The Chinese Press Market

1. History of the Chinese Press
The Chinese press market has been newly revived and emerging during the past three decades. Traditionally all Chinese media have been controlled by the government. So it was not until 1979, when the economic reform and opening policy was implemented, that the press began to think about marketing. Yet the process was a very slow one. Before 1992, most of the publications were still subsidized by the government, and didn’t need to pay much attention to marketing for advertising and subscriptions. At that time there were three types of publications. The first one were the government organs: the central government had more than 10 publications, and each province, city and even county had their own publications too. The second one were the industrial organs. They were set up and controlled by the country’s industrial leaders – usually the national ministry of each industry, or some national associations. The third one was all other publications. They were more market-oriented, but still had to be published in the name of an official organization. The three types of publications have remained till today. The situation of the government control on media has barely changed. But after 1992, when Deng Xiaoping strengthened the market economy in China, the government began to cut down media subsidies. First the amounts of government publications were cut, and there remained seven organs of the central government and each provincial and municipal government was allowed to keep one newspaper and one magazine. The industry leaders also shrank their contributions to the industry publications, and some were required manage on their own. As a result many newspapers and magazines were dismissed. However, their licenses never die, and they were either put on the market or kept by some government-supported media groups. Meanwhile, although the identity of the third type of press still remains official, its control has been weakened. Private capital can be invested in them, and they are run as businesses, so that in some cases the official organizations behind represent just a shell. They can choose partners or sell the licenses to a private company to run the press. But in case any political problems arise with a publication they will be held responsible. Therefore, although the total number of publications in China is not increasing, a publication can completely change its character once it is on the market.

2. Structure of Press Distribution
There are three major types of distributors in China: China post, media groups and private distributors.

2.1. China post
The post has been a traditional distributor for press in China, dominating the distribution system for 50 years since the founding of People’s Republic of China. But facing the impact of other distributors it is becoming much weaker. Rigidity and low efficiency are the main problems of the state-owned system. It has a unique network all over the country, occupying most of the newsstands, but still finds it hard to earn profits. In 2005, its deficit soared to 398 millions RMB (about 39.8 million Euro). In 2006 a reform to energize the postal system was introduced, with restructuring and co-operations with local media groups in cities like Beijing and Shanghai in order to build thousands of newsstands in the streets. Also the admittance threshold for new publications entering this distribution channel have been raised. Any new publication needs to pay a security deposit and ensure a minimum circulation. If the sales for a title remain low at all newsstands for 6 months it will no longer be distributed. Today the China Post still distributes more than 6.000 publications with a total circulation of up to 20 billions a year.

2.2. Media Group Distribution
In the late 1980ies some of the successful titles were tired of the low efficiency of the postal system and decided to start their own. There are dozens of media groups in China, most of which originating from provincial government organs. Among them, three outstanding media groups should be mentioned: the Guangzhou Daily Group and the Southern Media Group in Guangzhou, and the Shanghai Media Group. For years, the advertising revenue of the Guangzhou media group kept surpassing CCTV, the central official TV station, which is a miracle for a media group that mainly relies on a newspaper. Its revenue is up to 1.6 billion RMB for a year (about 160 millions EUR). The Southern Media Group owns the most influential titles in China, such as the biggest circulation weekly newspaper Southern Weekend, the best metropolitan newspaper Southern Metropolis Dailyand the biggest financial newspaper, 21st Century Business Herald. The Shanghai Media Group, which owns Shanghai TV Station, has also made great efforts on the press market. Its combination of TV and press is unique and successful in China. Its business newspaper «China Business News» shares information from TV and is the second biggest business newspaper in the country. All of these powerful media groups have set up their individual distribution systems as a subsidiary of the group. Today there are more than 800 newspapers in China distributing their products by themselves. As a result the advertisement revenues have increase rapidly. Among the newspapers whose advertisement income enter the top 200, only 11.5% still rely on the post. Up to 80.5% have their own distribution company. In Guangzhou, where the media are most developed, only 15% of the major newspapers are distributed by post and 85% through an individual system. The distribution companies also begin to diversify, trying to get more revenue from logistics services or by distributing other newspapers and magazines along with theirs. For example, the Southern Media Group has established about 3000 branches throughout Guangdong Province that offer all kinds of logistics items. Competition in this field is becoming more fierce.

2.3. Private distributors
Private distributors were a minor power in the Chinese market for many years. But now, with the support from national bureau since July, 2003, they become stronger and stronger. The first private distributor was permitted in August 2003, just one month after a new publishing regulation was endorsed, which for the first time omitted the restriction that a distributor should be state-owned. By the time of February 2008, there were 17 private distributors.

3. Foreign distributors
After China signed the WTO agreement in 2000, foreign distributors have been encouraged to enter the Chinese market. Bertelsmann and Global China Circulation&Distribution Limited (GCCD, a company of Sing Tao News Corporation Limited, HK) are two leaders among the foreign players. As of February 2008 there have been 51 foreign distributors, most of them from the United States, Britain and Germany. Bertelsmann has been allowed to enter the book distribution business in Shanghai as early as 1998. In its first seven years it earned a total of 1.3 billion RMB. With the opening of the policy it will try to spread its network out of Shanghai through co-operation with local private distributors. While Bertelsmann is booming in China, GCCD has chosen another way to penetrate the Chinese market. A co-operation between GCCD and a company of the People Daily, a Chinese central government organ, has been set up. It is reported that GCCD will invest 1.4 billion RMB (about 140 millions EUR) for this joint venture.

4. Outlook
The competition has grown very strong. The more the market opens up, the more challenges will the postal system have to face. Also, the media group distributors face the impact of online distribution. And with the WTO integration and an increase in foreign investments a growing number of local and foreign private distributors will compete on a market that will have to improve its efficiency.

Author: Li Zixin