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Cablegate: Hard Times for China Times -- Taiwan's Dailies Face Revenue

VZCZCXRO9744
RR RUEHCN RUEHGH
DE RUEHIN #1541/01 3050707
ZNR UUUUU ZZH
R 310707Z OCT 08
FM AIT TAIPEI
TO RUEHC/SECSTATE WASHDC 0229
INFO RUEHBJ/AMEMBASSY BEIJING 8683
RUEHHK/AMCONSUL HONG KONG 0130
RUEHCN/AMCONSUL CHENGDU 2875
RUEHGZ/AMCONSUL GUANGZHOU 1466
RUEHGH/AMCONSUL SHANGHAI 2286
RUEHKO/AMEMBASSY TOKYO 0308

UNCLAS SECTION 01 OF 04 TAIPEI 001541

DEPARTMENT FOR INR/R, EAP/TC, EAP/P, EAP/PD

DEPARTMENT PASS AIT/WASHINGTON

SENSITIVE

SIPDIS

E.O. 12958: N/A
TAGS: PREL KPAO TW
SUBJECT: HARD TIMES FOR CHINA TIMES -- TAIWAN'S DAILIES FACE REVENUE
PROBLEMS

1. (U) Summary: The China Times, one of Taiwan's oldest and most
respected newspapers, has laid off half its staff, seen its
circulation drop by half, reduced its daily page count and announced
its intention to transform itself into an "elite" daily.
Advertising expenditures on the island have fallen across the board
and for newspapers in particular. The price of newsprint surged by
50 percent last year. Taiwan's public increasingly receives its
news from television and the Internet, and although the China Times
Group has two TV stations and a Web presence, so far it has not
figured out how to prosper from electronic news media. As in other
developed markets, newspapers as a news delivery medium are becoming
outdated and unprofitable, and the China Times could become the
highest-profile casualty of the decline of the newspaper business in
Taiwan. The general decline of newspapers as a news medium also
lessens the U.S. ability to deliver complex policy messages to the
Taiwan public. End Summary.

-----------------------------------------
Rise and Decline of Taiwan's News Dailies
-----------------------------------------

2. (U) Nearly two decades after an explosion in newspaper
publication in Taiwan with the coming of democracy in the 1980s, the
newspaper market in Taiwan is feeling the squeeze. The Independence
Morning Post ceased publication in 1999, followed by three other
island-wide Chinese-language dailies in 2006: Min Sheng Daily News,
Central Daily News and Taiwan Daily. The venerable China Times,
one of the four largest remaining Chinese-language dailies in
Taiwan, announced on June 18 that it would soon transform itself
into an "elite" newspaper, reducing the number of pages and
streamlining its operations. The China Times Group -- composed of
two newspapers, two TV networks, a weekly magazine, a publishing
company, an online media company and a travel agency -- is an
influential conglomerate in Taiwan whose assets were once assessed
at over NT$10 billion (US$307 million). The group closed its
17-year-old evening paper, the China Times Express, in November 2005
and has been suffering severe deficits over the past few years.

3. (U) The paper cited the rising cost of operations and shrinking
advertising revenues as the reasons for its "transformation." Chou
Sheng-yuan, then-publisher of the China Times, was quoted in June as
saying that the paper would shut down one of its three printing
houses and close all its regional bureaus around the island.
Sources from within the paper confirmed in early September that the
paper has reduced its work force from 1,200 people to about 700,
with Publisher Chou among those who left. Beginning August 1, the
China Times reduced its page count from thirteen to ten or fewer
broadsheets, expanded its editorial and op-ed pages, and moved the
international (mostly wire service) news to its front pages -- an
unusual move among Taiwan's Chinese-language dailies, which focus
heavily on local news. This is a striking change for this
58-year-old island-wide daily, which once ran as many as 25
broadsheets on weekdays and ranked among the top-circulating
newspapers of the mid-1980s. It continued to run neck-and-neck with
its rivals, the United Daily News and the Liberty Times, into the
late 1990s.

--------------------------
Newsprint Up; Revenue Down
--------------------------

4. (U) According to China Times then-President (now Publisher) Lin
Sheng-fen, the overly competitive media environment in Taiwan in
recent years and huge drop in advertising revenue has made it
difficult for the China Times to maintain its current operations.
Lin attributed the difficult newspaper environment to the soaring
cost of newsprint, which has surged 50 percent from US$600 per
metric ton to US$900 last year. An Apple Daily reporter told AIT in
September that Hong Kong-based Apple Daily, with circulation of over
500,000, had signed a seven-year futures contract for newsprint when
it set up its Taiwan edition. They would undoubtedly feel the heat
in 2011, however, when the contract is to expire.

