AmCham arrow Publications arrow Topics Archive arrow Topics Archive 2005 arrow Vol.35- No.8 arrow Cover Story: Cable TV is Now King of the Media Market
Cover Story: Cable TV is Now King of the Media Market PDF Print E-mail

The traditional dominance of daily newspapers and broadcast TV has been eroded by cable's emergence. Internet media are also catching up fast.

BY PHILIP LIU

 

Taiwan's mass-media market, following a trend visible in many countries around the world, is in the midst of a major shakeup as the public shows a growing preference for audio-visual media - particularly cable TV - over the traditional "print" sectors of newspapers and magazines. A further shift is already underway due to the rapid emergence of Internet media.

The current dominance of cable TV can be seen from the fact that Taiwan's 75 cable-TV stations together registered NT$24.6 billion (US$769 million) in advertising revenue in 2003 (the most recent year available), according to Rainmaker Industrial, a media survey firm.

That represented a 42% share of the media market, compared with a share of only 15% in 1996. Cable TV's success has been achieved mainly at the expense of broadcast TV (sometimes referred to as the "terrestrial" channels), which posted ad revenue of NT$8.8 billion (US$275 million) in 2003 for a 15% market share, down sharply from 1996's 44%, according to Rainmaker Industrial's figures.

Riding on their success, cable-TV operators have been making heavy new investments in hopes to consolidating their status. In 2003, for instance, they accounted for 41% of all investment outlays by Taiwan's media companies, followed by newspapers with 26%. A major focus of the cable-TV investment has been in the development of shopping channels, targeting consumers who are short of time or have an aversion to street shopping. On those channels, accomplished salesmen pitch everything from jewelry and watches to home appliances to cosmetics. Prices are not necessarily cheap, but quality is assured, and TV shoppers are generally not as price-sensitive as bargain-seeking street shoppers. In addition, shopping channels provide attractive gifts to offset their price disadvantage relative to hypermarkets and other discount stores.

Eastern Multimedia pioneered the shopping-channel business five years ago. In 2004, it took in NT$30 billion (about US$937 million) in revenue from its five shopping channels, equivalent to the total turnover of the 150 large-scale 3C retail outlets operated by Tsann Kuen Enterprise around the island.

The development of cable TV has benefited from the island's high extent of urbanization, which makes it relatively easy to build the infrastructure to access large numbers of households. In addition, the diversity of programming has enabled the cable operators to achieve a subscription rate of over 80% of the island's households. As a result, audience ratings show a 70/30 split in favor of cable channels over broadcast TV.

The most popular category of cable-TV programming appears to be the news channels. For a population of 23 million, Taiwan has had eight all-news channels, compared with three in the United States with its 300 million people. Reporters from the specialized news channels rush to be the first to arrive at the scene of breaking news events to give audiences first-hand, live reports. In 2004, the eight news channels boasted an audience share of 18%, the second highest category, trailing only the four broadcast channels with 22%.

Growing sensationalism

The acute competition among local news channels, however, has led to an emphasis on sensationalism. Some examples this year were the extensive coverage of the suicide of TV performer Ni Min-jan, including drawn-out speculation about his motivation, and of the funeral of Taiwan's foremost gangster, "Wenko." Aside from the scandals and peccadilloes of celebrities, news reports often focus on the ups and downs of political personalities, domestic-violence cases, and serious traffic accidents, while touching only lightly on public-policy issues. In response to criticism that the preponderance of reporting on violence and scandal contributes to social instability, TV news executives point to the ratings and say they are just giving the public what it wants to view. Lin Yu-hui, chief executive of the Broadcasting Development Fund (a government-funded organization designed to promote the healthy development of Taiwan's television industry) questions the accuracy of those ratings, however. She also suggests that the best way to achieve better-quality news coverage and programming would be establishment of a publicly funded media group similar to Britain's BBC.

In 2003, according to ACNielsen data, Taiwanese people spent an average of 2.36 hours a day watching TV, up from 1.98 hours in the 1990s (but considerably less than in the United States, where the average amount of TV viewing is four hours per day). The increase in TV viewing has been a blow to the local newspaper business, whose advertising revenue in 2003 of NT$15 billion (US$468 million) gave that sector a market share of 25.7%, a far cry from 1996's 31%. Again citing ACNielsen data, the number of people above the age of 12 who say they read a newspaper regularly has dropped from 61% in 1999 to about 50% in 2003. The future looks even less promising, as the newspaper-reading rate for the 12-19 age group plunged the most during that period - from 48.7% to 27.3%. Loss of young readership translates into a decline in advertising for such trendy products such as cellphones, cosmetics, apparel, and notebook PCs. Afternoon papers are in especially dire straits, having seen their readership rate drop to only 2.8% of the over-12 population in 2003, down from 1999's 7.1%. The afternoon papers previously attracted readers mainly for stock-market reports and breaking news, but in each of those categories they are now facing stiff competition from both cable TV and online news.

Aggravating the plight of the local newspapers has been the acute competition among the major players. The inauguration of the Liberty Times in 1996, for example, challenged the long-standing twin dominance of the newspaper market by the United Daily News (UDN) and the China Times. To build up its circulation base rapidly, the Liberty Times launched an unprecedented promotional offensive, offering raffles of hefty gifts - including even houses and gold bars - to solicit subscriptions. The effect was phenomenal, and the paper now boasts the highest readership among the three leading dailies. (Political leanings may also have played a part in the Liberty Times' ability to attract certain readers, as the paper has consistently backed pan-green policies and candidates, whereas both of its two main rivals are staunchly pan-blue.)

