Next Digital’s loss widens but new strategy shows promise

Next Digital, which publishes the pro-democracy newspaper Apple Daily, is among the Hong Kong media entities that have confronted challenges as well as opportunities amid the months-long anti-government protests in the city.

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Standing at the forefront in reporting the unprecedented events to the Chinese speaking population across the world, the newspaper group enjoyed huge readership for its print and digital offerings but was nevertheless hit by a decline in advertising sales as the Hong Kong economy fell into a recession and businesses cut back on spending.

The mixed fortunes were evident in the firm’s fiscal first-half results that were unveiled on Monday.

As per a stock-exchange filing, Next Digital posted overall group revenue of HK$556 million for the six months ended September, representing a decline of 16 percent from the same period last year. Net loss widened to HK$313 million, from HK$287.5 million.

Business on the whole was affected by weak macroeconomic environment in both Hong Kong and Taiwan, which dented advertising income in print as well as digital segments. Digital business advertising income came in at HK$177 million, down 40 percent from the same period last year.

Advertising dollars from its Apple Daily businesses in Hong Kong and Taiwan fell below the HK$100 million benchmark in the six-month period at HK$91 million, down 27 percent from the year-ago HK$125 million.

However, the company saw strong growth in revenue from the sale of newspapers, despite an increase in the cover price of Apple Daily in both markets from January 2019. Newspaper sales income was up 17 percent at HK$163 million. Meanwhile, the firm booked online subscription revenue of HK$47 million during the period.

Next Digital introduced a pay-wall for its news portal in Hong Kong and Taiwan starting from September this year. In Hong Kong, the company had charged subscribers a one-off HK$3 for the period between June and August. Then, starting from September, it charged subscribers HK$1.68 a day for the website access. Hence, the subscription income in the interim results only reflects the one-month sub-segment revenue.

Next Digital said performance exceeded expectations, with the service rapidly accumulating over one million paid subscribers across Hong Kong, Taiwan and overseas markets. In September, Next Digital announced that it had around 840,000 subscribers in Hong Kong. The figures suggest that Taiwan and overseas markets account for around 200,000 of the overall subscriber numbers.

During the six months to September, the newspaper group said its combined platforms for Hong Kong and Taiwan together attracted an average monthly page view count of approximately 1.3 billion, making it one of the leading news sites in the world.

Apple Daily had a user base of approximately 12.8 million monthly unique visitors in Hong Kong, around 13.9 million monthly unique visitors in Taiwan, 910,000 monthly unique visitors in the USA and approximately 322,000 monthly unique visitors in Canada, Next Digital said in its filing, adding that the “broad readership allowed the company to take advantage of a variety of advertising revenue generation opportunities.”

Assuming that all the one million subscribers of Next Digital were paying HK$1.68 each day for the subscription fee, the company would generate around HK$604 million in online subscription revenue for a year.

Though the subscription rate is not uniform across the markets, the million-plus subscriber base, which can be expected to grow further, should help contribute significant revenue for the media group going forward, helping offset falling advertising income due to a weak economy and boycotts by some pro-Beijing advertisers.

What Next Digital’s management needs to do is further reduce its reliance on advertising dollars. In the fiscal first-half 2019, sale of newspapers generated much more income than advertising. The company should copy this model to its online business through subscriptions.

The revenue streams from readers could be a solid foundation for Next Digital to defend itself in the face of an unfavorable advertising market, which stems in part to political factors.

The company said that in the second half of the current fiscal year, it will focus on consolidating and growing the subscriber base of its new paid digital subscription service by launching new content and a new data management platform to provide personalized experience for its readers.

Embracing a bold new business model, Next Digital, despite the multiple challenges, says it is “well-positioned to capture the upside from any future positive shift in market sentiment and advertiser confidence.”

As Hongkongers, we can only hope the media group succeeds in its objectives and shores up its financial health, which will help it remain an important voice for the city and its people.

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A columnist in political development in Greater China region, technology and gadgets, media industry, parenting and other interesting topics.

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