spending to the Internet. "Starting last year, a lot <strong>of</strong> people in the traditional media industryhave grown concerned about the future due to pr<strong>of</strong>its <strong>of</strong> newspapers being diverted to theInternet," said Mr Long Xinmin, director <strong>of</strong> General Administration <strong>of</strong> Press and Publication,which regulates China's print media. He was speaking at the China Media Forum 2006 heldhere yesterday. Since China began loosening restrictions on media in the early 1990s,hundreds <strong>of</strong> local newspapers catering to China's growing middle class have sprouted up to<strong>of</strong>fer sports news, entertainment news and other alternatives to staid Communist Party-ownednewspapers such as the People's Daily and Guangming Daily. For the past decade or so, thesemetropolitan newspapers' have grown exponentially, thanks to China's rapid growth. Between1998 and 2003, the country's newspaper circulation rose by 35.69 per cent while advertisingrevenues grew by 87 per cent. Now, the world's largest newspaper market is facing its biggestchallenge ever. A joint study by Qinghua University and the Chinese Academy <strong>of</strong> SocialSciences found that Chinese newspaper advertising turnover has dropped by more than 15 percent since last spring, the first time ever the industry has seen a decline in advertising. Asadvertising accounts for more than 70 per cent <strong>of</strong> most Chinese newspaper revenues, the dropin advertising income has eroded their pr<strong>of</strong>it margin. However, figures illustrating the declinein pr<strong>of</strong>itability are harder to come by because most newspapers are privately owned by localgovernments. Last week, the Hong Kong-listed Beijing Media Corporation issued a pr<strong>of</strong>itwarning for its 2005 earnings, citing a slowdown in advertising revenue, particularly fromreal estate companies. It is the advertising arm <strong>of</strong> the Beijing Youth Daily and the only listednewspaper company out <strong>of</strong> 1,922 newspaper companies in China. The government's measuresto cool down the overheating economy, starting in 2003, targeted the real estate andautomobile industries which are major advertisers. "Since the macroeconomic controls policycame out, our advertising from real estate companies and automobile manufacturers havefallen," said Nanfang Daily Group CEO Fan Yijin. Also, Chinese newspapers are not immuneto the shift to Internet advertising which has clouded the outlook <strong>of</strong> newspapers around theworld. While spending on newspaper advertising has dropped, spending on China's Internetadvertising rose 78.4 per cent to 4.17 billion yuan (S$842 million) last year, according toiResearch market research firm. At the forum yesterday, more than 260 newspaper andmagazine executives wrestled with how to adapt to this new business environment whereyounger readers prefer to get their news online for free. Most industry experts agreed that theInternet's growing popularity does not necessarily mean that newspapers will be driven toextinction, as Micros<strong>of</strong>t founder Bill Gates once predicted. Unlike blogs or most otherInternet companies, newspapers have the resources necessary to send journalists into the fieldto report the news. "Baidu will not manufacture its own content. Our primary responsibility isto help people find the information they are looking for," said Mr Liang Dong, vice-presidentat China's largest search engine Baidu, which has benefited from the growing Internetadvertising market. http://www.asiamedia.ucla.edu/article.asp?parentid=44054; April 25,2006JapanDentsu Inc., Japan’s largest ad agency, on Feb. 20 released its annual advertising sales reportfor 2005. The report says total ad spending, covering all sectors, rose 1.8 percent from 2004,hitting 5.9625 trillion yen in a second consecutive year-on-year increase. Breaking adspending down by category, each <strong>of</strong> the four categories <strong>of</strong> newspapers, magazines, radio andtelevision suffered declines in ad sales, dropping 0.7 percent in total. Ad spending innewspapers fell 1.7 percent to 1.0377 trillion yen, reversing the first year-on-year gain in fouryears registered in 2004. <strong>Newspapers</strong>' share <strong>of</strong> total ad spending fell 0.6 percentage points to17.5 percent. Ad spending on television fell just 0.1 percent in its first year-on-year drop inthree years. However, ad spending on the Internet continued to climb, surging 54.8 percent.22
Search-engine-linked advertising continued to lead among advertisers seeking maximum costeffectiveness,with demand for this kind <strong>of</strong> advertising soaring among Internet ads. Accordingto the report, ad spending was up from 2004 as part <strong>of</strong> a general recovery in the Japaneseeconomy. The Aichi <strong>World</strong> Expo in the first half <strong>of</strong> the year and the general election in thelatter half were also major factors in the increase. Nevertheless, the rate <strong>of</strong> the increase wasless than that recorded the year before. As the Japanese economy continued to recover, adspending in newspapers showed marked improvement toward the end <strong>of</strong> the year, in part dueto the general election. But total ads sales in newspapers were down from 2004, when salesrose for the 2004 Summer Olympics in Athens. By type <strong>of</strong> newspaper, ad spending in localnewspapers, sports dailies and evening newspapers were all somewhat weak compared to thatin national newspapers. Ten out <strong>of</strong> the 21 major industries spent more on newspaper ads. Inparticular, the “foodstuffs,” “cosmetics/toiletries” and “home electric appliance/audio-videoequipment” industries respectively spent 13.3 percent, 8.3 percent and 15.0 percent more onads. Cosmetic and health-food makers, personal computer makers and advertisers usenewspapers for direct and mail-order sales to boost credibility among customers. Ad spendingfor “automobiles/related products” in newspapers plunged 14.5 percent, while falling only 4.9percent for all four main media together. Ad spending for “beverages/cigarettes” was down8.5 percent in a reaction to a surge in 2004 due to an unusual heat wave.“Information/communications” ads sales were down 8.0 percent due to a lack <strong>of</strong> popularitems for sales promotions. A decline in ad spending by these major industries worked to curbthe growth in aggregate ad spending in 2005. Ad spending by “governments/organizations”was up 5.3 percent due to the general election. http://www.pressnet.or.jp/newsb/, March 2006Advertising ForecastsGlobalAdvertising Market Growth Forecast2005 2006France +2.2% +3.0%Germany +1.4% +2.7%Italy +2.8% +4.0%Spain +8.1% +6.4%U.K. +3.1% +3.6%USA +3.5% +4.4%Japan +2.0% +3.0%China +18.4% +15.1%Russia +31.2% +23.6%Source: Ad Barometer – Mars 2006 – BIPE/Interdeco/OMD France; ANIMA Newsletter,March 20, 2006JapanDentsu Inc. issued a prediction that nationwide ad spending will rise 2.1 percent in 2006, to6.0883 trillion yen. It predicted that ads would rise on the continued increase expected incorporate earnings for a wide range <strong>of</strong> industries amid the generally strengthening economy.It predicted that capital investment will keep rising as production expands and outmodedfacilities are upgraded. Dentsu also predicted that the market for IT- and digital-related goodsis likely to keep growing. There are several major sporting events taking place 2006, rangingfrom the 2006 Olympic Winter Games in Turin to the 2006 FIFA <strong>World</strong> Cup in Germany.They and other factors should all contribute to higher ad sales. Dentsu predicted that23
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