Conference,
Report from Beijing, FIPP 2007
(2007)
Abstract
China hosted the 36th FIPP World Magazine Conference in Beijing in
May. Attended by a record-setting 1,000 registrants, a population
that was swelled by about 400 publishers from the PRC—the beauty
of a command economy—the two-day affair was a grand accomplishment
by the organizing committee and the China Periodical Association.
Pulling off a successful event in a country where the government
manages the press and keeps a keen eye on foreign media is worthy
of some applause. Understandably there were no firebrands at the
podium but there rarely are at such events. I mean as a compliment
that the agenda for this conference, with the exception of China-specific
details, could have traveled anywhere in the world, as the offerings
were consistently steady and useful.
The long walk to the conference halls past hundreds of Chinese magazines,
with a heavy emphasis on fashion, lifestyle, and health, was a reminder
of how much this market, spurred by the big-brand international titles,
has changed in the last five years. The number of new domestic Chinese
magazines seems astounding, perhaps suggesting that the government’s
plan to limit media subsidies and force a free market solution is
bearing some fruit. The production quality of the titles on display
has certainly improved. But that can be confirmed by looking at the
rich display of magazines at any kiosk or book store in a city of
size. At the same time there is, to a degree, a haunting similarity
to many of the women’s titles—domestic publishers have certainly
learned from their international cousins. The demur Chinese model
looking out on the world seems almost archetypal, a concept not unrelated
to the selling proposition. Imitation remains the highest form of
flattery.
A Matter of Culture
Hung Huang, CEO of China Interactive Media Group (iLook, Seventeen,
and Time Out) was quoted in AdAgeChina on the challenge of domestic
players building a brand in this fast moving country. “China is still
the factory of the world,” she notes. “A brand is an idea, but they
are used to competing by developing distribution channels and cutting
prices. When you look at Chinese companies, including joint ventures,
in distribution they will always beat the Western companies. Go to
the smallest town, and you’ll find a Chinese company has found some
way to distribute their goods there and you wonder, How did they
do that? It’s one reason L’Oreal bought (mass-market Chinese skin
care brand Mininurse in 2003).” Hung did not speak at the conference
but has been very vocal in the PRC and the West about what Chinese
domestic magazines need to do to compete
For a lively account of an anti-branding revolution that is being
led by nationalistic but worldly Chinese youth, see the June 2007
Fast Company cover story on China’s new creative class. This piece
is a reminder that innovation and creativity in design, fashion and
media is fast becoming a driving national mission. As the article
points out domestic glossies such as Vision, Urban and Modern Weekly
are giving more space over to local design talent. Chinese government
officials frequently speak of magazines exporting the Chinese culture
abroad. More likely, the vehicles for such cultural exports will
be fashion, film, and architecture. As Jennifer Wen Ma, a designer
and on the Beijing Olympic planning committee, told Fast Company:
“Whatever we end up doing, the bottom line is to showcase the innovation
of the Chinese people. Everyone wants to project a very modern image—one
that will stun the world.” Creativity is moving up the knowledge
food chain very fast in China. Some commentators have called this
a marriage of Confucian values and Western branding
Obviously, some mainstream Chinese media companies, including Rayli
which was on the FIPP agenda, are becoming very savvy about branding
and compete quite nicely with the international titles (Rayli got
a big assist last year with an investment by Gruner+Jahr in the advertising
agency side of the business). And Modern Weekly in Guangzhou has
been equally successful in part by emphasizing the Chinese-ness of
the business and celebrating cultural figures. This publication has
been very outspoken about the advantage they have over international
fashion and lifestyle brands: their editorial point-of-view flows
more directly from the Chinese psyche. While no one thinks the international
brands face a threat anytime soon, there is a sense that Chinese
culture is playing a greater role in the icons of advertising, marketing,
and branding, whether in the avant-garde interpretations of traditional
Chinese calligraphy or the exploitation of street culture, an increasingly
important force in the nation.
But at the moment these titles are the exception rather than the rule.
Tom Gorman, Publisher of Fortune China and a long-time resident of
Hong Kong, spoke about how his competitive set of business and finance
magazines has increased from a handful to more than one-hundred in
the last five years. While most of these are on the fringe and non-competitive,
their free-wheeling use of the word “Fortune”—and Time and Life for
that matter—muddies the publishing waters. And the muddying is everywhere.
In Beijing a short walk from anywhere will take you past new condominiums,
many with the English name “Fortune” in their promotions and all
sorts of superlatives that get the owners in deep water with authorities.
According to Reuters the Beijing Administration for Industry and
Commerce complained that pitches like “luxurious, “ultra-distinguished”
and “Be a Foreigner’s Landlord”—in Chinese only, went too far. Beijing
authorities remarked that “At present, there is a problem with certain
advertising not conforming to the demands of a socialist spiritual
civilization. Nor do they conform to the simple traditional virtues
venerated by the Chinese nation, and they are unhelpful for social
harmony.”
