SPH shifts media business to not-for-profit entity amidst falling ad revenue

Singapore Press Holdings (SPH) is transferring its media business to a newly incorporated wholly-owned subsidiary, SPH Media Holdings, amidst the ongoing challenge of falling advertising revenue. The exercise involves transferring the 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.

Under the restructuring proposal, SPH Media will eventually be transferred to a not-for-profit entity for a nominal sum. The not-for-profit entity will be a newly formed public company limited by guarantee. More information on the company limited by guarantee will be announced in due course. After the transfer of SPH Media to the CLG, SPH will no longer be subject to shareholder and other relevant restrictions under the Newspaper and Printing Presses Act.

According to SPH, it approached the Ministry of Communications and Information with a restructuring proposal to put the media business on a long-term sustainable financial footing. While such a model may be unfamiliar in Singapore, SPH said many news organisations overseas are operating under these funding structures. These include The Guardian in the UK that has been controlled by the Scott Trust since 1936 and the Tampa Bay Times in the US that is owned by the non-profit Poynter Institute.

SPH will provide the initial resources and funding by capitalising SPH Media with a cash injection of SG$80 million, SG$30 million worth of SPH shares and SPH REIT units, as well as SPH’s stakes in four of its digital media investments.

The media industry has faced unprecedented disruption in recent years. SPH’s operating revenue has halved in the past five years due largely to a decline in print advertising and print subscription revenue.

SPH’s media business has since fallen into the red. It recorded its first-ever loss of SG$11.4 million for the financial year ended 31 August 2020. If not for the Jobs Support Scheme, SPH said the loss would have been a deeper SG$39.5 million. For the six months ended 28 February 2021, pre-tax profit before tax fell 71% to SG$3.1 million compared to the same period last year. Again, if not for the JSS grant, the media business would have incurred a pre-tax loss of SG$9.7 million.

Even with the resumption of business activities post-lockdown, the decline in advertising revenue is expected to continue at a similar pace to the last five years.

Over the past five years, SPH increased its spending in technology, product development and data analytics talent by 48%, to more than SG$20 million a year and invested SG$35 million in digital content and audience development talent in the newsrooms. Beyond manpower, SPH also increased spending on new consumer-facing digital platforms and products, averaging more than SG$20 million a year over the past five years.

As a result of its digital transformation efforts, SPH’s average monthly unique audience across all SPH titles over the past two years has nearly doubled to a record 28 million. According to SPH, digital circulation has since surpassed print circulation.

However, digital subscription and digital advertising have been unable to offset the decline in print advertising and print circulation revenues. As a result, the losses of the media business are likely to continue and widen. In a highly competitive media landscape, further investment will be needed to strengthen digital content creation and product development capabilities. It added that these investments will take more time to show results.

SPH's chairman Lee Boon Yang said with the resources that SPH is providing upfront and the prospects for public-private partnership funding going forward, it anticipates that SPH Media will have a more sustainable financial future.

"It will have the resources to focus on transformation efforts and quality journalism, as well as to invest in talent and new technology to strengthen its digital capabilities. This will ensure that the public will continue to benefit from quality information and credible news from trusted media titles and newsrooms, across different platforms and in vernacular languages," he added.

With the removal of the Newspaper and Printing Presses Act restrictions after the restructuring of the media business, Lee said: "The exercise will give SPH greater financial flexibility to tailor its capital and shareholding structure to seize strategic growth opportunities across the other businesses in order to maximise returns for shareholders."

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