By Li Zixin (Gazette is the biggest publishing magazine in Europe)
1. Overall History of China’s Press
The Market of China’s Press has been newly emerging during the past three decades. It is a tradition that all the Chinese media are controlled by the government. So it was not until 1979, when the economic reform and opening policy was implemented, the press began to think about marketing. Yet the process went very slowly. Before 1992, most of the press were still subsidized by the government. They didn’t need to care much about marketing and subscriptions.
There were 3 types of press at that time. The first one was government organ. The central government had more than 10 organs then. And each province and city, even county一 had their own organs. The second one was industrial organ. It was set up and controlled by the country’s industrial leaders – usually the national ministry of each industry, or some national associations, which are also very official. The third one was the other press. They were more market-oriented but still had to be under the name of an official organization.
The three types of press remain today. The situation of government controlling media is barely changed. But after 1992, when Deng Xiaoping deepened the market economy in China, the government began to cut down subsidy for press. First, the amounts of government organs were cut. It remained 7 government organs by the central government and then each provincial and municipal government can only keep 1 newspaper and 1 magazine as their organs. The county administrations were not allowed to have their own organs. And the industry leaders also shrank their subsidy on their industry press. Some were required to make balance by their own.
As a result, quite a lot of newspapers and magazines were dismissed. But their licenses never die. They either flew into the market or kept by some government-supported media groups. Meanwhile, although the identity of the third type of press should remain official, the control has been weakened. Private capitals can be invested onto them and the media were run like economic entities. The official organizations which put names above the media sometimes are just like mummies. They can select partners or just sell the licenses to a private capital to run the press. But once the press have any political problems, they should take the responsibilities or help the authority to suppress the press. So, although the total amounts of press in China seldom increase, the press can be changed totally like a newspaper and be put into the market. It partly maintains the competition of China’s press market.
2. Structure of Press Distribution
There are three major types of distributors in China: post office, media groups and private distributors.
It is a traditional distributor for press in China. It has dominated the distribution system for about 50 years since the founding of People’s Republic of China. But it’s getting weaker and weaker, facing the impact of other distributors.
This state-owned system has a common problem: rigidity and low efficiency. It has a non-comparable network all over the country, occupying most of the newsstands, but still finds it hard to earn profits in quite a long time. In 2005, its deficit soared to 398 millions RMB(about 39.8 millions euro). From 2006, a reform kicked off to energize the old system. Capitols were introduced to restructure the company. It cooperated with local media group in major cities like Beijing and Shanghai, to build thousands of newsstands on streets. In the meanwhile, it raised the admittance threshold for new press to enter its distribution channel. Any new press getting into this system has to hand in certain security deposit and ensure certain quantity of circulation. If certain press’s sale remains at the bottom of all newsstands for 6 months, the press will be eliminated from the system.
Nowadays, the China Post still distribute more than 6,000 press, with the total circulation up to 20 billions a year.
Media Group Distribution
Since late 1980, some of the successful media were tired of the low efficiency of the post office system. They decided to build their own.
There are dozens of media groups in China. Most of them stemmed from provincial government organs. The local governments support them to build themselves into media groups. Talking about that, three outstanding media groups should be mentioned. Two are in Guangzhou, the Guangzhou Daily Group and the Southern Media Group, and one in Shanghai, the Shanghai Media Group.
The advertisement income of Guangzhou media group kept surpassing CCTV- the central official TV station for years, which is a miracle for a media group that mainly rely on a newspaper. The income soars to 1.6 billion RMB for a year (about 160 millions euro).
The Southern Media Group owns the most influential press in China, such as the biggest circulation weekly newspaper– Southern Weekend, the best metropolitan newspaper – Southern Metropolis Daily and the biggest financial newspaper – 21st Century Business Herald.
Let’s look at the Shanghai Media Group, which owns Shanghai TV Station. But great efforts was also been made on the press market. The combination of TV and press is unique and successful in China. For example, the business newspaper “China Business News” shares information from TV, which makes it the second biggest business newspaper in the country.
All of these powerful media groups set up their own distribution system and converted it into a distribution company as a subsidiary of the group.
Now, there are more than 800 newspapers in China distributing their products on their own. As a result, the advertisement incomes increase rapidly. Among the newspapers, whose advertisement income enter the top 200, only 11.5% still rely on post office system. Up to 80.5% have built their own. In Guangzhou, where the media are most developed, only 15% of the major newspapers are distributed by post office, 85% are by the own system of press. In the meantime, the media’s distribution companies begin to diversify. They try to get more income through logistics services, or by distributing other newspapers and magazines. For example, the Southern Media Group has established about 3,000 branches throughout Guangdong Province, serving all kinds of logistics items. It makes the competition fiercer.
Now come back to the third party—the private distributors, they were minor power in this market， but now, with the support from national bureau since July, 2003, they become stronger and stronger. The first private distributor was permitted in Aug, 2003, just one month after a new publish regulation was endorsed, which for the first time omitted the restriction that a distributor should be state-owned. By the time of Feb, 2008, there were 17 private distributors.
3. Foreign distributors
After 2000, since China signed WTO agreement, foreign distributors are encouraged to enter the China market. Bertelsmann and Global China Circulation & Distribution Limited (GCCD, a company of Sing Tao News Corporation Limited, HK) were two leaders among the foreign players. There are 51 foreign distributors by the time of Feb, 2008. Most of them come from the United States, Britain and Germany.
Bertelsmann was allowed to enter the book distribution business ever since 1998 in Shanghai. In the first 7 years, it earned a total income of 1.3 billion RMB. With the policy open, it will try to spread its network out of Shanghai through co-operation with other local private distributors.
While Bertelsmann is booming in china, GCCD chose another way to penetrate the Chinese market. A co-operation between GCCD and a company under “People Daily”, Chinese central government organ has been set up. It is reported that GCCD will invest 1.4 billion yuan (about 140 millions euro) for this co-operation.
The competition becomes heated. The more open the market is, the more challenges the post office will face. Even the media group distributors face the impact of online distribution. And with the processing of WTO, and enlarged investment running in, the power of private distributors will be seen, so would the foreign players.