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Star Newspaper Business Study

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COMPANY BACKGROUND

Company's history

The Star was first published regionally in George Town, Penang on the 9th of September, 1971. The Star went to become a national newspaper on Jan 3, 1976, when it set up an office in Kuala Lumpur. To adapt a growing staff and a new press incorporating the latest technology, it moved its headquarters from Kuala Lumpur to its present premises in Petaling Jaya in 1981.

The Star created histor y on June 23, 1995 when it became the first Malaysian newspaper and the third in Asia to launch a World Wide Web edition. In addition to that, The Star also achieved a new milestone in its corporate history in the same year by being listed on the Main Board of the Kuala Lumpur Stock Exchange.

In the year 2000, The Star relocated in stages to its very own 17 storey premises, Menara Star in Section 16, Petaling Jaya.

In January 2002, The Star's new printing plant, Star Media Hub was officially opened by the Deputy Prime Minister of Malaysia, YAB Dato' Seri Abdullah bin Haji Ahmad Badawi in Shah Alam, Selangor. The Star also has a new office and printing plant, Star Northern Hub in Bayan Lepas, Penang.

About The Star and Sunday Star

The Star weekday paper is packaged as a 4-in-1 paper, comprising the Main Paper, StarBiz and StarTwo. The Main Paper covers the latest in regional, national and as well as international news while StarBiz offers a comprehensive coverage of local and international financial news such as market trends, financial reports and latest market updates. StarTwo features articles on lifestyle, entertainment, health, parenting, social issues and et cetera.

Every Sunday, there is an additional section known as Sunday Star. For the Sunday Star, it covers current local and as well as worldwide news. Apart from that, Sunday Star also contains an educational section where careers, further education, exams tips and various comments are featured within.

Board of Directors

The current Executive Deputy Chairman of Star Publications (Malaysia) Berhad is Dato' Clement Hii Chii Kok whereas the Group Managing Director / Chief Executive Officer is Datin Linda Ngiam Pick Ngoh. There are two Executive Director in the company which is Tan Sri Datuk Seri Kamal Mohamed Hashim and Mr. Ng Beng Lye. And the Group Editorial / Education Advisor is Dato' Ng Poh Tip.

Group's Financial Highlights

The revenue of the company as at 31 December 2008 is RM 831,040,000. Profit before tax is RM201, 463,000 whereas the profit after tax is RM138, 701,000 which show that the tax expense is RM 62,762,000.

Political and Legal Environment

There is one law in Malaysia that protects media freedom that is Article 10 of the Constitution. It also notes that there are limits to this freedom, and that these limits are, generally, defined by the Government. The constitution provides freedom for speech of the press. However, some important legal limitations exist. According to the government, it forced restrictions on the media to protect national security, public order, and friendly relations with other countries.

The law that provides legislation in the interest of security or public order may restrict freedom of speech. Example, Sedition Act prohibits public comment on issues sensitive such as racial and religious matters. Government used Sedition Act, Official Secrets Act, Printing Presses and Publications Act, criminal defamation laws, and other laws to limit and threaten political speech.

As for Printing Presses and Publications Act, it requires local and foreign publications to apply annually to the government for a permit. This is to make publication of wicked news a punishable offense and authorized the minister of internal security to ban or restrict publications believed to threaten public order, morality, or national security.

Besides, it also prohibits court challenges to delay or revocation of publication permits. According to the government, these conditions make sure that the media did not spread twisted news and were necessary to preserve harmony and promote peaceful in a multiracial country.

Criminal defamation is punishable by a maximum of two years in jail, a fine, or both. This is along with the government power over annual license renewal and other policies inhibited independent or investigative journalism and resulted in widespread self-censorship. Government had banned some foreign newspapers and magazines and, occasionally, covered up foreign magazines or newspapers.

Furthermore, you could point to the guarantees under the Communications and Multimedia Act (CMA) if you want to impress the crowd which covers broadcasting and Internet. The guarantees under this act are no monopoly or oligopoly control of the airwaves and nothing in the Act is to be regarded as censorship of the Internet.

No monopoly or oligopoly control of the airwaves is that no group of companies should own enough of the radio and television stations to prevent listeners and viewers from having a choice of material. So far is all good but they have not seen it put into practice as yet. As for censorship of the Internet, it is a bit more of a problem. Although there is not any censorship or control of the Internet under this Act, doesn't mean there isn't any censorship of the Internet.

Internet access was widely available and internet subscriptions totalled approximately 13.5 million at the end of 2006. However, criminal offence and preventive detention laws generated some self censorship from local Internet content sources. Examples are bloggers, Internet news providers and NGO campaigners. The Malaysian Communications and Multimedia Commission (MCMC) shut down 11 Web sites for breaking rules and regulations concerning the publication of information on the Internet. Neither the MCMC nor the government released the names of the 11 Web sites.

The CMA requires certain Internet and other network service providers to obtain a license. Previously, the government stated that it did not intend to enforce controls on Internet use but that it would punish the misuse of information technology. The CMA permits punishment of the owner of a Web site or blog for allowing content of a racial, religious, or political nature that a court deems offensive.

