Media
Waning competition
Lee Kuan Yew wasn't just stating an opinion about harmful TV competition; it may well lead to some major change. By Seah Chiang Nee
Nov 16, 2003

THE ERA of two Singapore TV networks competing with each other that was launched less than three years ago may be facing drastic changes, if not extinction.

This prospect has become very real after the government relaxed its media competition policy to allow them to close loss-making operations.

It represented a U-turn from the stand taken in 2000 to end a media monopoly by two media companies, one owning all newspapers and the other all TV channels.

The prelude for change came from Senior Minister Lee Kuan Yew, who said in a TV interview on Wednesday that he did not think Singapore could support two local TV stations.

"Both are losing money and both are haemorrhaging and they're trying very hard to stop the haemorrhage," he said. "But I don't think it's possible. I think both are going to keep on losing."

Two years ago, SPH raised the paid-up capital of its TV arm to S$90m, which is almost gone. It has told shareholders that it will be closed if losses hit $150m. In the last fiscal year lone, the loss was S$40.2m (S$44.6m in 2002).

Its competitor, MediaCorp is faring no better. Its two major channels - 5 and 8 - suffered losses of $71.7m in 2002 and $20.4m this year.

Both groups have been retrenching staff. Lee was interviewed by Channel News Asia, Singapore's 20-hour news channel, in which he strongly emphasised the political importance of TV.

The implication is that the government will never let TV fail for whatever reasons.

If history is any indication, Lee's message will almost certainly lead to some action to lighten or eliminate the contest - either a closure of loss-makers or a merger of some products.

Some cynics say it may also result in a hike of TV fees or newspaper prices.

Earlier in the same day, the Minister for Information, Communications and the Arts said the government would free the two players of the "losing" competition, but he added the decision was theirs.

"The government is always in favour of competition but we cannot artificially create the competition at a great loss," Dr Lee Boon Yang told a Press Club luncheon.

"If the companies cannot sustain the competition, they will have to work out a strategy to enable them to survive."

The media is the second such change in policy U-turn. Just last month, the authorities said it wanted Singapore Mass Rapid Transit Corp (SMRT) to consider taking over operating a new mass transit line from Comfort-DelGro Corp.

The line is bleeding money because ridership is significantly lower than what the government originally projected. Both companies are government-linked.

There are similar complaints in the telecommunications sector, too, where companies say the market is too small for too many companies.

In October, MobileOne, Singapore's second biggest mobile operator, said it would be open to talks with third-placed StarHub for a possible merger.

These changes have raised demands for the government to get out of business on the grounds that private businesses can do a better job at it.

SM Lee talked of TV's domestic profit limitation without referring to, as is often the case, going out to compete in the regional market with its programmes the way Hong Kong has been doing rather well.

That, of course, would require not only creative talent, but also a freer atmosphere for artistic shows that doesn't exist here.

Both SM Lee and the information minister had talked about TV and did not refer to the competing newspapers, which are also bleeding.

The "media liberalisation" move was launched only three years ago aimed at allowing a new newspaper (in trusting hands) to compete against The Straits Times, the flagship of SPH. MediaCorp was granted a licence to start a free newspaper, TODAY.

But SPH promptly countered with two new dailies, Streats (free) and Project Eyeball, which has since closed down.

All this expansion couldn't have come at a worst time. With so many new TV stations and newspapers starting at the beginning of one of the state's worst economic crises, costs skyrocketed and advertisements slumped.

There had been several rounds of retrenchment in both camps but profits remained weak. Not only were the new products fighting each other for revenue, but they were competing with their own associate products.

It contributed to a two-year delay in the listing of MediaCorp in the stock market. TODAY was originally targeted to stop losing in two years, which did not happen.

In its latest reporting year, it lost about S$10mil, down from $18.2m in 2002, while Streats (despite synergy from its group papers) lost $5.8m, down marginally from 2002.

Canabalising ad revenue

The impact of competition on SPH was worse not only because TV start-ups cost a lot more, but also its own intra-competition in newspaper advertisement is more severe.

Firstly, as readers cut cost, the appearance of two free newspapers has resulted in a small shrinkage in Straits Times sales. A long dormant stock market also cut into Business Times circulation (now partly recovered).

But the worst nightmare is the impact the two mass circulation tabloids had on advertising revenue in the flagship Straits Times.

Because the two rivals - TODAY and Streats - are free, the competition between them lies in advertisement much more than editorial. "Like other free newspapers, their target priorities are advertisers, advertisers - then readers next," one journalist commented.

Both are gaining advertisement revenue at the expense of The Straits Times, whose rates are much higher.

In bad times, some advertisers looking for bargains move to the tabloids. The Friday editions of these free newspapers are thick, stacked with advertisements as the year-end shopping nears.

Some of the revenue in Streats has undoubtedly come from Straits Times or Business Times.

It is too early to predict how or when the whole thing will unravel. Will it lead to closure or merger or some other engineered loss-reduction scheme, and if so, what goes to whom?

Some believe it will happen before the change in prime ministers next year.

The immediate reaction from the two media giants is predictable. Both have signalled the status quo will prevail, understandable at least until they have time to consider what to do.

Neither side can afford to show too much eagerness for fear of losing bargaining strength. Staff and advertisers had to be reassured.

Whatever the change, it will lead to another traumatic loss of jobs and reduction of future recruitment of journalists, TV artistes and studio technicians. They will probably suffer the most. The two companies make up pretty much Singapore's media industry.

When it was expanding, it drew a large number of Singaporean youths into the mass communication and journalism degree courses here and abroad to take advantage of a boom.

For a time, it was one of the hottest subjects. Many have graduated and others due to come on stream soon. For them, the rainbow has turned into a cloudy sky.

(This is updated version of article that appeared in Sunday Star on Nov 16, 2003)