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Jan. 9, 2018, 11:01 a.m.

Newsonomics: Can cross-subsidy (and nursing homes) help revive the Singapore Press?

“In the past one or two years, I’ve been reminding colleagues that we are not a newspaper company — we are a media company. The frame of change of mind is very important.”

— Even virtual monopolies get the blues.

Singapore Press Holdings — publisher of its flagship Straits Times — is confronting the worldwide downturn in newspaper business fortunes. The large daily (383,000 daily circulation, print and digital) and its well-regarded parent SPH saw some tough numbers last year: down 16.9 percent in ad revenue, 13 percent in overall revenue and five percent in circulation revenue for the fiscal year ending September 2017. Profits suffered as well, down 33 percent. And SPH, which still employs 1,200 journalists across its array of 11 newspapers in four languages, magazines, and radio stations, announced significant job cuts in October, with 230 positions cut. The globally oriented company now plans to fund an overseas correspondent staff of 40.

None of those results is news to North American or European publishers, who have suffered similarly. Print business woes are universal across the developed world. What’s intriguing about SPH is its evolving set of strategies to forge a more robust future. How far will it extend itself in its new nursing home business? Can luxe retail malls continue to fund journalism? Might a plan for a state-of-the-global art city delivery service help revive readership?

Everyone who’s learned about the more than half-century-old Singapore experiment knows the city-state is a special case. It’s essentially a one-party state run by highly competent central planners. For a place that wasn’t much more than a fishing backwater at the dawn of the 20th century, English-speaking Singapore now ranks as the fourth wealthiest country on the planet. Its 1.6 million expats drive much of the regional economy, enjoying a relatively un-congested, well-working cosmopolitan center, even if they’ll tell you the state’s closed-circuit-TV-everywhere approach to security and societal control can be a bit unnerving. Meanwhile, Singapore’s four million multi-lingual citizens and permanent residents enjoy a level of housing, health, and education security that’s the envy of many around the world. All in a city-state that ranks third in population density (behind Macau and Monaco) globally.

SPH may be that virtual monopoly, but it’s a publicly listed company, and as such, it still has to make its numbers work. Part of its current challenge: the onrushing businesses of Google and Facebook. “It’s a rapid rise in the last 12, 18 months,” says deputy CEO Anthony Tan.

Adds Alan Soon, a veteran digital executive in Asia for Yahoo and other companies: “Singapore typically trails the U.S. by about two to three years when it comes to trends” Singapore-based Soon, who recently opened up Splice Newsroom “to deliver business intelligence on the media industry in Asia,” confirms that the hot breath of Google and Facebook has been more greatly felt in Asia more widely and more recently, though he notes that each media market experiences it differently. “In other parts, like Indonesia, that impact could take five years-plus to play out.” But the impact of the duopolistic ad dominance is truly becoming global.

Soon assesses SPH, which has seen its share price drop by a quarter over the past year, candidly. “SPH’s revenue and monopoly are the envy of the region. You’d expect a company with an annual operating revenue of S$1 billion (FY 2017) to be more aggressive in building out digital products and serving a distinct audience. SPH is hemmed in on two sides. First, it has a credibility problem. The government’s control of editorial policy and coverage means the organization will continue to be viewed as mouthpiece for propaganda. Second, the company faces the same disruption to its business as other media companies with digital. Newspaper circulation is down as people spend more time on digital platforms.”

I talked with Anthony Tan at his SPH office just after Christmas and got a wide view of the company’s thinking, plans, and bets big and small. Among them, a new business news radio station (Money FM 89.3, launching Jan. 29), participation in a project to assess newspaper delivery in the age of Amazon (which offers two-hour delivery in Singapore) logistics, and major investment in nursing homes and malls. The key word here: cross-subsidy.

That’s the building of ancillary businesses to support the basic craft of news. That’s a theme familiar to two European media contrarians, Schibsted and Axel Springer, both of which have built large non-news publishing businesses to help their news businesses in the long arc of business transformation.