Besides that, almost all the newspaper companies are under a political control. This is where the politician uses the publications to spread their news to the public. The biggest press group was Media Prima which is owned by Malaysia Resources Corporation Berhad which has close ties with the ruling United Malays National Organization (UMNO) and government. Media Prima owns the leading English-language newspaper The New Straits Times, the second biggest Malaysia-language paper Berita Harian, Malay Mail, Harian Metro and the ShinMin Daily News. In addition, Media Prima owns four terrestrial TV channels.

However, the acquirement of Nanyang from MCA two years ago which is 2005 has since setup its monopoly in Chinese media. Sin Chew Media Group was being owned by the timber tycoon, Tiong Hiew King. He already corners about 90% of the Chinese language newspaper market, with his control of Sin Chew ,which publishes Sin Chew Daily and Guang Ming Daily, and Nanyang Holdings, which has Nanyang Siang Pau and China Press. As for The Star, it was owned by MCA while MIC owned Malaysia Nanban.

Economic environment

2009 will bound to be a very challenging year for Malaysia, although Malaysia's economy is holding up pretty well this year. The first half of 2009 is expected to be a very tough period for Malaysia. The impact on Malaysia this year has somehow been cushioned but many are beginning to feel the economic downturn towards the year-end.

Since the beginning of the global economic crisis, much has been said and published about its economic and financial impact, but relatively little has been said about the socio-economic impact. While it is not difficult to observe the direct and often immediate unpleasant social impact of the crisis, little is known about their indirect and long-term effect on the country's human development and social capital potential which are increasingly acknowledged in developing economies as a critical factor for sustainable development.

Economic pressures are becoming the primary forces determining the behaviour of Malaysian newspaper companies. It is increasingly clear that the responses of some newspaper managers are affecting journalistic quality, producing practices that reduce the social value of newspaper content and that redirect the atten­tion of newspaper workforce from journalism to activities primarily related to the business interests of the press.

This situation has promoted encouraged self-interested behaviour aimed at exploiting market potential, and there is a growing conflict between the role of newspapers as servants of readers and the exploitation of readers to seek additional com­mercial gain. It should not be surprising that the public increasingly sees the press as just another business that is more concerned with its own economic interests than with the broader interests of those it purports to serve.

This entry gives GDP growth on an annual basis adjusted for inflation and expressed as a percent. The graph above shows the overall performance of Malaysian in economy. We can see the economy started to drop from the middle for second quarter of 2008 till 2009.

(Source: CIA World Fact book, September 17, 2009)

The print media is already feeling the pinch of the economic downturn. Newspaper adex has fallen for four consecutive months from October to January 2009. In January, newspaper adex declined 4% year on year to RM258.6 million while total adex for the media industry as a whole (TV, radio and print) inched up 2% year to year. This means that newspaper companies suffered a bigger blow than other media channels.

As an open economy, Malaysia was badly affected by the global financial crisis and economic downturn. The major decline in exports, in turn, affected domestic demand. Thus, economic growth contracted 6.2% in the first quarter of 2009. However, the decline narrowed to 3.9% in the second quarter, assisted by speedy and effective operation of stimulus packages as well as monetary easing.

Economic performance is expected to improve in the second half of the year, supported by counter-cyclical measures and reinforced by stabilization in the global economic environment. As such, the economy is expected to turn around in the fourth quarter, though for the year it is estimated to contract 3%.

The current environment exists as the Malaysian newspaper industry faces an uncertain future because of inactive markets, increasing competition from other media for audience attention, use by progressively smaller portions of the population and changes in advertiser media choices. It is a common view that the newspaper business is elastic because people read the papers every day, regardless of the economic climate. People want to know the latest happenings in good times and bad.

It is expected to see a slowing down in adex in this year, 2009, with the absence of any major events, together with the weakening economic climate. The lower economic growth forecast has an effect on the newspaper industry including advertising. Last year's growth was driven by worldly TV adex (up 20%), newspaper (8%), radio (21%) and point-of- sale (28%).

Malaysia Advertising Expenditure Trends

Year 1997 to 2008

Circulation

Generally, there is a total newspaper circulation rise since 1998. The actual figure in appendix for 2008 should have rose higher though if the data from Nanyang, Malay Mail and Weekend Mail are included. Newsprint has 'not dead yet' and will co-exist with online media. The circulation growth has been steadily all these years which contributed by the increase of the population and the knowledge of society.

There are a few online news portals which without print circulation have been gaining huge popularity since last year. This creating a strong competition in online space compared to the print circulation. In English newsprint, The Star is still far ahead of everyone. As for The Sun, it considers that it offers free controlled circulation.

Competition in Malay circulation is only reserved for the 'big three' which similar to the online scenario shown in figure 2 at appendix. Harian Metro is gaining popularity in recent years. This had posed a challenged to Utusan Malaysia's top position. Another famous trend in the Malay segment is newspaper sales on weekends are generally much higher than working days.