However odd or humorous this might seem from a distance, this incident
encapsulates in a way the tension between a roaring entrepreneurial
society and what the government refers to as social harmony. As Wu
Wenkai, a member of the Party Central Committee noted. “Such advertisements
should be cleaned up because they revealed a massive wealth disparity
and threatened social harmony.”
This is the paradox that is China. In the major cities signs of wealth
and conspicuous consumption are everywhere. A short walk from the
FIPP conference is a mall dominated by big-name fashion stores: Louis
Vuitton, Versace, Chanel, Armani, Lancôme and others. AdAgeChina
has observed that the PRC “already accounts for 12% of global sales
for luxury goods such as watches, fashion apparel, perfumes, cosmetics,
jewelry, automobiles and premium spirits.” Marketers expect the 12%
to double in a decade. And these brands are driving the growth of
the high-end fashion and lifestyle titles. Magazine sales are being
helped by the growing middle class and their taste for luxury good
in less-mentioned cities such as Shenzhen, Dongguan, Shunde, Zhuhai,
Hangzhou, Ningbo, Tianjin, Wuhan, and Wuzhou.
In his FIPP welcoming remarks Chen Zhili, Member, State Council of
the PRC, focused on magazines, which in his words have played an
important role in human civilization, as carriers of culture and
social harmony in an increasingly diverse world. He was hopeful that
Chinese publishers would learn from their Western counterparts but
made it clear he envisioned an independent development of “our own
brands.” Few Chinese officials fail to mention that the PRC has 9468
magazine and Mr. Chen was no exception. This is not meant as criticism.
The Chinese government has long considered magazines from an industrial
perspective (as output) and reported on them accordingly, often in
terms of tonnage. He said that the content economy has a role to
play in the national economy. He encouraged publishers to speed up
magazine industry developments in a harmonious way, consistent with
social and political realities. He saw opportunities in technology
and digital magazines.
The remarks by Chinese officials were necessarily high level with
a focus on culture. Wang Qishan, Mayor of Beijing, reminded attendees,
that the first magazine published in China was in 1872. At the moment
Beijing is home to 27% of Chinese magazines, a determination that
was largely made more than fifty years ago when the government distributed
newspaper, magazine, and book licenses to the majority provinces,
with Beijing getting the lion’s share (read Publishing in China by
Xin Guangwei: http://www.thompsonlearningasia.com/)
Liu Binjie, Minister, General Administration of Press & Publication
(GAPP), said that China will comply with WTO requirements by “going
a step further” to open the magazine market and welcome foreigners.
He also suggested magazines be the vehicle to promote social well-being
and the family. He mentioned a familiar refrain: China’s desire to
publish its magazines globally and called for equal treatment overseas.
Mr. Liu cited Chinese science and technology magazines as a way to
present its culture and image to the West, a somewhat surprising
reference as science and technology magazines, as a rule, seem to
be suffering from the reduction of government subsidies and are finding
it difficult to compete in a market-oriented economy.
International publishers, now in distinct minority, who are still
waiting in the queue for licenses to publish in China, will take
heart in Liu Binjie’s remarks. The fact is, with a few exceptions,
most international magazine publishers are in China and doing very
well (Reader’s Digest just received permission to publish in China.
Other announcements are expected shortly). Though references to “cultural
pollution” can still sometimes be heard, such as when Rolling Stone
magazines was shuttered in 2006 (only to come to life in another
form), content rarely keeps international publishers out of China.
Magazines with content that might upset the government generally
don’t receive publishing licenses. But culture, whatever it means
to authorities, is nonetheless very important and not just a code
word to keep foreign publishers out.
The Unofficial Culture
Read the door-stopping China’s Media and Entertainment Law (reviewed
at www.magazine.org/international) as a reminder of how important
a role culture plays in government regulations. It is central to
this volume. The subject is becoming more important (and problematic),
the authors write, because the impact of technology blurs the jurisdictions
of government authorities. In turn this becomes a source of tension
among PRC regulators (Preface: vii). The “cultural” map implicit
in government regulations increasingly looks less like the actual
“territory” of the street. Of course Chinese regulators sometimes
take refuge behind the “culture card,” but this concern is nevertheless
a serious matter. This issue impacts television much more than print
because for fifty years television has been used as a tool to forge
a national identity and spiritual and cultural preservation. Up to
about fifteen years ago this task was relatively easy because not
much from outside China was being consumed by the public who might
have been fortunate enough to see the Sound of Music and Gone with
the Wind and some early Disney favorites, including Mickey Mouse
(with subtitles).