5. (U) Weber Lai, an associate professor at the Graduate School of
Applied Media Arts at National Taiwan University of Arts, elaborated
further. Lai said a majority of local newspaper managers were
traditionally promoted from the ranks of editors and veteran
journalists. They lack real management skills and the ability to
deal with challenges of a digital era, in which many people receive
their news online without having to pay a cent. China Times union

TAIPEI 00001541 002 OF 004


leaders as well as some media watchdog organizations, by contrast,
blame the newspaper's managers for hollowing out the daily's assets
by expanding operations too rapidly. In addition, they acquired two
TV networks, in 2002 and 2005, respectively, but the financial
results have been mixed, with the entertainment channel making money
and the terrestrial station and the all-news cable channel not
faring well.

6. (U) In a legal filing by China Times to the Taipei District Court
in June, as reported by Taiwan's Business Weekly, China Times has
suffered accumulated losses of over NT$4.5 billion (US$138 million)
between 2001 and 2005. Adding in the financial losses of the paper
over the last two years, it is estimated that China Times' deficit
has exceeded NT$5 billion (US$154 million) since 2001. Statistics
from the Taiwan Advertisers' Association (TAA) also show that China
Times' advertising revenues have shrunk severely over the past few
years, plunging to barely a third of those in its best year, 1998.


--------------------------------------------- ---
Declines in Advertising Hurt Most Taiwan Dailies
--------------------------------------------- ---

7. (U) China Times is not the only paper that has suffered such a
downturn. TAA's statistics show that advertising revenues for
Taiwan's dailies in general have been declining successively over
the past nine years. With the sole exception of the sensationalist
Hong Kong transplant Apple Daily and the economically-oriented
Economic Daily News, advertising revenues for most Taiwan dailies
have dropped nearly 10 percent over the last two years, according to
TAA.

8. (U) A study in the June issue of the Taiwan magazine "Brain"
revealed that China Times suffered the most severe losses in
advertising income among Taiwan's twelve major dailies: a 15 percent
slump from NT$2 billion (US$62 million) in 2006 to NT$1.7 billion
(US$53 million) in 2007. The other dailies include three other
general Chinese-language dailies, two papers specializing in
economic news, one evening paper, two regional papers and three
English-language dailies. Liberty Times had the highest ad revenue
in this group with NT$3.8 billion (US$117 million) in 2007.

9. (U) NowNews, a Taiwan online news network, reported in mid-August
that the United Daily News, whose advertising income plunged by 12
percent in 2007 from the previous year, had laid off, and would
continue to lay off, more senior employees. Jimmy Lai, Chairman of
Next Media, Ltd., and founder of the Apple Daily, which was the only
general daily to register an increase in advertising revenue in 2007
(6.7%), also complained of a severe drop in profits last year.

10. (U) Newspapers specializing in economic news in Taiwan have
fared better, thanks to a more targeted readership and advertisers.
Economic Daily News of the United Daily News Group registered 16
percent growth in its advertising revenues in 2007. The Commercial
Times, a publication of the China Times Group, was able to retain
the same level of advertising income as in 2006.

11. (U) Not only did advertising revenues for most newspapers see a
decline, but the entire advertising market in Taiwan has suffered a
slump as well. China Times President Lin Sheng-fen noted that
Taiwan's overall advertising revenue has dropped from NT$100 billion
(US$3.07 billion) in 1990 to NT$50 billion (US$1.54 billion) in
2006. Statistics from a study by Nielsen Media Research on the five
major media -- television, newspapers, magazines, radio broadcasting
and outdoor advertising media portfolio (including billboards,
buses, etc) -- indicated drops of between two to ten percent in
Taiwan's advertising market from 2005 to 2007, varying by medium.
Newspapers are the media that have been hit hardest by the
advertising slide, the study said.

12. (SBU) Central News Agency Chairman Huang Chao-sung, who is the
former president of the China Times Group, told AIT in September
that, during his tenure at the China Times Group, the real estate
companies in particular put the squeeze on the newspapers. Aware
that they were the largest single source of advertising for
newspapers, they negotiated advertising discounts with the
newspapers, nearly halving the revenues from this sector. In
addition, the food giant Uni-President stopped advertising in Taiwan
entirely and devoted all its advertising to mainland China, with the
exception of ads for its 7-11 stores. Nielsen statistics for the

TAIPEI 00001541 003 OF 004


first half of 2008 indicate that Taiwan's advertising on cable
networks accounts for 30% of the market, versus a 28% market share
for newspapers.

--------------------------------------------
Newspapers Not the Public's Medium of Choice
--------------------------------------------

13. (U) Not only has the shrinking advertising market dealt a heavy
blow to Taiwan's newspapers, but changes in the public's media
consumption patterns have also taken a toll of print media. A
survey released by Taipei's Shih Hsin University's (SHU) College of
Journalism and Communications in December 2007 revealed that 66.6
percent of respondents said they acquire news from television. Only
16.3 percent said they read news from the print edition of
newspapers and 10.2 percent said they get news online. Dr. James
Hsiung, dean of SHU's College of Journalism and Communications, also
told AIT that the future trend will be for more and more people to
get their news online.