Forty-four-year-old Tan, a savvy watcher of global news industry trends, moved into the company’s deputy CEO position 18 months ago, after joining the company as executive vice-president in 2015. Like many SPH executives, his experience included high-level governmental positions (deputy secretary in the health ministry, director in the manpower ministry) as well as ones in the private businesses of retail malls and the health industry — both of which have proved handy in his new role. His role has continued to grow and in 2017, he was given responsibility for all of the company’s publishing businesses, separated by language into the English/Malay/Tamil Media Group and the Chinese Media Group.

Tan has a big turnaround job in front of him. While “media” drives three-quarters of the company’s revenues, it now contributes only 35 percent of the company’s profits. Though it is making significant cross-subsidy moves, the company is playing catchup. That’s where the new businesses — headed by the acquisition of higher-end nursing home supplier Orange Valley Healthcare last April — will play a big role.

Here’s my interview with Tan on SPH’s road ahead, edited for length and clarity.

Ken Doctor: 2017 was the year of pushback for Google and Facebook. A lot of it around fake news, and the platforms’ part in propagating it. But also fear of big tech. And the Europeans, in fining Google $5.3 billion last year, have pushed a lot more in terms of market domination. Has the question of market domination come up in Asia? Is there any kind of regulatory or judicial pushback on Google or Facebook?

Anthony Tan: I think judicial, less so. There’s no common consensus. In many Asian countries — I hate to use the word to describe it, but it’s mainly protectionism. You would see countries of different persuasions, of different inclinations, some of which have become protectionist against the dominance of Google.

Doctor: What kind of actions have they taken?

Tan: One good example off the top of my head — South Korea. If you look at South Korea, many of the services that Google provides don’t work very well in Korea. Maps, at least, doesn’t work very well. I think maybe it’s because it’s a difficult language.

Doctor: Are they not letting them do mapping?

Tan: If you have been to Seoul, the interesting thing is that if you pick up Google Maps, the only way you can navigate is in straight lines, which doesn’t work. They have a more sophisticated explanation, but this didn’t come officially. I was a visitor, and I asked. They said that, well, this is highly confidential, and the North Koreans are going to use it. Some people explain it that way. It’s not like in Vietnam, or in China, where they were barred from driving the vehicles around by the police.

China, of course, is very extreme. China and Vietnam have gotten very extreme. They’ve just got firewalls, very sophisticated firewalls. That has allowed the growth of their own companies. As markets, they’re big enough. I think that’s an advantage in language you will see in Korea, you will see in Japan. Japan, I think, has been a bit more embracing, but they do have their own quirks. Then, the smaller countries, like us, many of us have grown up in a free-trade environment. Singapore, Malaysia, Indonesia, to a certain extent — many of the colonies, past colonies, whether British, French, or otherwise, have open economic policies.

Doctor: What’s the impact of Google and Facebook on your business?

Tan: Google and Facebook find that it is obviously useful to be in Singapore, because it’s a good place to be for the markets. Google has taken up huge premises in Alexandra [an affluent Singapore region]. Facebook has moved into new premises in a matter of years as well. It has now become fashionable to be in the digital marketing space. Agencies and advertisers want to be at least on Facebook.

Doctor: How recently have you felt the pressure? Like, the last two, three years?

Tan: It’s a rapid rise in the last 12, 18 months. It used to be that there would be one person at, say, a retail chain in charge of all the advertising decisions. These days, over the past 18 months, you have seen more of them hiring someone totally new for digital. They always hire millennials. Not especially those who have been in advertising — they are just people who seem to be in touch. I think it has been a bit of that whole halo effect that Facebook and Google has.

Rewriting strategy in the platform age

Doctor: How has that changed your sales strategy?

Tan: More relationship selling. You have to appeal to both the left and right brain, I think, in dealing with your customers. You have to give them the data and the stats to prove that the dollar is well spent, but also have that relationship building.