On the website DANWEI (Chinese for unit or work unit and reminiscent
of an earlier time) devoted to Chinese media, advertising and urban
life David Moser writes that everything changed in the mid-90s when
digital technology came to China in waves of pirated CDs, software,
computer games, etc, all becoming available almost overnight through
black-market channels, opening Pandora’s Box wide. As Moser notes,
authorities could go little more than instigate symbolic sweeps against
offending material, often referred to as “sweeping away the yellow
(pornography)” or crushing pirated material with steam-rollers.
Moser continues: “The rate at which utterly foreign and even shockingly
subversive ideas entered into China during this period was astonishing.
Fueled by images, ideas, and attitudes in the now pervasive digital
disks, entirely new artistic subcultures and cultural movements began
to appear, many of them adopting wholesale precisely the kind of
avant-garde, iconoclastic, or downright nihilistic values the Party
wishes to shield China from.”
“The rise of a middle class and disposable incomes combined with a
new plugged-in worldliness was setting the stage for massive cultural
shifts. In particular, a white-hot youth culture had begun to explode
that was iconoclastic and contemptuous of traditional values as that
arising in the 1960s in the US and other industrialized countries.
Chinese young people, at long last connected to the vibrant global
youth network, also began to sport outlandish hair styles, get tattoos,
form rock bands, take drugs, developments that would have been unthinkable
just a few years earlier.”
Moser’s piece at http://www.danwei.org/media is entitled: “Media Schizophrenia
in China.” His writing underscores the challenges Chinese authorities
face when trying to keep out content they consider undesirable. What
is kept out officially through various restrictions often seeps in
on the back of so much pirated material (and now via the Web). Moser
predicts that the current artificial distinction “Between news and
everything else” will remain. He also suggests the Chinese system
will peacefully evolve into something quite similar to America in
that popular culture and entertainment will drown out serious political
discussion. There is some evidence that he is prescient.
Sometimes the importance of brands shows themselves in unexpected
ways. The Wall Street Journal editorial page (May 30, 2007), commenting
on the tainted pet food and toothpaste from China, writes that “China
is learning that brands matter.” The nation “was destined one day
to suffer blowback from its shortsighted attitude toward intellectual
property, especially in its disregard of trademarks. Such protection
is vital to public safety.” Chinese consumers are becoming much more
conscious of the meaning and value of brands and have not been reluctant
to take Western marketers (including P&G) to task for what for what
they consider misleading advertising, an “offense” that pales by
comparison to the examples cited by the WSJ.
The Digital Space
Because so much in China is moving at warp speed, there seemed no
inconsistency at the FIPP conference when one minute Chinese authorities
were talking about traditional values and culture and the next the
discussion was about the growing importance of digital. John Rose,
Partner, Boston Consulting Group, USA, set the stage by suggesting
attendees focus less on today’s competitors and more on responding
to changes in the competitive environment and on who is likely to
disrupt my business in the near term. He reminded registrants that
companies such as YouTube, Skype, DoCoMo and others came out of nowhere.
He noted that, though the business models are remarkable different,
in terms of reliability there is really little difference between
the content on Wikepedia and the Encyclopedia Britannica.
Pointing to the U.S. he said that magazines should have owned the
subject of food online rather than the Food Network. He outlined
the importance of Web 2.0 features for magazines, adding that rather
than use this as a prescription use it as a basis for experimentation.
He said the key challenge was not about strategy but about the organization
and internal culture.
Rose was followed by a panel discussion of digital strategies, moderated
by Don Kummerfeld, President, FIPP who was joined by: Liu Danhui,
Vice President, Rayli Group, China; Yu Guoding, President, Business
Weekly Media Group, Taiwan, China; Paul Keenan, Chief Executive,
Emap Consumer Media, UK; Torstein Klein, President, G+J International,
Gruner+ Jahr AG, Germany; Hugo Shong, Executive Vice President, International
Data Group (IDG), USA.
The opening question—how much revenue is coming from digital operations—proved
a little slippery. Not surprisingly, business-to-business titles
are showing good early growth as they are in much of the world. On
the b-to-b side IDG reports about 10% coming from digital; Emap about
15% from their data and information businesses. On the consumer side
3-4% was most frequently cited though everyone agreed that digital
in both sectors was growing at between 20-50 percent a year. Klein
saw a 50% year-on-year growth in some of his consumer sectors. Steve
Murphy mentioned that Rodale’s digital revenues are about 10% with
good results coming from their e-commerce activities. He noted Rodale
has a data base of 30 million customers and 30% of those have bought
something else, beyond the primary purchase.
By some estimates China is poised to move to digital magazines at
a much faster pace than other countries where print has more of a
foothold. Although Chinese magazines
have a long history, as noted earlier, the present offering of upscale
consumer magazines, many tied to international partners, is at most
about two decades old. Mr.Yu noted that in Taiwan readers were deserting
his PC Gamer and he shifted to digital. He asserted that “digital
will replace print.”