14. (U) A study conducted by Dr. Su Herng, chair of Taipei's
National Chengchi University's Department of Journalism, in
September 2007 illustrated the same point. Newspaper subscription
rates saw a sharp drop over the past few years. People also spend
less time reading newspapers every day, particularly since more and
more TV anchors in Taiwan tend to read the news in the newspapers to
their audience. Su's study further revealed that Taiwan newspaper
readers nowadays favor soft news over hard news and prefer graphics
to words. Even though most readers still focus on current events,
those who prefer news about entertainment, recreation and lifestyle
have increased.

15. (U) In addition, since rapport with political and business
elites acts as a guarantee to secure more advertising income for
newspapers in Taiwan, newspaper managers are bound to maintain close
relationships with the political and business leaders. Taiwan's
papers are "under the dual delimitation of economic and political
power," Su noted. When discussing the difficulties of China Times
in July, some journalists speculated that, without a powerful
political backer and not being a "squarely Blue" daily like the
pro-KMT United Daily News, the somewhat centrist but KMT-leaning
China Times has gradually lost its appeal among "pro-Blue" Taiwan
readers. The paper's financial fortunes saw no upturn with the
KMT's return to power in May 2008.

16. (U) Even after the current revamping of China Times, industry
sources believe there will be another wave of downsizing for the
paper before the end of 2008. Sources within the paper also
revealed that China Times has cut the print run from around 400,000,
a level it had maintained for the past several years, to 220,000.
As the paper's deficit continues to widen, China Times is mulling
over innovative approaches to improve the situation. Its plan is to
slash the number of copies printed to between 120,000 and 150,000,
sources said.

--------------------------------------------- -
Advertising from the PRC? No Salvation for Now
--------------------------------------------- -

17. (U) Taiwan's "Business Today", a popular business weekly,
disclosed in June that TOM Online has been in close contact with the
China Times Group since last year. TOM Online is a leading Chinese
wireless Internet application company controlled by Hong Kong tycoon
Li Ka-shing, who also established Cite Publishing, Ltd., which owns
more than 40 magazines in Taiwan. The China Times Group is
reportedly hoping that TOM Online will invest in its operations.
Neither the China Times Group nor Cite Publishing was willing to
comment on the matter, according to Business Today. Market sources
said that several parties are interested in buying the China Times
Group. Only Apple Daily Founder Jimmy Lai's Next Media Group is
seen as the likely winner, however, as it is willing to accept a
package deal (China Times, Commercial Times, and CTI TV), while the
other bidders only want to purchase the more profitable CTI TV
network. Takeover talks are reportedly near completion, and an
announcement about the deal is likely to be made in early November.
If the takeover materializes, it would make Next Media the largest
media group in Taiwan with one TV station, one magazine, and four
newspapers.

18. (U) During a meeting with the Government Information Office in

TAIPEI 00001541 004 OF 004


June, the Taipei Newspaper Association suggested a new approach.
The Taiwan authorities should lift the ban against Chinese
businesses, particularly the real estate industry, placing
advertising in Taiwan's print media, so as to increase newspapers'
advertising revenues. But Taiwan's Mainland Affairs Council told
AIT that the proposal is still under consideration, and the ban on
advertising from China is not likely to be lifted in the near
future. Without external financial support or assistance from the
Taiwan authorities, this 58-year-old paper could become the next
casualty of the decline of Taiwan's newspaper business.

--------------------------------------
Comment: TV - A Less Thoughtful Medium
--------------------------------------

19. (SBU) The decline of China Times and the general hardships faced
by Taiwan's news dailies reflect the woes of print media in many
places elsewhere: the decline in popularity of the daily newspaper
as a news medium. As more people - especially young people - turn
to other media sources, circulation drops. Advertisers, already
suffering from unrelated economic difficulties, buy fewer ads. This
leads to less revenue to newspapers, thus diminishing newspapers'
capacity to produce a quality product, thus further diminishing
circulation. And so the downward spiral continues.

20. (SBU) Although the China Times has no more sterling a record for
accuracy than some of its print rivals, it functions on a 24-hour
news cycle, which allows at least a moment's reflection before
publishing news - a chance to check facts and consult several
sources. This is a positively stately pace compared to that of
Taiwan's six breathless round-the-clock cable news channels which
broadcast first and think later. As circulations of comparatively
responsible print media decline and more people in Taiwan turn to TV
for their news, the overall standard for news reporting is likely to
continue dropping, while sensationalism becomes more prevalent.

YOUNG

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