondly, I don’t think that selling

is an issue, because of the moral obligation for this media. That’s very

important - that’s why we launched just two years before ’97. No-one in

their right mind would launch with the intention of selling, even the

most optimistic person,’ he says.

For Lai, it would appear, the price war is a holy one, a moral media

crusade. ‘Money is not so important. I couldn’t stand tall and raise my

head if I sold, no matter how much money I had. I can’t live my life

with my head bent because I wanted to make a few bucks.’

It’s a stance that justifies Lai’s informal reputation as ‘dissident-in-

waiting’, or, as one advertising executive put it: ‘He’s setting himself

up as a dissident and martyr - come ’97, he’ll be the first up against

the wall.’

Lai believes that both he, and Apple Daily, will be allowed to continue,

in order not to alienate global opinion or shake confidence in Hong

Kong’s financial markets. ‘It is very uncertain, but ‘one country - two

systems’ is the promise, so hopefully they will allow the media to go

on. How can the Chinese control it? Hong Kong is so different, we are

part of the global network - so it’s very difficult for them to control

the media without harming the welfare of the society. By controlling the

free flow of information they would make business here untenable. So

even though the intention is there, I’m not so sure they can control it.

We will try to continue; if we can, all the media can, but we have to be

flexible. We don’t have to provoke the Chinese, but we love the freedom

of free speech and we will uphold that value.’

Lai is taking a considerable risk, but where the stakes are high, so are

the rewards. Jeff Fergus, the managing director of Leo Burnett in Hong

Kong, says: ‘Our revenue grew 26 per cent last year and we were the

fastest growing of the world agencies in Asia-Pacific. I attribute that

to the number of local markets that are reasonably well established and

show considerable growth, such as China and India, as well as new and

upcoming markets such as Burma, Vietnam, and Laos. The rate of

development is so rapid that markets that were lagging two years ago are

now accelerating, making them consistent with the rapid degree of

development associated with the area.’

Financially, Hong Kong had something of a hiccup over the last year with

a slowing down in retail sales, notably in consumer durables which were

down more than 15 per cent. One suggested reason for that is that people

are reluctant to splash out in the atmosphere of uncertainty preceding

the Chinese takeover. If the handover proceeds smoothly and everyone’s

worst fears prove unfounded, Hong Kong would not only be a key gateway

to the vast Chinese market, but would also benefit from the opening

floodgates of local spending. In order to make the best out of both

developments, some agencies are opening Mandarin-speaking sister

branches in Hong Kong, including J. Walter Thompson and McCanns with its

new Guan Ming agency.

Ira Carlin, executive vice-president and worldwide media director of

McCann-Erickson, is cautiously positive about the future: ‘I’m just back

from Beijing, and I’m still not sure what will happen next July. There’s

no question that the government of the People’s Republic is firmly in

control, and has a different point of view on capitalism than the

current regime. On the other hand they are pragmatic, so I don’t believe

they will kill the golden goose. Currently, the Chinese government owns

the media and so I presume they will own the media in Hong Kong but it

would be foolhardy to make predictions as to how it’s going to play out.

You can rest assured things are going to be different, though.’

The guarded optimism of Fergus and Carlin reflects the official line

that nothing will be changed by the handover. Unofficially, though, a

number of advertising executives voice understandable fears about the

future. ‘They have a Middle Kingdom mentality,’ confides one, ‘by which

China is always right. Everyone says they won’t kill the golden goose,

but they bloody well will if they feel like it - they would cut off

their nose to spite their face. People once said they wouldn’t be so

stupid, now they’re saying ‘they wouldn’t....would they?’.’

This uncertainty is reflected in the vacillations of the media market in

general, torn between the desire to stay at the heart of things and the

temptation to up sticks and move to safer pastures. Pearson has bought

into Hong Kong with the purchase of 10 per cent of Television Broadcasts

(TVB), and the Financial Times has nailed its colours to the mast with

the opening of a new printing press in the colony.

Rupert Murdoch’s Star TV will continue to broadcast from Hong Kong - its

fare of light entertainment and sport has already been deemed suitably

uncontentious by Beijing.

Not all the media is so confident, however. The BBC World Service

transmitter is a conspicuous symbol of the free media and was the means

by which details of the Tiananmen Square massacre was broadcast, in

Mandarin, to the Chinese. It is being dismantled to prevent the

communist government using it, and a replacement is being built in


According to one media analyst, MTV, ESPN, Turner International and the

Discovery Channel are all planning to move operations to Singapore. If

Cable News Network moves, it will represent a U-turn from the stance of

Ted MacFarland, the president of Turner International, who was reported

as saying: ‘They shut us down in Beijing but they didn’t kick us out. If

they shut us down here, the world will know.’

It’s a sentiment shared by Jimmy Lai, despite Tiananmen Square, and the

recent sabre rattling directed at Taiwan. ‘What they can do in China,

they just can’t do in Hong Kong because it is more transparent. The

world is watching us 24 hours a day, it’s more transparent to the world

than Taiwan. Hong Kong has fundamental values and a cultural setting the

world can share, unlike Beijing.’

No-one can be sure what future the media has in Hong Kong, but in a real

sense the future of the colony itself is dependent on how the media

survives. Beijing has proved indifferent to world opinion in the past,

but it has never tried to operate in such a media-rich environment.

Closing down those media would risk damaging the financial markets with

their voracious information appetite. Leaving the media to operate

freely risks opening up the closed doors of Beijing government to the


As Lai puts it: ‘Hong Kong could be a goldmine for the Chinese if they

are prepared to live and learn, and let it prosper. Or it will be a

minefield if they mistreat it, and the whole world will take Hong Kong

as the symbol of what China is really all about.’ The question is, will

they care?


Top ten regional ranking of adspend and Billings 1995


Advertisers                             Growth  USdollars   HKdollars

Kao Products                               28%      19.79      153.14

Hong Kong Bank                             35%      17,69      136.87

Marlboro cigarettes, related products*     14%      14.88      115.17

Hutchinson Communication Equipment         66%      13.91      107.62

McDonald’s                                  2%      12.42       96.13

ATV                                        72%      11.31       87.52

National, Panasonic and Technics            8%      11.20       86.66

Standard Chartered Bank                    63%      11.13       86.15

Hang Seng Bank                             81%      10.60       82.05

American Express                           66%      10.59       81.94

Agencies                                Growth  USdollars   HKdollars

J Walter Thompson                          -2%        118       915.2

Leo Burnett                                50%        110       848.6

Oglivy and Mather                          12%        102       788.9

DDB Needham                                18%         90       697.3

Bates                                       8%         82       631.6

McCann-Erickson                             6%         79       609.3

Dentsu, Young and Rubicam                  27%         67       517.6

Grey Advertising                           -2%         63       489.9

Euro RSCG Ball                              5%         59       454.1

Bozell                                      1%         58       448.7

Medium                                  Growth  USdollars   HKdollars

Magazines                                   9%     232.06    1,795.56

Newspapers                                -12%     565.53    4,375.83

Radio                                      20%     126.35      977.66

Television                                 19%     960.61    7,432.76

MTR                                        14%      50.76      392.72

Cinema                                    -24%       6.13       47.46

Other                                      10%      11.79       91.22

Total                                       7%   1,953.24   15,113.19

Source : Asian Advertising and Marketing, SRG Adex and Hong Kong’s 4A’s

*Includes records, sponsored events, fashions and joint promotions