The background music for some of these remarks is the nature of the
Chinese publishing landscape, especially the importance of mobile.
With 400 million mobile users—and climbing—and with an expanding
3G technical infrastructure to support such usage, China will have
the opportunity to chart its own future. Mr. Liu of Rayli made it
clear how important mobile applications in particular and digital
strategies in general are to his very competitive women’s fashion
and lifestyle business. A number of Chinese publishers seem very
advanced in using SMS and other techniques to forge a two-way communications
with readers. Rayli is sending digital fashion and beauty magazines
to 1.2 million consumers via mobile devices (More about Rayli later).
Patrick McGovern, Founder and Chairman, IDG and beloved in China for
his pioneering work that began almost three decades ago, spoke about
digital opportunities. He recalled the launch of China Computer World
in 1980, a feat accomplished in sixty days. This launch generated
35,000 paid subscribers in the first week promptly leading to a surge
in advertising, more than the book could accommodate. He suggested
to his partner they double advertising rates to reduce demand. They
followed his advice and reported back to him that the strategy had
been a failure: not one advertiser dropped out.
IDG has been a true trailblazer in China opening doors and making
the path a little easier for Hearst, Reed Elsevier, and subsequently
Rodale, Emap, National Geographic and others through Trends Publishing.
McGovern remains very bullish on China where labor costs are about
one-tenth of New York costs, where there are officially no single
copy returns, and where profits are about 40% pre-tax. He recounted
IDG investing $13 million in eight Chinese companies and enjoyed
a 30X ROI.
McGovern spoke about the regulatory and cultural challenges that international
publishers face. As with telephony these challenges exist at a different
stage in the various global markets: every region is different. And
some are changing very fast, especially China where two-thirds of
a 1.3 billion population are expected to have mobile devices by 2020
and an equal number having Internet access. He suggests that advertisers
are often quickest to embrace and monetize digital, as they seem
to be doing with video.
McGovern reiterated what other IDG executives have said: the business
in the U.S. has reached a tipping point, meaning that absolute growth
in digital revenues is faster than loss of print revenues (down about
7% year-on-year.) Today 35% of the domestic business comes from online;
by 2010 that number is estimated to be 50%. And 50% of the revenue
growth has been from price increases. Today’s web-centric audience
allows IDG to focus on and monetize narrower audience segments than
they could have done with print.
There had been some talk in the corridors at FIPP that the b-to-b
print segment in China was under some pressure because of the flight
to digital. Gordon Hughes, President & CEO, American Business Media,
set the stage by recounting the transformation of his organization
to digital and how this change has made ABM into a global association.
He stated that face-to-face (events and the like) revenues for his
sector are $11.3 billion annually, a little more than magazines at
$11 billion and declining. Digital revenues are $4 billion and climbing.
Li Ying, Vice President & Chairman, CCID China, a organization with
print magazines, 41 web sites, databases, event marketing capabilities,
mobile applications and e-commerce, seemed to be a perfect advertisement
for what Gordon Hughes was talking about and in a way echoed what
John Rose of Boston Consulting was calling for earlier. Mr. Li described
a twenty-year old, customer-centric, nimble organization dedicated
to providing client services through utilizing of Web 2.0 and Web
3.0 technologies. Echoing McGovern, Li advocated chasing and monetizing
smaller market segments.
Perhaps the funniest remarks in this round were provided by Erwin
Reisch, CEO, Alfons W. Gentner Verlag, Germany, which publishes plumbing
magazine representing a smelly business serving an audience who are
neither early adopters nor professionals. In other words Herr Reisch
had his work cut out for him.
Humor notwithstanding his remarks had a sober side. His customers
did not inhabit a Web 2.0 world. He had to begin at ground level;
investing in technology and understanding more about his customer.
There were generational considerations. Over time he learned that
a print magazine might be better as a blog. One way to communicate
with younger plumbers was through podcasts. Eventually his company
evolved into a full service media agency which offered Consumer Generated
Media, blogs, tags, RSS, reader comments, white papers and sponsorships.
He mused about communicating with his son (and heir) through Second
Life. Yes, a plumber in Second Life.
One benefit of these international gatherings is the reward one finds
in some of the most unexpected places. Take Story Magazine, represented
by He Chengwei. This company publishes a magazine by that name with
a circulation of 5 million monthly copies and sells according to
Mr. He 120 book titles a year. I have seen the magazine and considered
it a relatively low production title that served a rural community—and
China has a lot of such titles that provide a useful service. I have
to remind myself that almost one billion people live outside Eastern
China that is served by the big domestic brands and international
titles. Not only is the company diversifying its magazine holdings
but is also investing in television programs, audio, video, and mobile
to better serve the rural community. While magazine brands remain
at the center of their business, Mr. He made it clear that digital
was the most dynamic way to interact with his consumers.
