Foreign investors seeking to sell newspapers and magazines in China face huge challenges to expand their market share rapidly, according to an industry report.
But if they adopt proper and stable strategies in market expansion, there are many places for them to grow, said Zhao Xiaobing, chief writer of the report titled China Press Circulation Report 2003.
Zhao is the president of Global China (Beijing) Media Consulting Co and the press circulation report was published by his company recently.
According to the report, newspaper and magazine circulation is the most profitable field in media.
The circulation volume of Chinas 2,111 newspapers and 8,889 magazines was 11.7 billion yuan (US$1.40bil) in 2001. This includes 7 billion yuan (US$845.40mil) in retail income and 4.7 billion yuan (US$567.60mil) in subscription revenues.
This has attracted more than 60 foreign media firms and book vendors to open offices in Beijing ahead of the opening of the market.
China met its promise to the World Trade OrganiSation and allowed foreign investors to retail newspapers, magazines and books in the country on May 1. In December 2004, China will allow foreign wholesalers in the newspaper, magazine and book sectors.
Seven foreign companies have reportedly filed applications with the General Administration of Press and Publication to sell newspapers and books in China.
Yet, Zhao said many difficulties in Chinas media circulation sector remain, and foreign players will not be exempt.
Chinas post office system still has the monopoly on the circulation of national newspapers and magazines and its retail outlets extend to most Chinese cities.
In Beijing, 95% of newspaper and magazine retail booths are controlled by the citys post office.
It is hardly possible that foreign investors will shake the dominant status of the post office in the press circulation market, Zhao told China Business Weekly.
Most profitable newspapers and magazines in China are local ones, such as the Beijing Youth Daily and Guangzhou Daily.
These media have their own strong circulation network and would not easily give ground to foreign circulation companies, Zhao added.
Yu Guoming, a media professor with the Renmin University of China, said that only when local newspaper groups have expanded significantly to other regions would they need the services of professional circulation firms.
Cross-regional development of Chinese media groups is still premature currently, Yu said.
Foreign media giants have noted the difficulties hindering massive expansion of their businesses in China. German media conglomerate Bertelsmann AG confirmed it has already filed documents to enter the industry.
But we are only applying to extend business lines offered by our book club, said Ji Hanbin, an official with the companys corporate affairs department in China.
The company launched a small joint venture in the late 1990s with the Shanghai Media Group, providing book club services a book retail service for local customers using the postal system.
The club has 1.4 million members currently.
Bertelsmann said it expects to open a number of new outlets this year in several cities, including Beijing.
Zhao said that foreign media groups have significant space to expand in the media circulation field in China in the long term.
The press circulation report suggests media groups sales agents have not concentrated on selling their products; information feedback is slow; the default of sales agents is frequent; and circulation efficiency is very low.
The difficulties faced by domestic media in circulation will become advantages of foreign press sales companies.
They operate an efficient circulation system with frequent feedback, and their payment conditions are generally more favourable than domestic firms, Zhao said.
The reason that many profitable media develop their own circulation branches is partially because of their dissatisfaction with the low efficiency of post offices and partially because of the lack of independent and highly efficient media sales agents, Zhao added.
If the presence of foreign circulation groups lowers circulation costs, they will win many clients who originally had their own circulation branches.
Foreign players should establish co-operation with circulation branches of domestic media as soon as possible, even though the conditions for co-operation might be very strict, said Zhao. China Daily/Asia News Network