Beijing Media Corp. IPO a litmus test for Chinese media

Asian Economic News, Dec 29, 2004

HONG KONG, Dec. 22 Kyodo

The initial public offering on Hong Kong's stock exchange Wednesday of Beijing Media Corp., the advertising unit under the Beijing Youth Daily, is a litmus test for the state-owned media industry, analysts say.

The newspaper is floating 25 percent of Beijing Media Corp. to raise HK$905 million (around US$116.3 million).

The IPO was well received in Hong Kong because of the paper's rising advertising revenue, with an oversubscription of 422 times from retail investors. It is priced at HK$18.9 per share.

The listing, however, does not include the daily's editorial division, which will remain under state control.

Yu Guoming, president of the Media Research Institute at People's University in Beijing, said the listing will serve as a model for other state-owned newspapers.

''Those allowed to be listed, whether they are newspapers or magazines, are not the politically critical ones,'' Yu told Kyodo News.

''Whether the trial will be extended (to the entire newspaper industry) will be based on political rather than economic considerations. The central government will need to see if it has an impact on the ideology, the content, and if it will lose control of the paper,'' Yu said.

''Allowing less critical press to be listed is to give a buffer to further liberalization of the industry,'' Yu said.

With a circulation of 600,000, Beijing Youth Daily's advertising revenue reached 787 million yuan (about $95 million) in 2003, ranking second to Guangzhou Daily in the country. It is the second largest newspaper in Beijing by circulation.

Although it has increased coverage of social issues in recent years, Beijing Youth Daily is considered placid compared with titles under the Southern Daily Group based in Guangzhou and Caijing (Economic) Magazine in Beijing, which are known for their feisty reporting styles.

In the IPO prospectus, Beijing Youth Daily said advertisements will be screened by a team of staff members to ensure contents are in line with government regulations.

Yu, however, said eventually the state will have to let go of its grip on the editorial section.

''You can't only float the rest but keep the editorial part,'' Yu said, ''The democratization of the media in China will come gradually.''

Yu said the reform will also bring an identity shift to the senior managerial staff of newspapers, who are often cadres of the Chinese Communist Party.

''Previously, the senior editors are accountable to the government, but now they are accountable to the shareholders,'' Yu said.

Richard Ji, who works for U.S. investment bank Goldman Sachs, said, ''I believe there will likely be more newspaper listings pending success'' of the current IPO.

''The Chinese government encourages media companies to tap into capital markets to streamline corporate governance and compete against foreign rivals, in response to the WTO accession,'' he added.

Ji said newspapers, including Beijing Youth Daily and Shenzhen Press, often enjoy a ''quasi-monopoly'' in local markets because they tend to become the daily habit of local readers.

''A top-tier newspaper generates steady revenue from circulation,'' Ji said.

''We believe they could thus be very profitable with net profit margin at around 20 percent, however, at the expense of poorly received newspapers,'' he said.

The listing is considered a bold step in ongoing media-industry reforms launched in July 2003 by the central government to improve the marketability of publications.

Other media companies such as Shenzhen Press are reportedly planning listings.

The Chinese press is still tightly controlled under the Propaganda Department, with journalists risking being thrown into jail for writing articles critical of the government. China's press ranks 162 out of 167 countries in the 2004 World Press Freedom Ranking conducted by the Paris-based Reporters Without Borders.

Even after its accession to the Word Trade Organization in 2001, China has not made any commitment to opening its news media to foreign investors.

In 2003, China had 2,119 newspapers and 9,074 magazines. According to research by Global China (Beijing) Media Consulting, total media advertising revenues in China surpassed 107.9 billion yuan, rising 19.44 percent from 2002.