HONG KONG (AdAgeChina.com) -- Now that the 2009 Lunar New Year holiday has drawn to a close, the size and scope of the challenges facing print publishers in China are etched far more crisply on the radar screen than they were just a month or two earlier.
The economic situation, both globally and in China, is the cause for concern. Some research companies still believe overall ad spend will grow by high single digit percentages over last year, which would amount to a strong performance in relative terms on a global basis. Even so, many industry players in China have a lingering sense of uncertainty and foreboding.
They fear that the worst of the bad news is yet to come and therefore further cuts in ad orders may be around the corner.
Some leading economists argue that their anxiety represents an over-reaction. They believe the combination of China's financial resources and the remedies the Chinese government has put into motion thus far should stem the tide and avoid any significant worsening of the economic situation.
Regardless of whether or not those economists turn out to be right or wrong, most advertising order books have been hit by an unprecedented wave of cancellations in the meantime.
Related reasons for concern also loom on the horizon, like worsening statistics on China's export and import trade and the prospects of new trade friction with the U.S. and other major trading partners.
A trend that started last year with minor budget cuts and order cancellations from a handful of industry sectors quickly snowballed across a wide spectrum of business categories. For many multinationals, even a more robust outlook emerging for China business later in 2009 will not necessarily exempt their China operations from globally imposed budget cuts, hiring freezes and layoffs.
Print media is vulnerable
As history shows, advertising is the first budget casualty when a recession hits. In a recession of the current magnitude, spending was bound to take a major fall, even in relative growth markets like China. Factor in the traditional strength of TV and the rapid growth of online in China, and print media becomes especially vulnerable, above and beyond the current recessionary market trends.
Looking down the road, it may be that when the psychological tide turns at the head office level, we will see a more rapid rebound in advertising spending in China than in many other markets, since consumer and business spending power remains strong in the mainland.
Meanwhile, print publishers have some important strategic choices to make in deciding how to cope with the current challenging market conditions. The upshot of decisions made may impact not only their own brands' viability, but also the future growth and development of the print sector in China.
Print media as a commercially managed business (as opposed to an extension of government activities) is still in an early stage of development in China. The country has only a relative handful of strong print brands in the market. Professional industry standards and ethical values are uneven at best, and under intense pressure in the current economic environment.
Audited circulation data is much more commonplace than it was ten years ago, but it is still available from only a fraction of the total number of titles. Higher quality syndicated research is also much more widely available than it was some years back, but this too is a work in progress.
Past growth was a blessing and a curse
An extraordinary two decades of high double-digit growth in advertising spending has been a blessing in the form of steady revenues.
But it has also been a curse for print in China, which still garners a relatively small fraction of the total advertising market as compared with other media. Prolonged growth rates are very forgiving of poor management and a lack of strategic thinking. The current economic malaise will be a significant test for all but the most subsidy-bound print publishers in China.
The losers will be those who flinch and either fail to define core brand values and strategy, or cut corners across these critical zones in order to economize to make it across choppy waters in the short-term.
One of the relative strengths of the most successful print products in China has been their ability to clearly demonstrate brand identity, editorial mission, positioning strategy and audience metrics.
Online media, by contrast, has tended to excel in lead generation, with third-party metrics usually overshadowed by click-through rates (CTR). Few if any online sites have yet created distinctive, enduring brand identities, but this is beginning to change.
Print players in China who don't step up and embrace the relative differentiating strengths of their products versus other types of media, or who cut and run on these core elements of strategy as part of cost-saving measures, may find themselves locked into a downward spiral which extends beyond the current recession.
Thomas D. Gorman is the chairman of CCI Asia-Pacific, which publishes Time Inc.'s Fortune magazine in China. He is based in Hong Kong.
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