Bosom Friend, another traditional domestic title, more associated
with old-style state-controlled publishing than a new age, demonstrated
that it can also be a friend to Web 2.0. After its circulation dropped
to one million in 1996 (from 3.2 million) He Chengwei invested in
the property, particularly in editorial, raising the circulation
to 6.3 million in 2007. In China where audits are not the order of
the day, numbers like this are suspect. Nonetheless, Bosom Friend
helped itself by brand extensions, newspapers, overseas editions,
a media college, extensive staff training, e-magazines, and documentary
films.
With an eye to the future they will digitize their files for re-use.
In China one frequently encounters companies that go off in too many
directions hoping something works. And there is some of that here.
But there is also a realization that the customer is the center of
the universe and a publisher has to experiment with ways of finding
and touching the customer. This is a huge change in China.
Jeff Sprafkin, Managing Partner, Media Pacific, China, a long-time
resident and frequently speaker at MPA, asked rhetorically: is it
enough to have a great magazine? He noted at the conference (and
earlier) that the magazine market in China is segmenting along the
same lines as mature markets—but much faster. Moreover, some categories
such as fashion, men’s automotive, women’s lifestyle, and increasingly
sports, are filling up. Given these trends and the fact that to publish
a magazine you still have to walk through a regulatory maze, magazines
might not be enough alone. And Sprafkin adds, they might be at risk
by themselves. One reason for this is the rapidly growing mobile
option that seems to be getting the attention of advertisers. He
suggests that especially in China is easier to start online and move
into print or even start with an event. He said after all the plans
are unveiled and speeches given the most crucial issue facing China
is in training, a sentiment echoed by Melvyn Goh who is CEO of M
Media Group (Harvard Business Review, Forbes, Information Week, and
others): “The greatest challenge we and other publishers face in
China is training and retaining our top-level executives while paying
equal attention to those directly below them.”
Engagement Asian Style
By the start of the second day the conference was due for a course
change and that was provided by Tateo Mataki, President & CEO, Dentsu
Inc., Japan who spoke about magazine advertising and Asian trends.
He first made the effort to forge a bond with his Chinese hosts citing
the original of ideogram (the Kanji) created over 3,000 years ago
in China and later adopted by Japan. Originally, he said, the ideograms
often took the form of what they intended to describe. The words
for mountain (yama) took that shape as did the words for river (kawa).
Kizuna, defined loosely as bonds or ties, is also used to define
the value of magazines and advertising. At the very least this was
a refreshing and culturally-grounded—almost linguistic--way to talk
about reader engagement which according to Mr. Mataki is about swaying
the heart of the reader so that he or she develops a deep trust in
magazines. Magazines, including the advertising, provide in his words
“stress-relief for the heart” and free readers from excessive noise.
Magazines provide the most profound kizuna (bond) with consumers.
I am sure some of this has been lost in translation. At the very least
Mr. Mataki took the contemporary notion of “engagement” and found
roots in symbol, language and history. Magazines invoke in their
design, presentation and texture the stuff that resonates with the
heart.
Jack Griffin, President, Meredith Publishing Group, led a panel that
examined how to increase magazines advertising share. On the panel
were: Peter Phippen, Managing Director, BBC Magazines, UK; Michael
Zhang, Managing Director, MediaCom, China; and Brian Segal, President
& CEO, Rogers Publishing Limited, China.
Mr. Griffin cited a number of industry and MPA statistics about the
importance of engagement and accountability measures and how well
magazines performed across the purchase funnel. He underscored the
need for a new business model and noted that Meredith 360, an in-house
full purpose agency, takes a media neutral approach. He called for
new metrics across the various platforms, a need echoed by a number
of his panelists.
Peter Phippen reminded attendees that his company also produces a
fair bit of television content, video and DVDs so he “has no vested
interest in overstating the value of magazines.” But, contrary to
reports magazine consumption in the UK is not going down. That’s
a myth. The country launches two magazines every day. Young people
are actually reading. In the 15-24 age group magazine was up substantially
in 2006 compared to the previous year. For him digital is not much
of a stretch in that BBC is actually a multi-media company. For example
one of the lead titles, Top Gear, also has a TV program, a web site,
and other multi-media offerings. His advice, whether about social
networks, CGC, and the like, is to own the communities and imbed
advertising.
Both Phippen and Brian Segal noted that in their respective countries
audience and distribution measures were still in vogue though in
the UK the focus by agencies on paid circulation is becoming slightly
more dominant. At the moment it’s a mix. But engagement seems to
have become they key measure of “wantedness.” Michael Zhang noted
that in China it is hard to measure engagement in part because print
is such a small part of the mix and the China market is so dominated
by television. He sees international titles occupying the first tier
of the print market but domestic publishers are catching up because
they have the key insights about the right content serving local
needs. He suggested this perceived difference is exploitable.