Societal

About three million Malaysians visited local online news portals daily in March this year, compared with 2.5 million in the same month last year, according to comScore Media Metrix (digital marketing research company). While the figures quoted in May edition of OnMedia, OmicomMediaGroup's industry newsletter, were based on average daily readership for the online news sites over the past year from March 2008 to February 2009. In total, the average daily readership for local news portals for that period was about 2.8 million.

Malaysiakini led online English news sites with 91,943 average daily visitors over the past year. In second place was The Star Online with 74,417 readers a day. Malaysia-Today.net registered 12,948 readers daily, putting it in third place. The New Straits Times Online came in fourth with an average of 16,871 readers a day.

However, in fifth place was theedgedaily.com, the website of The Edge Malaysia, which averaged 3,844 readers daily over the past year. However, according to Google Analytics which monitors online site traffic, since its relaunch in March this year as theedgemalaysia.com, the site has averaged around 14,000 readers daily.

For the Malay-language online portals, Utusan Malaysia Online led with an average daily readership of 70,641 over the past year. It was followed by Berita Harian Online which averaged 55,764 readers a day for the past year. myMetro (the website of Harian Metro) averaged 51,767 readers daily, placing it third. ChinaPress dotCom was the most popular of the Chinese-language online news portals with an average of 29,950 readers a day. It was closely followed by nanyang.com which averaged 27,168 a day, and Sinchew-i which received an average of 23,779 readers a day.

Key points that emerged from the study, if price were not a factor and if their choice was restricted to paper, online, e-paper and mobile devices. Sixty-nine percent (69%) of respondents would pick traditional newspapers as their first choice for news consumption. While, twenty-nine percent (29%) would make online sources their first choice, with the remaining twenty percent (2%) opting for e-paper or mobile devices first. The gap between traditional newspapers and online was, however, significantly smaller for younger respondents.

"Both consumers and advertisers have demonstrated a willingness to pay more for high value, topic-specific publications than they would for newspapers providing general news only," wrote authors Marieke van der Donk and Marcel Fenez in the report's executive summary.

Financial readers were willing to buy financial online content for 97% as much as they would pay for a traditional paper. Meanwhile, sports fanatics would pay as much as 77% as they would for a traditional paper, for an online edition that focused on sports.

The study showed newspapers are still the major sources of news and information for consumers, with survey respondents listing almost equally television, the Internet, and newspapers (free and paid) as their main source of news and information. Moreover, all 4,900 respondents were willing to pay for the general print news content.

This is not to say that newspapers should not make the move online, said the report. Over 60% of respondents were willing to pay for general online news. Furthermore, based on the report's findings, a key future trend is the willingness of younger readers to pay for online content. According to the report, newspapers have been able to earn readers trust and loyalty, thus giving them the opportunity to both lead and follow audiences as they migrate online and into the use of portable electronic media like mobile devices.

It also noted that although the rapid adoption of the Internet and mobile technology have created a market for mobile devices, especially for those under 35, they are low on the list of preferences for accessing information because of the difficulty of reading content on these devices.

Malaysians are not giving up newspapers for the Internet. This research based on the data sourced from Nielsen Media Index from 2006 to 2008. It shows that newspaper consumption levels held steady all through 2008 despite the rise in Internet consumption.

Malaysian newspaper consumption holds steady despite Internet. It's written by Emily Tan, Tuesday, 01 September 2009 at 11:24.While the average time a Malaysian spends online has increased by 24% from three hours a day in 2006 to three hours and 46 minutes a day in 2008, the average time spent reading a newspaper has held steady at 49 minutes in the same time span. "There is no sign that Malaysians are shifting from newspapers to the Internet," said the report published in PHD's August newsletter — "PHD Pioneering". PHD is a media service agency under the Omnicom Media Group.

The PHD study found that Malaysians over the age of 30 spend more time reading newspapers and its about 50 minutes daily, while the teenagers and young adults read for about half an hour on average per day.

A few online news portals that without print circulation have been gaining a huge popularity since last year, creating a stiff competition in online space compared to the print circulation. As for English newsprint, The Star is still well ahead of everyone, considering The Sun offers free controlled circulation.

Newspaper readership in Peninsular Malaysia for the fourth quarter of last year (4Q08) grew about two percentage (2%) points to 55% from 52.9% in the same period in 2007, possibly in tandem with population growth of those aged 15 and above. Bahasa dailies seemed to have gained the most from the slight increase in newspaper readership, growing from 26.8% to 29.3% in the fourth quarter. English dailies saw marginal growth of 0.3 percentage point while Chinese and Tamil dailies saw a drop of 0.2 and 0.4 percentage point correspondingly. This is written by Aznita Ahmad Pharmy, Thursday, 05 March 2009, at 17:44.

Technology

On the other hand, the media industry is challenged by the rapidly changing environment, birth of new digital technologies and advertising money diverting to new media platforms on the internet. The local media industry has yet to capitalize on the full potential of the internet which will remain the fastest and the next powerful media platform, globally.

Largely driving this change is technological development but the industry is also being affected by the impact of globalization of media ownership, the phenomenal growth of the internet, and other ambient media such as outdoor, point of sale, television, bus and taxi sites.