The strategy of UDN, in response, has been to try to retain an elite readership by offering in-depth, rich content. The large disposable income of those readers gives the paper a special appeal to prospective advertisers for higher-cost items. To try to consolidate its quality image, UDN this year entered into cooperation with the prestigious New York Times to publish a weekly supplement containing extracts from the U.S. paper, along with Chinese translations.

Another bombshell was dropped into the market with the entry of the Apply Daily in 2003. The paper's sensationalized approach to the news, splashy layout, full-color printing, and retail-oriented circulation strategy posed new challenges to the existing competitors. Following the extensive hype when Apple first started in Taiwan, the circulation level has since dropped to about half of the initial peak, and the paper suffered a heavy loss of NT$800 million (US$25 million) in 2004, according to the financial statement of its Hong Kong parent company. UDN and the China Times are also hurting. In preparation for the market assault by Apple, they both cut their newsstand price from NT$15to NT$10 per copy, matching that of the Liberty Times but leading to serious erosion in their profits.

As a result of the acute competition, no newspaper can now claim to have a dominant share of the local market. Some commentators have even joked that Taiwan now has no big papers, only a number of minor ones. Almost all newspapers are now operating in the red, and to survive they have had to lay off large numbers of employees.

Magazines, radio, and Internet

In the magazine segment of the market, advertising income topped NT$7.5 billion (US$234 million) in 2003, for a market share of 12.7%, up from 9.7% in 1996. Although the proportion of the population reading periodicals suffered a moderate decline to 32.9% in 2003 from 1999's 34.2%, there were still some 8,000 magazines published in Taiwan. Retail outlets, notably convenience stores, account for three quarters of the sales, and since convenience stores have been steadily raising their shelf fees, that has cut considerably into magazine publishers' profits.

Radio media took in ad revenue of NT$2.1 billion (US$66 million) in 2003 for a market share of 4.6%. The size of the radio-listening public is five million people, and many stations have sought to carve out a niche by switching their focus to a specific listening group. In the process, much of the programming has become increasingly sophisticated, able to appeal to the preferences of the target group. Philharmonic Radio Taipei is a prime example. Established in 1998 with capital of NT$52.5 million (US$1.6 million), the station suffered a loss of NT$9 million (US$281,000) in its first year, but has been in the black ever since. Earnings per share are expected to come to NT$4.4 this year, according to General Manager Hsia Ti. Such success for a privately operated classical-music station is extraordinary, he says, especially considering that "85% of classical-music radio stations worldwide are government-owned or publicly funded, including those in Singapore, Hong Kong, the Philippines, China, and most Western countries."

Contributing to the success has been the diversification of business operations. Advertising now accounts for only 45% of the station's total income, down from the original 90%, with the remainder coming from sponsorships of musical activities and direct sales of music products. When the local radio broadcasting market was deregulated several years ago, "the number of stations more than quadrupled, but the overall advertising pie has remained largely the same," notes Hsia. "You can't rely on advertising only."

Internet media are currently still at a nascent stage of development, but the outlook is highly promising in view of the huge number of Internet users in Taiwan and the web's popularity among younger age groups. Taiwan now boasts an Internet population of 9.25 million, for a penetration rate of 40%. Of the total, 3.7 million users are equipped with broadband connections. For the 12-25 age group, surveys show that over 90% have the habit of surfing the Internet regularly. In 2003, local Internet users spent an average of 12 hours a week online, an increase of 80% from 2001. Internet advertising rose by 60% in 2003 to reach NT$1.5 billion (US$46.8 million) and is estimated to have hit NT$2 billion (US$62.5 million) in 2004.

The transformation in Taiwan's media market being triggered by rapid technological development is similar to what has happened in the United States and Europe. During a recent visit to Taipei, New York Times Publisher Arthur Ochs Sulzberger Jr. spoke about this trend. "Different times have different news carriers," he said in a speech. "As a result, The New York Times has been constantly expanding its news services to new media, such as radio, TV, and the Internet. Despite the changes, there always exists a group that demands professional and high-quality news services. The service value of a newspaper lies in news rather than paper." He noted that besides its 18 newspapers, eight TV stations, and two radio stations, the New York Times Co. also operates 40 websites.

Along similar lines, UDN and the China Times have also been investing to develop news sites in recent years. Udn.com, for instance, turned a profit in 2004 with earnings per share of NT$1.1. Alvin Liu, chief executive of the website, says a successful repositioning of the website has enabled it to cope with competition from the news services of portal sites and search engines. "We now regard ourselves mainly as a content-solution provider [to other organizations], rather than a simple news supplier," notes Liu. Some 40% of the website's revenue now comes from projects for government agencies, as well as subscriptions to the newspaper's archives database plus content licensing. Another 40% comes from advertising, and the remaining 20% from new business models, such as the supply of news to cellphone operators. Udn.com plans to list its shares on the over-the-counter market by the end of this year and to use the capital it raises to expand the scope of its services, perhaps by acquiring some existing sites.

Besides UDN, the China Times has also been adjusting its business model; in addition to a news website, it now operates a cable-TV station, CTI TV. If the example of those major players, as well the New York Times is any guide, the continued diversification of Taiwan's media groups into new media fields is likely to be an inevitable trend.
 
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