In an AdAgeChina Roundtable Hung Huang, introduced earlier, gets closer
to one of the issues that plague magazine publishing in China. “One
of the key problems,” she remarks, “for China’s media industry is
the lack of audited circulation figures; there is a gross exaggeration
to the point that would be criminal in any other country. Waste and
overspend are critical problems. All print titles care about is advertisers,
but TV stations say: We never know what advertisers want, but we
know what gets good ratings so they only sell advertising based on
ratings. We work with the Travel Channel and try to get them to integrate
content with brands, but the Chinese media is low in management and
creative talent. It’s a people problem.”
When asked during the same roundtable why marketers tolerate the lack
of audited ratings, Dale Sullivan, Shanghai’s GM’s Chevrolet brand
director and VP-China General Motors, responded: “figures exists
but they’re way out of line and people make stuff up. But we’ve got
to be there; you’ll be known by your absence if you’re not on TV.
The big figure we look at is brand awareness.” It is not so much:
do you have enough GRPs; but do you have enough brand awareness.
Shi Feng, President, China Periodicals Association, is committed to
magazine auditing but the focus on making audits mandatory has not
gained a lot of traction. A test in 2006 that involved auditing 44
newspapers did not seem to win many converts as this approach invites
the suppression of bad news. The good news is that BPA Worldwide
has been quite successful, especially in the b-to-b sector, in convincing
Chinese publishers that auditing is not only a good business practice
but it provides a competitive advantage. Glenn Hansen, President
of BPA Worldwide, reports that he has 69 members (and 14 pending)
in China and Hong Kong. He expects that number to double in the next
few years. This is a very important beachhead, though a faster acceptance
rate will come when the Chinese magazine industry undergoes a genuine
consolidation and clients and advertising agencies makes this the
cost of doing business.
Until marketers demand audited numbers it is not likely circulation
inflation, perhaps by a factor of five, will end any time soon. As
Dale Sullivan observed, in such highly competitive sectors such as
automotive, you will be noticed for your absence, especially on television.
Though the number will certainly go down, at the moment there are
more than 100 auto manufacturers in China and that creates considerable
marketplace clutter. This situation is not unique to automotive.
There are 1,800 skin care and 2,000 hair care products in China.
Alfonso De Dios, P&G’s media director, Greater China acknowledged
in the same interview that in “The last couple of years, our success
was built on massive ad spend. We and our competitors try to outspend
each other, but even local rivals are realizing we can’t continue
to escalate this pattern. That’s why we need to create new models
that can really work” (http://adage.com/china). One approach taken
by P&G is to invest heavily, at the local level, in Chinese reality
television, through imbedding its brands in programming. With the
success of “Super Girl,” modeled after “American Idol,” reality television
has found a very large audience in China.
Cross-cultural fertilization has become the norm in China. South Korean
street culture, fashion and music are very popular here. Many teenagers
think hip-hop originally came from Korea. If there are any doubts
about the origin of hip-hop, there is no doubt about Korea being
one of the most wired countries on earth. Jeeong-Woo Kil, President
and CEO, JoongAng M&B, Korea, which does 62% of its business in newspapers.
The company has significant magazine operations, including agreements
with Time Inc, Hearst, Forbes, Newsweek, Nikkei, and the New York
Times.
The usage numbers speak for themselves. High speed Internet penetration
is 75%. Seventy-seven percent of the population carries some mobile
device. Korea is in the 3G phase of mobile technology. Jeeong-Woo
Kil seems very much of a realist regarding media consumption. He
considers advertising the real catalyst that is migrating to new
media. For him the value of print is that it strengthens copyright,
is targeted, and serves to anchor brands. Magazines can be read anytime,
anywhere and are institutional.
Rance Crain, President and Editor-in-Chief, Crain Communications,
spoke at the FIPP and wrote later in Advertising Age (May 28, 2007)
that “If you want a scary look at how ad volume in the U.S. will
hold up to new digital media, go to Korea. New media advertising
grew 21% in Korea last year vs. 1.2% for magazine ads—and new media
outpaces magazine ad volume $840 million to $495 million.”
Media executive routinely talk about being “media neutral;” Mr. Kil
seems to live and breathe this neutrality. His company is relentless
in digitizing all its content and supplying what’s appropriate to
the right platform. Publishers and editors select very early in the
production process content and applications for broadband uses whether
it’s text, video clips, and the like. Nothing seems to be wasted;
everything appears to be digitized and monetized. Through IPTV the
company is able to deliver newspaper pages or articles to subscribers
who can read them on their sets.