The process of creating media strategies has become more complex and dynamic with the introduction of very highly developed software designed to optimize media selection against an unending range of criteria. There is a growing movement away from the use of simple age sex demographics for most media assumptions and an increasing appreciation of the need for a more holistic understanding of current and potential customers, including characteristics such as media usage, buyer behaviour, attitudes, lifestyles and interests.

According to Nielsen Media Index, while mainstream media continues to control the Malaysian media scene, the internet is fast catching up. There was a double growth in internet penetration which reaching up to two out of ten people compared to five years ago. The executive director for Nielsen Media Research Malaysia, Andrea Douglas said that internet will become a more important part of the media mix with its continuous growth in the market.

She added that Malaysians are decided to go on online news for faster and constant updates. This can be seen by the 35% growth in online newspaper readership over a year, reaching one million readers. Those who only read news online exclusive online newspaper readers, it grew from 55,000 to 70,000 in 2008. The index signified a 21% increase in internet users with almost four out of ten users spending one to two hours on the internet every day. Increasing internet penetration goes hand-in-hand with increased Internet usage.

However, news seekers have not abandoned the traditional medium as nine in 10 readers still obtain their news through a hard copy. Apart from more common features such as email, surfing and information gathering, the popular activities for citizen are online TV/music/games (47%), followed by message/chat/blogging (45%) and reading newspaper/magazines (35%). Within the Top 10 categories, nine categories advertised online but the spending only between less than 1% and 3% of the total budget online.

Newspaper industry players have to constantly evolve themselves to stay ahead by improving technology and addressing readers' preferences.

The second Finance Minister, Tan Sri Nor Mohamed Yakcop urged the industry to play actively its role by involving themselves in developing the digital medium instead of ignoring it. He said it in his keynote address at the Malaysian Newspaper Publishers Association forum.

Nor Mohamed said that with the online global reach, publish news about the country's development became faster and easier. He added that to promote Malaysia as a developing and stable nation to potential foreign investors, information reported must be accurate. This image would be able to attract more foreign investments and visitors in Malaysia.

As for Group M chief executive officer, Henry Tan said that as technology drove change, consumers, media, media agencies and clients were changing as well. New generation was created by new technology while new media structure and ownership will strengthen competition. The role of media agencies has expanded to more than just planning and buying media spots. Agencies also have to recognize changes in clients and deal with each one differently.

Dow Jones Asia-Pacific sales director, Mark Hollands said change was not uncommon in the print media which comprised it to be better and more efficient.

Potential new revenue stream and the branding improvement from a strong online presence in the combination of global trend, these have seen that local traditional news organizations begin to put more resources on the online platform. Besides, they also hired people who recognize the benefits of Web 2.0 applications such as social networking site Facebook, and Twitter, the so-called SMS of the Internet.

The growing popularity of online news sites where readers can read for free is one reason decision-makers at traditional news organizations find it very hard to raise cover prices for their printing product. A drop in circulation numbers directly impacts the advertising rate which a publication commands.

According to the On Media newsletter, the circulation numbers from Nielsen Media Research signified online news portals have not affected print newspaper that much though online readership has increased rapidly over the past year. At present, online news sites still do not enjoy the level of loyalty and commitment shown by readers to newsprint. Online readership tends to change based on economic, political and social events, said the newsletter. Based on Nielsen Media Research and Com Score, the newsletter concluded that readers spend less time reading online news than print.

About three million Malaysians visited local online news portals daily in March this year, compared with 2.5 million in the same month last year according to ComScore Media Metrix, a digital marketing research company. The average daily readership for local news portals for that period was about 2.8 million. Malaysiankini led online English news sites average daily visitors over the past year. As for The Star Online was placing second. Utusan Malaysia Online led Malay-language online followed by Berita Harian Online. As for the Chinese-language online news portals, ChinaPress dotcom was the most popular. There are more on societal changes.

Managing director of Omnicom Media Group, Andreas Vogiatzakis said that newsprint have little to fear from online news portals. He said that newspapers must learn to pull on their online portals to add value and enhance their offerings to the consumer.

The industry has seen a decline in newspaper adex over the past three years, from 58% in 2006 to 54% 2008 said the Nielsen Co Malaysia executive director Andrea Douglas. She said that the reasons for these changes are difficult to said but some categories have changed their spending patterns. There has been a decline in residential ad spending due to the economic downturn and this category is almost fully print advertising. The web has introduced new advertising potential and new media that could be eroding the traditional print share.

According to Nielsen Media Research, newspaper in Malaysia has a mainly younger readership, with 65 per cent below 40 and 35 per cent of its readers are above 40 years. Percentage of newspaper readership between 20-29 age is the highest while the age between 50-54 is the lowest percentage of newspaper readership.

According to Nielsen Media Research, newspaper in Malaysia has a mainly younger readership, with 62 per cent below 40 and 38 per cent of its readers are above 40 years. Percentage of newspaper readership between 20-29 age is the highest while the age between 50-54 is the lowest percentage of newspaper readership.

