The Edge CEO: The rise of the digital duopoly has 'destroyed' the news business

It isn't breaking news that media publishing houses specialising in print  in Malaysia have experienced a decline in revenue over the past few years as a result of the rise in advertising dollars shifting to the realm of digital.

Most recently, Utusan Melayu which has been around for over 80 years, delisted from Bursa Malaysia after failing to submit its regularisation plan by 19 August as it was unable to find potential investors to revive the business. Meanwhile last December, Malay Mail ceased its print edition and went fully digital as part of "a change of business direction", according to editor-in-chief Datuk Wong Sai Wan.

According to the Audit Bureau of Circulation in Malaysia, newspaper circulation figures for English, Chinese and Malay newspapers have been on the decline since 2013. The decline in newspaper circulation and revenue can be attributed to the rise in popularity of digital-only news websites and the growth of the duopoly, CEO and publisher of The Edge Media Group Datuk Ho Kay Tat said during a the Malaysian Media Awards and Conference organised by the Media Specialists Association titled “Game Changers”.

"Unless readers are willing to pay for newspapers without them being heavily subsidised, media companies will not be able to keep up with the duopoly and there might be “no money left to invest in journalism”, Ho said.

With the lack of subsidies and the unwillingness of consumers to pay for quality journalism, Ho said it “very likely” that news operations will be scaled down. He added:

My worry is that if there is not enough money for good journalism, which is important for society, and we cannot attract the right talent into the industry.

Despite this, he is of the view that not all newspapers will disappear. Instead, there will be fewer titles over the next few years. According to him, one of the reasons for the decline in Malaysia’s print media is that many of these newspapers “have lost their way as they became tools of politics”, causing readers to be turned off, Ho said. It is important for news companies to build trust and credibility among consumers, as well as raise the quality of their work.

“I think journalists can only play a role in society if we build trust so that the public will support us, whether they are readers or advertisers. Also, we can only play that role if there’s enough money to fund us,” he said. Ho added:

Hopefully you will pay for a newspaper what you are willing to pay for a cup of Starbucks.

While it is possible to take a page of out of The Washington Post’s and South China Morning Post’s books and turn to tycoons for investments, Ho explained that tycoons and shareholders in Malaysia “have lost billions in the destruction of their media companies over the last five years”. As a result, they “might no longer have the appetite” to invest more cash to revive the companies, Ho added.

“Ultimately, we are storytellers. Our strengths lie in our news, explanations and analysis. Be it print, mobile or radio, those are just channels and technology which will change over time but our principal role as journalists remain,” Ho said.

The rise of digital colonialism

According to Ho, companies in Malaysia are shifting their ad spend to social media and digital, mainly Facebook and Google which now control 80% of the digital ad revenue. Last year alone, he told audiences, globally Facebook made US$55.8 billion in revenue, 90% of which came from digital advertising, according to its financial results. Meanwhile, Google made US$116 billion in ad revenue which formed 85% of its total revenue, Forbes reported. Ho said:

The rise of the duopoly has not only disrupted but also “destroyed” the economics model of the news business.

In the past, newspapers were sold at a heavily subsidised price or even for free to maximise their reach, which allowed them to attract many advertisers. As a result of this model, Ho said media companies were able to generate 80% of their revenue through advertising and 20% from circulation sales.

“Advertising revenue subsidised the cost of the paper and paid for everything else. It was a happy tripartite agreement that has been around for so many years for media companies, readers and advertisers until Facebook and Google came along,” he said.

From 2014 to 2018, Ho said that shareholders of Star Media Group, Media Prima, Media Chinese International, Utusan Melayu and Berjaya Media have lost approximately RM3.765 billion in market value. Ho added that Facebook and Google “do not invest in generating content and news but make money off of those who do”. While news companies fight back by making their news available for free on these digital platforms, Ho explained that they earn “little to no money” from it.

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“We also have websites but the revenue generated from there is very small compared to what we have on print. My estimate is that for every dollar that has been generated from digital, Facebook and Google will take 90 cents while we are left with 10 cents,” Ho said. He added:

I call this digital colonialism and it’s exacting considerable damage to media companies.

Besides “destroying” the media ecosystem, Ho said tech giants such as Facebook and Google are also exempted from paying taxes in countries where they are making money from as they operate out of Silicon Valley. This is compared to Malaysian media companies that are paying local taxes and have numerous employees to feed.

“These tech giants operate from Silicon Valley and they book whatever offshore revenue they have but how much taxes do they pay in the country where they are making money from? I think how they operate and the impact that they have on domestic society, not just in Malaysia, is something that needs to be looked at. They have become too powerful and big,” Ho explained.

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