Analysis: The writing was on the wall for SPH to spin off media biz, says industry

Singapore's Ministry of Communications and Information said it supports Singapore Press Holdings' (SPH) proposal to transfer its media business, SPH Media, to a company limited by guarantee. SPH's flagship title The Straits Times reported that the government is willing to offer funding support to the company to help build up capabilities for the future. The statement came following a shocking announcement yesterday by SPH where it announced the transference of its media business to a newly incorporated wholly-owned subsidiary, SPH Media Holdings. This involves the shift of its entire media-related businesses of SPH including relevant subsidiaries, relevant employees, News Centre and Print Centre along with their respective leaseholds, as well as all related intellectual property and information technology assets. SPH Media will eventually be transferred to a not-for-profit entity for a nominal sum, and the not-for-profit entity will be a newly-formed public company limited by guarantee.

Minister for Communications and Information S. Iswaran, said in a statement that a professional, capable and respected local news media is critical to Singapore's national interest. According to the minister, the SPH Board and its management said the current media business model within a listed company structure "is not viable" due to global technology and industry trends, as well as the need for "significant investments in digitalisation and capability development".

Industry professionals MARKETING-INTERACTIVE spoke to agreed that the move was inevitable and the writing was already on the wall concerning SPH's future. In March, the company underwent a strategic review to consider options for its various businesses as its board of directors said SPH remains undervalued, while its media business continues to face a challenging operating environment and outlook. Meanwhile, SPH said its operating revenue has halved in the past five years due largely to a decline in print advertising and print subscription revenue.

Hari Shankar, chief revenue officer of in-stream video advertising marketplace iVS, told MARKETING-INTERACTIVE that media houses such as SPH should have commenced transformation efforts ground-up at least a decade ago, when the writing on the wall started becoming clearer that the world will move towards depending on digital touchpoints for information needs. Its business models as such, explained Shankar, should address the wherewithals of harnessing this huge shift in audience habits.

Shankar was previously the CEO at Singapore Media Exchange (SMX),which was a digital alliance between Singapore’s publishers Mediacorp and Singapore Press Holdings, for close to two years. Under his leadership, SMX expanded across Southeast Asia and partnered with seven media publishers and marketplace owners. Citing South China Morning Post as an example, Shankar said the publication has been very successful in its transformation from traditional existence, to incorporating state-of-the-art digital and adtech solutions in hardware, software and humanware. He added,

Having had the chance to be up-close and personal with both the media conglomerates of Singapore, I can very clearly see the gaps (or shall I say chasms) in the software, hardware and most importantly, the humanware area on both sides.

He added that with the spinning off of its media business, SPH can continue to exist as a brand that provides quality news and information to the public. Moreover, the winding up of such a behemoth is not feasible and SPH's move signals the shift from chasing revenue to creating quality content first. However, if it were to maintain business continuity, Shankar explained that quick and agile rejuvenation, along with a tech-driven transformation plan of a "hitherto lagging media business" would be required. 

Meanwhile, Cyril Pereira, adviser, China Daily (Hong Kong) and principal at Telesis Consulting, said if SPH was a manufacturing business with a loss-making line, it would have been a straightforward decision to axe its underperforming media assets. However, The Straits Times has 175 years of history and "no bunch of businessmen can casually decide to shut ST", Pereira said. Instead, they owe it to Singapore to find a way for it to continue.

However, it was also clear to SPH's board of directors that it could not continue to carry a loss-making business with no prospect of a return to profitability in the near future. As such, SPH had to cut its media business loose from the diversified group. Pereira, who was formerly the director, newspaper operations at South China Morning Post, explained that by spinning off its media business, the group, excluding its red ink media assets, will be able to focus on growth initiatives in real estate, shopping malls, aged care homes, student accommodation and 5G telecommunications.

SPH is not the only media conglomerate to have experienced losses. Malaysia's Star Media Group and Media Prima, for example, have also experienced a revenue dip. According to Pereira, national newspapers all face a decline in print ads and sales, adding that digital transformation is a key challenge for mobile access 24/7. At the same time, ad rates online are very low and are set by "the huge global vacuum machines such as Google and Facebook.

Tiny readerships of local media cannot command higher rates. For fully staffed serious newspapers, the online earnings do not cover their print losses.

SPH also acknowledged this in its statement yesterday. The company invested SG$35 million in digital content and audience development talent in the newsrooms, and more than SG$20 million a year on technology, product development and data analytics talent. Additionally, it also increased spending on new consumer-facing digital platforms and products, averaging more than SG$20 million a year over the past five years. While its monthly unique audience across all SPH titles over the past two years nearly doubled to a record 28 million, SPH said digital subscription and digital advertising have been unable to offset the decline in print advertising and print circulation revenues. 

Potential pitfalls of the new structure

While there has not been much chatter about public funding for press in Singapore, this has been a hotly debated issue in the West. In addition to public funding, Pereira said trust, ethics, independence, and professional practices are also important. "Who will set policy? How will leadership of the product be decided? What about continuity? Should it be under a Foundation or Trust?" he added.

The latest move might open SPH Media up to public and corporate funding to keep it going. However, Pereira said:

The potential pitfalls for SPH Media are political meddling, loss of credibility, loss of trust, and lack of sufficient annual funding. 

Agreeing with Pereira on this point is Vishnu Mohan, chairman of the Vivendi Committee Southeast Asia and India, who said that moving forward, SPH Media will be "totally dependent" on what it is able to obtain from open source funding. "That will depend also on who is put in charge of the new organisation, how they are yielding this opportunity to demonstrate the fact that this has made a difference to SPH, and that they are taking the right steps to uphold the very objective of why it has to be done," he explained. However, if this is not done right, Mohan said there is a risk that SPH Media might not be able to sustain the business.

Fundamentally, he views this as a great initiative as it will allow room to refocus on quality journalism and innovation which could actually benefit advertisers. "The most important thing is to be able to demonstrate innovation and quality. If those elements can be brought in, it has an opportunity to attract advertisers because it will attract readers first," Mohan said.

He explained that there are other perimeters besides the number of eyeballs that are far more important as a currency when it comes to evaluating from an ad perspective. For example, the levels of engagement and time spent on the site. "If those impressions can become more valuable or more engaged, advertisers would then follow," he added.

Although the concept of a not-for-profit entity might be new to some in Singapore, SPH is not the first company to have taken a step in this direction. The Guardian in the UK, for example, has been controlled by not-for-profit entity The Scott Trust since 1936. In 2019, the media company broke even financially, with revenue rising to about US$312.34 million compared to the 2018 financial year, assisted by growth in digital revenues and increased reader contributions, The Guardian previously reported. Likewise, the Tampa Bay Times in the US is currently owned by non-profit Poynter Institute.

"It takes time for people to understand that it is possible for a media organisation to be a non-profit organisation. However, this does not mean that an NGO always has to serve a charitable cause. The cause can also be news delivery," Mohan said.

Although SPH might have restructured and siphoned off a certain portion of the business that is not be doing well financially, the move still preserves the intent of why the news organisation was created in the first place. Nonetheless, this is a step that could have come earlier.

Although it might come across as a move in response to current times, I think it may have been brewing for awhile.

Former editor at SPH and media veteran PN Balji said the proposed media model is not really novel but the question is, will SPH papers have that guarantee and be allowed to practise independent journalism?

“Past history doesn't give me optimism," he said adding:

The media's future is in the hands of the government. They are the biggest stakeholder, not the readers, advertisers or journalists.

"The establishment is not likely to relax its curbs on media. So it will be status quo."

Photo courtesy: 123RF

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