The readership of age above 55 years old in 2006 increases 3.5% compared with the readership of age 55 years old in 2005. The old generation between the age of 55 and above are still enthusiastic supporters of newspapers while the younger generation appear to be much in tune with computers and the internet. The newspapers are not only challenged by online websites but also the electronic media having regular updates in the news bulletin. Many youngsters enjoyed reading serious news on the internet rather than from the newspapers. Hence, newspaper publisher should focus on public from the age of 55 and above.

According to a statistic from Department of Statistics, Malaysia, the population of Malaysia is increasing. The population of age 15 and below is decreasing every year. The decreasing rate of year 2002 to 2004 is 0.3% whereas the decreasing rate of year 2005 to 2008 is 0.2%. The population of age 64 and above is increasing every year by 0.1 % except for the year 2005 and 2006 which remain same at 4.3%.

The same pattern of readership frequency could also be observed among the respondents with different educational backgrounds. According to The Public Awareness of Science and Technology Malaysia 2000, the frequency of newspaper readership continued to be the highest among those with tertiary education where 60.0% of them read the newspaper daily. This was followed by those with secondary education (44.1%) with the lowest frequency (28.1%) among those with primary or lower education.

In terms of locality, The Public Awareness of Science and Technology Malaysia 2000 also revealed that 49.3% of the urban respondents read the newspaper daily compared to those in rural areas (39.8%). On the frequency of readership, the opposite situation could also be observed in the other categories (a few times a week, once a week, or seldom). For example, about one-third (32.1%) of the rural respondents and similarly about 34.4% of the urban respondents read newspapers only a few times a week.

  1. Identify the rivalry currently exists in the industry in which the company is operating.
    1. Are there many competitor or just a few competitor or no competitor?

There are many competitors around Star Publication. For instance, Berita Harian, Guang Ming Daily, Sin Chew Jit Poh, The Sun Daily, Utusan Malaysia, and also New Straits Times. The largest Star Publication newspaper competitor is the New straits Times.

The "sell" recommendation of analysts on Star Publications (M) Bhd are the country's largest and most profitable print media group and as well as other media stocks, such as Media Chinese International Ltd and The New Straits Times Press (M) Bhd, shows the current negativity on the industry's earnings prospects in the coming quarters, if not years.

The Nielsen Media Report shows that Star's gross adex dived 20.6% y-o-y in January. Citi Investment Research's analyst Alyson Shin has noticed that the page count for classified advertisements, which make up 25% of Star's advertising revenue, has fallen 33% to 40 pages from 60 pages in better times.

Alyson Shin mention that Star has raised its advertising rates by an average 4% for both classified and display advertisements for the heavier days which is Wednesday to Saturdays. "However, this is unlikely to be sufficient to offset the drop in adex in FY (Financial Year) 2009. Factoring in the 4% ad rate hike, we still forecast adex to contract 12% in FY2009," Alyson Shin comments in a February research report.

Over the past two decades, Star has grown by shooting up and bounds in terms of earnings as well as manpower, after its English daily, The Star, overtook its main rival New Straits Times. The group's fixed operating costs have blown up. Its total operating costs that inclusive of printing and the newsprint have been above RM600 million in the past three years. This ascend to RM651.2 million in FY (financial year) 2008 versus revenue of RM831 million and net profit of RM138.9 million.

The high fixed cost structure is a blessing for the group when advertisers are fighting for space in the newspaper because of the profit margin is getting bigger as the advertisement relative amount rises. Star has been the case this for over the past 10 years. It is the country's most profitable newspaper with a handsome pre-tax profit margin of 24.2%, compared with its rival NST (New Strait Times) which manages only 9.5%.

NSTP lost much of its thump over the past 25 years, especially on two separate occasions. During Operasi Lalang in October 1987, Star Publications (M) Bhd's licence was revoked under a plan to crack down on the opposition leaders and social activists. After Star got back its licence, its readership and circulation surged. According to Nielsen Media Research, as at end-2008, NSTP's flagship newspaper New Straits Times had a readership of 308,000 while New Sunday Times' readership stood at 263,000. As at end-June last year, New Straits Times' circulation, according to the Audit Bureau of Circulation, stood at 136,530 while that of New Sunday Times was 156,910.

These figures cannot rival that of its main competitor, Star Publications, which had a readership of more than one million for both its daily and Sunday paper. Star's circulation was over 300,000 daily.

    1. Are the products/ services offered by company very much different from its competitors in terms of price/feature/others.

KUNTUM

An educational monthly in Bahasa Malaysia for children ages 6 to 12. In keeping with its "Learning is Fun" motto, the Kuntum Club organises many fun activities and holiday outings for its members each year. Kuntum is sold at RM2.00.

SHANG HAI

Commonly regarded as the most authoritative Chinese language business monthly in the country. Priced at RM5.00 (West Malaysia) / RM5.50 (East Malaysia) / S$5.00 (Singapore, incl. GST) / B$5.00 (Brunei), this magazine focuses on the latest economic, social, political and business issues and is well-read by many businessmen and executives.