When faced with a mammoth giant, we have to think of new ideas. One of the new ways is that we have decided to tie up with our TV national broadcaster. In January, we will have the private exchange setup, so we are actually selling premium programmatic in a joint venture.

Doctor: How much extra do you think you will be able to yield from premium programmatic, compared to regular programmatic? 40 percent extra or less?

Tan: 30.

Doctor: Which would mean about what kind of rate in Singapore dollars [which trade at about 75 cents U.S.]?

Tan: 20-ish. Yeah. The beauty of it is that, in Singapore, there are quite a lot of advertisers — whether it be the public sector, government agencies, public agencies, or some of the brands — who had a few scares over the last year and a half when some of their programmatic ads went onto pornographic sites, which we are very touchy about, extremist sites, and stuff like that.

Doctor: Direct sales are harder?

Tan: Direct sales are harder, because of Google and Facebook.

Doctor: You are investing in branded content?

Tan: We bought an outfit called Brand New Media. We bought the Singapore and Philippines operations from the Australian founder.

Doctor: Part of that cross-selling is an effort to get more yield out of your sales forces, right? I know expense and headcount reduction is a key goal.

You have a newspaper, magazines and radio, but TV is separate, right?

Tan: TV is separate. We used to have two TV stations about a decade ago and we sold it to the national broadcaster, Mediacorp. We’re also cross-selling with the cable TV operator StarHub.

Doctor: Then you can sell across radio, magazines, and newspaper.

Tan: That’s right. And outdoor.

Investing in malls and nursing homes: The cross-subsidy strategy

Doctor: I’ve read that you are now you’re in the nursing home business. And you’re in real estate. It looked like about, what, 25 percent of the revenues are coming from other businesses?

Tan: And more than 50 percent of the profit. A bit of perspective of our history. The company is 34 years old this year. We were exclusively a newspaper company; back then, we weren’t even printing magazines. They had the foresight to see the advent of digital technology, that one day, somehow, the good days of print would come to an end. Back then, they had with cash and they began to make sensible acquisitions in a new business area, thinking that, at the core of that, we will always remain a newspaper media company. So they bought the first shopping mall on Orchard Road, if you’ve been to Orchard Road. [I have. Singapore is home to some of the more amazing shopping malls, with Gucci, Bulgari, Dolce & Gabbana, Burberry, and Prada shops, amid the multi-gastronomy of its luxe food courts. Orchard Road itself touts itself to international shoppers as a “2.2 km shopping belt.”]

We bought one of the bigger shopping malls there. The chaps who bought it allegedly almost lost their jobs, because there was a school of thought on the board and in senior management that media will never die, print will always be king.

Over the years, we developed some condominiums, which we sold on land that used to be our factory land before. Since then, we have built two more malls, bought into one more mall, and we are adding another mall next year. Property has become quite a good business.

Doctor: It’s a good investment. I got a chance to visit the Schibsted last year. Fascinating company, and Norway of course is a small country, about the size of Singapore. More and more of their profit is coming from the other businesses as they’re trying to transition the news business. Is that a similar philosophy? Nobody likes to use the word subsidize, but are you able to take profits here and invest them?

Tan: Precisely. We call it a cross-subsidy. It’s a good, defensible argument because it was the original profits that allowed us to foray into these other businesses.

Doctor: That’s true. You can justify it that way.

Tan: It’s a matter of perspective. I think the important thing to tell our colleagues is that we have not lost the focus — and to tell the market [investors, who have knocked 25 percent off of SPH’s market value over the last year]. The market doesn’t always listen, but the market is irrational sometimes. I think it’s important that colleagues in the newsrooms understand that we need the ability to continue making investments, even in bad times, and to keep a reasonable workforce for journalism really stems from the ability for us to have economic success that is more resilient.

Doctor: That makes sense, and yet all businesses have their cycles. In the U.S., malls are hollowing out.