Kil raises some familiar questions: how do you monetize without cannibalizing;
how do you change the online mindset of reporters and editors; and
what is the strategy for digitizing accumulated magazine content?
Rance Crain offers an interesting perspective on the Asian vs. Western
response to digital: “The problem is that both advertising and media
industries in the U.S. don’t seem very good at breaking down silos
we’re constructed to protect individual properties. The Asian view
of looking many years ahead for success is more compatible with the
digital world’s reward for combining material across myriad evolving
platforms. We think vertically; they think horizontally.”
I would add that up-scale consumer magazines have a much shorter history
in Asia than in the West and legacy issues don’t seem to figure as
prominently. As Mr. Kil noted broadband technology have revolutionized
the way they do business. From the decision to publish content in
any form he can plan multiple uses in various digital formats down
the long tail of the customer. And these opportunities enable him
to rationalize the digitization of all content. As technology and
mobile screen resolution, in particular, improves, so do the prospects
for e-magazine in short or long bites.
The Changing Consumer
Kate White, Editor, Cosmopolitan, USA led a panel on consumer trends
that included Peng Changcheng, Vice President, Reader’s Magazine
Group, China; Mark Frith, Editor, Heat Magazine, Emap, UK; and Li
Shuanke, President, China National Geographic. No one is surprised
when Western magazines radically change their business model in service
to the reader but in China such activity can get attention. Reader’s
Magazine, reminiscent of the American Reader’s Digest, once seemed
to be just another large, state-sponsored publication with little
need for urgency. Now their publishing game seems to be changing
from within. Mr. Peng discussed ways the ways his editors are trying
to more fully engage the reader. He mentioned his agreement with
China Mobile to deliver questionnaires to readers; his use of SMS
for voting and/or comments on articles. He indicated that reader
input has changed the number of articles than appear on average in
an issue. He claims his readership has climbed from 4.6 million in
2001 to 9 million in 2006. While numbers like this are impossible
to verify, it seems obvious that Reader’s Magazine, once a hallmark
of a command economy, is becoming much more reader-centric.
Chinese National Geography is a substantial magazine with a pedigree
advertising base, a BPA-audited circulation of 730,000, and a substantial
international readership. Mr. Li spoke of “transferring the power
to the readers” and uses online editorial surveys, mobile efforts
and SMS.
As a number of FIPP speakers noted, domestic Chinese publishing company
are responding creatively to the new marketplace realities. There
is probably no better example than Rayli Publishing, which was on
the conference agenda and also opened its door for a closer look
at the business. Rayli is not a new company; in fact it just celebrated
its 12th anniversary. As Mr. Li noted, about 47% of the brand advertising
in China is spent in the fashion and beauty category: thus the competition
among Rayli Fashion & Beauty, Elle, Vogue, Harper’s Bazaar and others.
Mr. Li thinks Rayli has some advantages when competing in fashion’s
digital space. (www.Rayliwoman.com is Asia’s leading vertical portal
for women). Their Sunshine Rayli bank and credit cards have allowed
them to develop a significant data base. Rayli publishes four sponsored
digital magazine in the style and fashion space which are delivered
to Nokia phones. Video ads are provided in e-magazines. Text messaging
is used for contests and editorial commentary. User Generated Content
and blogs are part of the editorial mix. The company offers a weekly
Beijing television program. E-commerce is a significant business.
Though it’s hard to determine the business import of all these initiatives,
at Rayli one gets a sense of experimentation and play, driven by
a youth culture. Ideas seem to leech easily across departments. Taking
chances is encouraged and failure is not frowned upon. The G+J investment
in Rayli advertising business comes at a very propitious time (http://www.rayli.com.cn/).
No discussion of publishing in China is complete without attention
to Trends, which is the dominant domestic Chinese publisher with
a banner list of international partners including: Hearst, Rodale,
National Geographic, Emap, IDG and American Express. In Beijing Trends
seems ubiquitous with many of its titles found in the growing number
of Starbucks, bookstores and kiosks. Trends takes retail promotion
very seriously and seems the dominant players at newsstands throughout
the city.
Wu Hong, president, Trends, China has spoken about blending a publishing
culture of international brands with strong local titles; to have
a world view but with firm local roots. In the fourteen years of
Trends existence the company has done just that. Mr. Wu carved out
special interest areas early—health, beauty, fashion, home design,
automotive and travel—and filled them with a balance of thirteen
international and local brands. The international brands are a center
of his business that is very much Chinese.
How far the company has come might be symbolized by the steel-framed,
utility bicycle displayed in the Beijing headquarters. Representing
one of the company’s first advertisers this bicycle is an internal
reminder of distance traveled in a little more than a decade (and
how far China, which is fast moving to the automobile, has come).
The bicycle is housed in a modern, museum-like structure, a fitting
projection of the Trends’ portfolio and psyche.