(Shang Hai was first published in March 1979)

GALAXIE

A light-reading forthnightly English entertainment magazine which has become a hit with teenagers and young working adults. This magazine costs RM3.00 (West Malaysia) / RM3.50 (East Malaysia) / S$2.00 (Singapore, incl. GST).

(Galaxie was first published in October 1974)

FLAVOURS

A bi-monthly magazine on good food and fine dining, with recipes of local and international cuisines, interviews with renowned gourmets, snippets on nutrition and a directory of restaurants and eating spots in town. Flavours can be obtained at the newsstands for only RM10.80 (S$5.50 in Singapore, incl. GST).

(Flavours was acquired in July 1995)

In similarly, both the Star and the News Straits Times provides online website with updated news from time to time. Besides that, these two company also provides advertising service through newspaper or online. In particularly, the New Straits Times doesn't have other type of publications like the Star.

  1. How the company copes with the competition?

Circulation

The New Straits Times Press (NSTP) lost much of its authority over the past 25 years, especially on two separate occasions. During Operasi Lalang in October 1987, Star Publications (M) Bhs's license was cancelled under a plan to crack down on the opposition leaders and social campaigners. After Star got back its license, its readership and circulation suddenly increased.

NSTP which is frequently seen as the government's mouthpiece lost more circulation and readership during the trial of former deputy prime minister Datuk Seri Anwar Ibrahim in the late 1990s. It has not really recovered since then.

According to Nielsen Media Research, at the end of 2008, NSTP's flagship newspaper New Straits Times had a readership of 308,000 while New Sunday Times' readership stood at 263,000. At the end of June last year, New Straits Times' circulation, according to the Audit Bureau of Circulation, stood at 136,530 while that of New Sunday Times was 156,910.

These still cannot rival its main competitor which is Star Publications. Star had a readership of more than one million for both its daily and Sunday paper. Star's circulation was over 300,000 daily. In terms of circulation, the free paper The Sun has surpassed NSTP's flagship paper, making the latter a poor third and unable to command much advertising revenue. Below was the table of circulation of The Star and other newspapers. The figure was shown in appendix.

STAR Economic - RECESSION

Star executive deputy chairman Datuk Clement Hii said that it is fortunate that Malaysia has escaped the worst of the global recession but did not completely avoid its outcome. In the industry, whether is print or electronic, they suffered in the first quarter but are now seeing an increase as optimism returns and with that, consumer and business confidence.

Revenue is expected to grow as advertisers regain their equanimity from recession. The sign is already there and has become more pronounced in recent months while top-line growth is important, it has to be matched by cost containment. They are already tackling that in terms of newsprint and staff.

Revenue

In revenue, Star showed double digits gain in spite of the decline in earnings. In 3Q revenue which is RM243.8 million, it was 20.1% higher compared with RM203 million a year earlier which a marginal gain of 0.2% from 2Q. From the nine months period, the total revenue was RM 659.4 million,

As for New Straits Times, a 15% rise in 3Q net profit from a year ago which reported by the New Straits Times Press (Malaysia) Bhd (3999). This is due to the driven by better revenue and higher operating income. They are confident that it can be done better in the 4Q this year as the economy is expected to continue stabilizing before growing further by 2% to 3% in 2010. The group said to the press release that continue to have improvement in advertising revenue together with lower newsprint costs enable the group to register better financial results in the 4Q this year.

According to ECM Libra Research, the Star higher revenue was due to continued improvement in advertising expenditure (adex) in the 3Q. The Hari Raya holidays in September would have contributed positively to the improved y-o-y (year-on-year) and q-o-q (quarter-on-quarter) performance in terms of revenue.

NET PROFIT

NSTP posted a net profit of RM18.5 million in 3Q09 was higher than 3Q08 for RM16.1 million. The revenue was up from 1.2% to RM150.4 million. Although the revenue grown 7% in the 2Q09, it is still lower compare to Star Publication. For 9M09, NSTP made a net profit of RM26.2 million was down from RM40.2 million a year ago. This was mainly because of the first quarter losses and high newsprint cost.

Besides, ECM Libra Research was stated that the fall in profits was due to lower revenue from the print and electronic media division and higher printing cost and other cost of sales from the event management and exhibition services sector. The signs of recovery in the economy could result in further improvement in adex figure for 4Q09. Results in more advertisements being placed for adex should have some improvement considering that the Christmas and New Year holidays fall in the last quarter.

Moreover, the research firm said that Star could benefit from a possible decline in newsprint cost in 4Q which given that newsprint prices had fallen since late June. Industry players had suggested that higher costs news print stock should have been used up in 3Q and this would result in falling costs in 4Q.

ADVERTISING REVENUE

Based on Star executive deputy chairman Datuk Clement Hii, the advertising revenue on a quarter-on-quarter is improving, he hopes that the trend will follow into the final quarter of the year. From second quarter into the third quarter were stabilized. He added that the improvement should be given to their active management of newsprint supply, the huge drop in global newsprint prices and their engagements with handling staff costs.