Tan: In Singapore, we are a bit more fortunate. In Asia, I think we are a bit more fortunate, and maybe it’s the profile of malls that we have. They are doing very well, and they have recurring characteristics to return money like a utility. Best of all, it’s not regulated, and that allows us to take the profit that we make from those to come and cross-subsidize or prop up some of our stable of titles, which is growing. We serve every official language of Singapore, so even the Tamil paper, which serves the Indian population, has a very small print run. That costs money to operate.

Doctor: That’s why you also bought into nursing homes last year?

Tan: Then you ask, why nursing homes, right? After a while we also realized, in looking at the U.S. and many of the developed countries and their malls, property is also now subject to fluctuations. So we really needed to think of analogy of a stool. A three-legged stool is inherently more stable than a two-legged stool.

Doctor: And you have an aging population.

Tan: We wanted to find another league of business that was also resilient to cycles. The best deal is a sunrise instead of a sunset industry. We wanted to go into health care. There were no big players, mainly mom-and-pop operators.

Doctor: Is this at the high end?

Tan: The latest center that we are opening, we also tried to aim for the more affluent, middle, middle-upper income people. We also take in today a mix of people who are subsidized by the government. We take in Medicare, Medicaid-type patients, but we also take in private patients.

Doctor: Well, you have really good social welfare programs here. You accept a mix of private and government.

Tan: The main differentiator is air conditioning, believe it or not. In health care in Singapore, the subsidized patients don’t get air conditioning. It’s a differentiator.

Doctor: People would wonder, given the nature of how the government works, and the relationship of government and press — if SPH is getting into the nursing home business, is that a decision that’s an SPH board decision, and then you basically say, “We have this capital, we’re investing it?”

Tan: Yeah.

Doctor: At the top you said, “We don’t believe in protectionism.” You’re talking about outside, but also in terms of competition. If you’re going to be in the nursing home business, do you have any specific advantage?

Tan: No. I just have to compete.

The only regulated business that we are in is the newspaper business, because there’s a newspaper and printing act that regulate that business. It’s a purely commercial decision, no protectionism. I face competition every day from many other upstart, including foreigners who may want to come in. If they’re given a license by the health authority to run a nursing facility, then I will have to compete.

Doctor: Yeah. Do you deal with all those businesses? Your title is deputy CEO?

Tan: Yeah. I deal with the media business; that’s my bread and butter, including radio, and all the factors of production associated with it. Then I take care of the health care business, primarily.

Of monopoly, culture, and boundaries

Doctor: So if the government is not an investor in SPH, how do you describe your relationship in terms of what you decide to publish in terms of this?

Tan: We get asked these questions either by the Americans or the Chinese — both different sides of the question.

Doctor: The perception is you’re free to publish, but you kind of know where the boundaries are. What do you think? Is that fair or not?

Tan: I think “culture” is an easy cop-out — a simple explanation of what is essentially a complicated world. I would also say that if you look at — I hate to characterize it as Asian culture, but the other bit is really that every newspaper will always have a positioning.

Doctor: Absolutely.

Tan: In any society.

Doctor: It needs to. If it doesn’t have a position, it doesn’t have a soul, right?

Tan: It just happens that in the publications that we have, and of course the flagships, the positioning sits where people also extrapolate and say that, well, there might be boundaries. It’s indeed true that there will be always be boundaries, but I don’t think it inhibits us on a day-to-day basis. I get asked very strange questions as well by countries of lesser democratic natures that come to me and says, “What time do you send your articles for review by authorities?” I say never, and they don’t believe me. I don’t get calls, I don’t do anything. I may get shot — not by the authorities, but by other people who are criticizing articles. Every newspaper has to have a stand. That’s the editor’s relationship with me; I have to also respect it.

Doctor: Who do the editor reports to?

Tan: Administratively, they report to me. I own the licenses; I apply for all of the licenses.

Doctor: If a Singaporean wanted to start another print newspaper, they apply for a license?

Tan: Yes.