Not only does Trends publish many international titles; the company
at times seems to transform them, such as Harper’s Bazaar which has
taken on new life in China. Trends is squarely positioned in the
middle of a fast-growing luxury goods market sought by a fast-growing
group of the affluent. Where else would one find a Trends Time, devoted
to the endless and the inexorable and supported by a catalog of elegant
advertisers (http://www.trends.com.cn/).
The Other Side
The City of Beijing promoted and commemorated the FIPP conference
by erecting hundreds of posters announcing in English and Chinese,
“Magazines Enrich Your World.” These displays were situated directly
above a selection of pages from Communist party-controlled newspapers,
displayed under glass, a practice going back fifty years. This juxtaposition
suggested, if one wanted to find a symbol, the distance the magazine
business has come in China.
FIPP was a sprawling conference in terms of subjects covered and the
event itself. By definition and tradition these gatherings are in
themselves symbolic and full of the glow of good business. This is
China after all and not the venue in which to raise questions of
government officials about making more transparent the magazine licensing
process. Mr. Liu intimated in his remarks that the state would be
making this process easier for foreigners.
During the gathering the English language China Daily published the
results of the Forbes tax misery index, causing “an uproar in China
as it ranked the country third among the world’s most heavily taxed.”
Tax officials reportedly shrugged off the debate but the public debate
was picked up in time by bloggers. The government had recently retreated
from a proposed policy that would require 20 million Chinese bloggers
to register their real identities, reportedly due to pressure from
technology companies.
Apparently, even in China no good deed goes unrewarded.
The 2008 Beijing Olympics was never far from view. In the center of
Beijing is a store housing official Olympic souvenirs. Outside vendors
were selling “unofficial” Olympic pins for four Yuan, about .50 cents.
The Olympics will be a real test for China (and sponsors) to promote
and police brands.
Also close at hand was the growing prominence of outdoor advertising
which takes around 10% of total adspend (compared to 4% for magazines).
China has approximately
60,000 outdoor media companies, according to the Administration of
Industry and Commerce. One of the leading outdoor companies, Focus
Media, listed on NASDAQ since last July, has a network of 83,000
outdoor displays in more than 30,000 commercial locations in about
75 Chinese cities, a digital version of another time when the Communist
Party painted propaganda messages on buildings (see http://adage.com/china).
It is not lost on investors that outdoor advertising and messaging,
as well as the growing use of flat screen panels in elevators, do
not face the same scrutiny faced by magazine content—and are a very
effective way to reach the upscale, first-tier city markets.
As CNET noted the Focus screen network “isn’t a network at all. If
the screens were connected, it would constitute a TV network and
the government would insist on monitoring the content. Thus, the
ads don’t come from the central server. People on bicycles go to
the screens every week and replace the memory card in the back, which
bureaucrats have no problem with.”
“The rapid success and somewhat unusual delivery models for ads ‘changed
the mindset’ of both entrepreneurs and local advertisers, who were
more focused on print and TV,” according to Ian Chin, President of
Wealink, a Mandarin language version of Linkedin” (http://news.com/).
And that is one of the paradoxes of China’s media and how the concept
of media is changing. Competition for magazine advertising will also
come from companies like Focus that runs videos ads on public LCD
screens. Competition will also come from the hundreds of video-sharing
sites, such as KU6.com, which loosely translates as “hang loose.”
As John Rose noted in the conference; we should watch out for the
competitors we don’t know or anticipate. Michael Kanellos writes
that “A rising middle class, cheap startup costs, increasing penetration
of PCs and Internet-enabled cell phones, and an ability to tap the
local market better than multinationals like Google or Amazon.com,
among others factors, is fueling the rush into Web sites, online
games and companies with novel advertising pitches,” such as KU.6.com
which is attracting upscale advertisers including: Disney, Nokia,
Motorola, Nike, Ford, McDonalds and others. Baidu, which controls
70% of the search market in China, has invested in the company and
is a good example of how a local company can successfully compete
the big buys, such as Google. (http://www.news.com/).
As often stated at the conference there are more than 9,000 magazines
in China; most are under some kind of state subsidy and not profitable.
By various reports international magazine brands in China get about
80% of that advertising revenue. So there is still much work to be
done. Given the growing number of advertising options available magazines
without strong branding and a competitive selling proposition will
face particular challenges.
In China observers often look to popular culture to note signs of
change (or unrest). In one sign of the times Christina Aguilera will
perform late June in Shanghai. Apparently her sexy acts passed muster
with officials and she didn’t suffer the same fate as the Rolling
Stones who were asked to tone down Brown Sugar and other lyrics in
2006 or rapper Jay-Z who was cancelled when authorities found his
lyrics to be vulgar.
This too is progress.
cmccullagh@magazine.org