The newsprint prices have significantly fall since the start of the year and have only recently rebound off multi years lows. The lower cost of paper will improve cost pressures in the coming quarters. While for the staff cost, a decline in headcount plus other cost-cutting plans are helping but as the economy expends and as we roll out our expansion plans, that strategy will need to be reconsidered.

Previously, staff motivations such as ex gratia which is given as a favour where no legal obligation were paid out across-the-board based on the company's performance and not individual performance. They have changed to undertaken a system that will reward and incentivize those who have performed well based on both the company and the individual's performance. In the long run, this will increase the productivity. This should send a strong message that they will reward hard work and diligence and it is also a fairer system.

Improve Distribution Channel

Distribution channel is the network of the interdependent companies through which a product passes from producer to end user. There are many different kinds of distribution channel members involved in getting products to buyers and the channel used by The Star to cope with the competition is direct distribution.

In direct distribution, the product travels from the producers to the consumer without intermediaries. The Star now directly offers its news through the multi-channels, such as The Star Online and also SMS news alerts. The Star Online is an information portal on the internet where the news was distributed over World Wide Web, on PDAs and via hand phones through SMS, WAP and wireless Internet access.

Beyond this, The Star has also directly offers its news to the Bahasa Malaysia speaking readers with the introduction of mStarOnline and also mStar SMS news alerts as they recognise the importance of contributing to the development of the national language.

By using this channel, The Star are much strong than its competitor because they were the first to go online in Malaysia.

Star Publication new product

Malaysia's Star publications launch mobile portal

Kuala Lumpur, Feb 16, 2007 (PTI) Star Publications (M) Bhd, the publishers of Malaysia's top English daily, have launched the Star Mobile portal, a brand new way to enable the public to keep pace with the latest news.

The portal, which utilizes 3G (third generation), WAP (Wireless Application Protocol) and mobile technology, lets users access selected content from The Star newspaper through their mobile phones. This includes news, sports updates, business news, and the latest buzz in lifestyle and entertainment. Special downloads such as ringtones, wallpapers, horoscopes and jokes.

On Jan 3 2008, we launched Studio V in One Utama to showcase the wide range of contents available in the various sections of the newspaper, the numerous portals in The Star Online, our Bahasa Malaysia website mStar Online and our three radio stations (Red FM, 988 and Suria FM). The two-storey outlet in the shopping complex boasts a modern studio for video recording and live radio transmission and an interactive area for video games and sponsored events.

TECHNOLOGY

On the other hand, the media industry is challenged by the rapidly changing environment, birth of new digital technologies and advertising money diverting to new media platforms on the internet. The local media industry has yet to capitalise on the full potential of the internet which will remain the fastest and the next powerful media platform, globally.

Globally, the media industry is embarking on one of the most significant and dynamic eras of change. Largely driving this change is technological development but the industry is also being affected by the impact of globalisation of media ownership, the phenomenal growth of the internet, and other ambient media such as outdoor, point of sale, television, bus and taxi sites.

At the same time each of the main media is increasing in complexity. Electronic media will be subject to the introduction of digital transmission and reception which, amongst other things, greatly increases the number of channels available for broadcasting and introduces the option of complementary data casting services. All of these need to be measured appropriately so that audiences can be clearly and accurately understood by media owners, planners and buyers.

The process of creating media strategies has become more complex and dynamic with the introduction of very sophisticated software designed to optimise media selection against an unending range of criteria. There is a growing movement away from the use of simple age sex demographics for most media assumptions and an increasing appreciation of the need for a more holistic understanding of current and potential customers, including characteristics such as media usage, buyer behaviour, attitudes, lifestyles and interests.

Maybe newspaper publishers could publish different editions targeted at different age groups. Thus one can have a youth edition, different from the normal editions. Both the editions may get different sets of advertisers targeted at each group. Currently, readers buy one full newspaper. Instead of that, imagine you can choose the pages you want to read and pay only for them.

Newspaper vending machines are in vogue in many parts of the world and, with the present technology it is not difficult to have a vending machine which displays the pages of the day's newspaper on a screen. After deciding which you want a full view of, you can punch in the page numbers and pay only for those. If newspaper publishers and the advertisers come out with other similar changes, the fortunes of newspapers might change for the better.

WAN-IFRA releases digital media reports

The World Association of Newspapers and News Publishers (WAN-IFRA) has released two in-depth reports on digital media opportunities for income and audience growth. World Digital Media Trends, and Winning Mobile Strategies, from WAN-IFRA's Shaping the Future of the Newspaper project, are companion volumes that provide publishers with new insights into the growth and value of digital platforms.

The annual World Digital Media Trends includes data from 54 research partners that maps out the world¹s media and advertising landscapes, media usage trends on different platforms, and their impact on the newspaper industry.

"As technology accelerates change, publishers today are tasked with making good decisions quickly, and this report aims to better inform those decisions," said Martha Stone, director of the SFN project.

Winning Mobile Strategies

Winning Mobile Strategies, provides case studies of how newspaper companies are making money from mobile today, and examines the new opportunities that are rapidly emerging.