Doctor: Is that hard to get?

Tan: Well, I mean…

Doctor: Has anybody done it?

Tan: Yeah. The national broadcaster used to publish a newspaper called Today. Now it’s only online-only.

Doctor: But nobody’s done it?

Tan: No, nobody’s done it. A lot of people recently have gone online. Some have succeeded, some have failed. Then, one of our ex-colleagues did the middle ground, which was exclusively digital, online. Had a fledgling operation; well, maybe a dozen or so. But that wrapped up late last year. She couldn’t make the economics work.

Doctor: Well, the economics would be even harder.

Tan: Right. There’s one that has survived these few years, Mothership. Mothership was some investors, well-intentioned Singaporeans of different persuasions in the arts business space, who put together this group. They are doing, I think, reasonably well. Some of the colleagues from our newsrooms have joined them, and it looks like they are doing okay.

Investing in AI, apps, and maybe a revolutionary city delivery logistics system

Doctor: Where else are you investing? What kinds of things are you investing in directly?

Tan: Artificial intelligence. The traditional areas — say, for example, data analytics, artificial intelligence, better app technology to serve apps better. Web technology. I mean, I got a lot of grief after coming into the job: “Your app doesn’t work very well. Your app is not fast enough.” App versus web, mobile web. We have to keep up with the technology.

Doctor: It takes a lot of investment, yeah.

Tan: Right. Every time Google decides on something new or Facebook deprioritizes you in the News Feed, what it deems news, then you have a challenge. So keeping a good relationship even with what you think is an enemy. Being a frenemy, I think, is better than being an enemy.

Beyond digital — maybe it’s this economy and the demographics of the country — I still have a very loyal print readership. It will go on for a while, because we have one of the world’s longest life expectancies. [Singapore residents live, on average 85 years, right behind Monaco and Japan.]

My biggest challenge is that I need the paperboy for the future. I’m running out of paperboys in Singapore. People would rather be an Uber driver. Uber driver, Amazon parcel delivery guy, rather than a newspaper man.

Doctor: So you have to pay more.

Tan: I have to pay more. The converse side of looking at it as an opportunity is that, if I don’t pay more, can I make it a full-time job? I’m quite happy to accept jobs from Amazon.

Doctor: It’s really becoming part of the modern logistics economy. Are you doing that?

Tan: We had started doing some experiments. First with some retailers that are outsourced a small bit, just for us to try our logistics business. The other thing that we have tried also recently is to try to bundle it. We also have a little convenience store business that I don’t know whether you know of. We have about 70 outlets in Singapore. Why? Newsstands.

The traditional newsstands where going the way of the dodo — the individual mom-and-pop operated ones. So we needed something. The individual 7-Elevens were charging a hell of a lot for us to shop newspapers there. They wouldn’t keep selling those papers. So we’ve also we started bundling and said: Can I deliver a loaf of bread or some eggs with your newspaper? We don’t have to do it every day, but if you subscribe to our newspapers in certain delivery zones, we can do it maybe two times a week, three times a week, depending on your preference.

Doctor: You’re delivering convenience items?

Tan: Yeah, eggs.

Doctor: So if I’m at my condo, SPH delivers to me?

Tan: We actually don’t have a delivery company. We work with what we call a freelance agency. We have the app, and we are beta testing that app. We even started selling newspapers.

Doctor: The idea there is to offset the cost of newspaper delivery by delivering other stuff. Do you think you could grow a lot, or do you know yet?

Tan: I don’t think that it will grow a lot, but it will help complement the business. We are a high-rise city, and many people are going to be over 65. They’re going to have bad knees, even though they’ll have lift stops on every floor. Every morning they would need someone to deliver a newspaper to them, and in addition to that, maybe a loaf of bread every other two days. A dozen eggs.

Doctor: Have you talked to Amazon about any kind of partnership?

Tan: Amazon is quite interesting in Singapore, because as far as I understand their model, they outsource it to many of these logistics providers. We are thinking about whether or not that’s something that we should go into a bit more seriously. We’ve got a network, we’ve got people.

We’ve made a small investment in an e-commerce site in Singapore called Q10, which is Korean in origin. They’re the No. 1 site on merchandising value. They are a bit like Amazon, but they don’t hold their own inventory — just like Amazon actually. They have their own logistics company, so whether we would make a further investment, whether we would work with them — it’s early days.

Doctor: You’ve got all the elements here. You have a high-rise city; you have, probably, the best central planning in the world that I’ve seen. From a planning point of view, it makes overall sense to make as efficient a system as you can, also to reduce pollution and congestion. I’m wondering if there is a model there of how you encourage companies that are in the delivery business, how you incentivize them to work together. Does that make sense?

Tan: Yes. There is an ongoing effort. There might be a sort of network of federated lockers that are delivery-service agnostic.

Doctor: In each neighborhood. Or in a building — it could be in a high rise.

Tan: Anywhere. They are a bit like Amazon’s lockers, but not exclusive to Amazon. Amazon can use it, UPS can use, or whoever.

Doctor: Is that a live experiment?

Tan: No. There is a plan to launch a tender and see whether or not there will be commercial interest to operate.

Doctor: It would a for-profit system of federated lockers, and then they would negotiate with each of the delivery agencies?

Tan: Then the delivery agencies are a question, because the point is how many last-mile logistic providers can Singapore support?

The core business

Doctor: How dependent are you still on advertising in your core business?

Tan: About 70 percent. We’ve always been like that; it was a bit of an aberration. Plus our newspaper has always been very cheap — our newspapers are dirt cheap, compared to anywhere else in the world.

Doctor: Is it profitable every day?

Tan: Yes, it is.

Doctor: Even Monday, Tuesday?

Tan: Yes. I will keep print going for as long as I can because it’s still a profitable business.

Doctor: How much are you charging now for a seven-day print subscription?

Tan: Seven-day print? Depending. The face value price will be $24.90 plus a three-dollar delivery fee, generally. For four weeks.

Doctor: You get digital access included?

Tan: We used to have bundling. We first bundled in the early days of digital. Now you have different packages, depending on what you want, digital PDF or digital access.

Doctor: You do have a unique opportunity here. You have high rises, you have a long-lived population, and you’ve got nursing homes. That’s a good strategy.

Tan: The first thing I did when we bought the nursing home was to bring in the newspapers. I made sure that the newspapers were available to the elderly. The elderly have the most time to read newspapers.

Doctor: Are you selling them, or are you giving them?

Tan: No, no. Giving them.

Doctor: Can you include it as part of the fee, and have the fee pay part of it? That wouldn’t work?

Tan: They would riot in Singapore. But it’s okay. It’s a bit of community service.

Doctor: I see that you are offering a text-to-audio product. Is it much used?

Tan: Yeah. Especially in the vernacular papers. In the Chinese newspapers, especially. From two sides. One is the illiterate elderly, who still want to read it. And the young, who are literate, but the parents force them, because they have to learn their mother tongue, Chinese, but it can be very difficult.

Doctor: Is that your own technology, or is that partnered?

Tan: No, we took the technology and formatted to our use. I don’t think many people have used this technology, text-to-speech. I can’t say that we are the first.

My kid’s latest craze is to play with the Google Assistant. We’ve been thinking about it, and working on how to deliver news in podcasts. The news will be read to me — that might be the future. I mean, just as the U.S. has got with Amazon with Echo and Google Assistant, China has also seen a rise in some of these.

We are technology takers in some way, and I think we need to invest more in keeping a bit ahead of the curve where technology advances are. In the past one or two years, I’ve been reminding colleagues that we are not a newspaper company — we are a media company. The frame of change of mind is very important.

Photo of Singapore’s Marina Bay by See-Ming Lee used under a Creative Commons license.

POSTED     Jan. 9, 2018, 11:01 a.m.
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