As mobile telephones evolve into hand-held computers, newspaper companies are well placed to exploit the growing opportunities provided by mobile online access ­ which could prove to be a more effective way to reach news consumers than through traditional websites, the report says.

"Although each market around the world has its own variables, they all have one thing in common: each day, the number of people who cannot live without their mobile goes up," says the report.

Winning Mobile Strategies is available exclusively to members of WAN-IFRA, which was created in July by the merger of the World Association of Newspapers and IFRA, the newspaper research and technology organisation. Members can download the report, and other members-only Strategy Reports on a variety of subjects, using their existing WAN and IFRA access codes, from www.futureofthenewspaper.com

INTERNET

The Star has get on multimedia more aggressively this year. It has benefited from the first mover advantage in the sphere of the Internet that they were the first English newspaper to have an online edition. The viewership online has grown over the years to an average 55 million page views a month.

Star online presence is important. It is because the Star is the third most visited Malaysian website in the country. Even with such honor, there is still room for more work. Their number one priority is to monetize such huge online numbers.

They have also managed to get Multimedia Super Corridor (MSC) status for three of their companies. These companies are involved in the development and management of various Internet portals and the MSC status will help in terms of achieving significant tax savings.

The Daily Chilli (theStar online) is a representation of what Star intend to accomplish and according to Datuk Clement Hii, the portal is off to a great and exciting start. It has produced two million page views already since its first appearance just four weeks ago. They have also just launched a new property portal and a jobs portal is in the works.

ONLINE PORTALS AVAILABLE

www.star-motoring.com

Star Publications has a stable of lifestyle portals that cater to Malaysians in many ways. Star-Motoring is a one-stop centre for motoring information to meet the needs of the ever-increasing number of vehicle owners in the country. Here, visitors will find the latest motoring news, information and reviews.

www.kuali.com

Kuali offers a large selection of recipes from various cuisines for all occasions! Visitors can also dig into reviews of popular and new eateries in Malaysia, making this portal a must-visit for food lovers.

www.allmalaysia.info

AllMalaysia.info is a comprehensive online guide and gateway to fascinating Malaysia with detailed information on culture and arts, places of interest, accommodation and other essential information about our country. It is a complete online resource for information on

Malaysia with easy access via hyperlinks to government agencies and civil organisations that promote social, political, cultural and economic development.

www.globalmalaysians.com

Global Malaysians Network (GMN) is an e-community for Malaysians to develop and foster social and business networking, besides leveraging on resources that Malaysians can offer other Malaysians wherever they are in the world. It aims to achieve this through knowledge exchange, a contact network, skills matching, investments and commercial joint ventures.

www.mstar.com.my

mStar is a Bahasa Malaysia portal that targets urban Malaysians, allowing them an experience of the latest in interactive technology innovation in a language they are familiar with.

www.star-jobs.com

Star-Jobs Online is a recruitment portal that helps human resource executives save time and money by eliminating resume flood, thus allowing recruiters to focus only on the most suitable and relevant candidates.

www.clovetwo.com

For those who have enjoyed Clove - The Star's monthly women's pullout, CloveTWO (Total Woman Online) is a place where you get to talk about love and relationships, toast the glitz and glam of the social world and learn some great R&R tips along the way. You will love the interactive zone too.

www.galaxieblog.com.my

Galaxieblog, gives gossip junkies their daily dose of the latest low down on the local and international scene. Share your views with our bloggers.

www.star-space.com

Our Home & Property portal features everything you ever wanted to know about the best places to live in Malaysia. Whether you are buying or selling property, we offer the most effective way to go about it. Our lifestyle guide points busy consumers to the best suppliers, while our vast storehouse of information on home financing, renovation, décor, gadgets and security measures offers the perfect environment to highlight your products or services. (Source: http://thestar.com.my)

  • SWOT ANALYSIS

S - Strength

As mentioned earlier, this is an internal factor which deals with the strengths within its owned business, operation, production floor or department. It is internal because it takes into considerations the level of capabilities in handling an identified issue. All if not most of the time, these issues are well within their circle of influence.

The competitor are not any competitor but we would pick one that is a ahead of the organization which is the New Straits Times Press. The reason is that we have to either maintain my competitive position or to catch up with the competitor.

The Star was the first Malaysian newspaper to establish its presence on the internet with an online version, The Star Online (www.thestar.com.my) which was launched on June 23, 1995 to serve and link Malaysian globally. This website is a popular source of information and is regularly accessed by people worldwide. Also as part of The Star's expansion in the plan electronic world , an 'e' version of the newspaper, The Star e-paper was launched on June 1, 2004.

Star Publications acquired Star RFM Sdn Bhd in September 2002 to complement its offerings as an integrated media company. Star RFM the highly popular Chinese radio station, 988, and the hip English radio station, Red FM. Star Publications has 70% stake in Suria FM, a Bahasa Malaysia radio station, which was launched in December 30, 2005.

Studio V, a tangible brand extension of The Star Media Group, aims to add value to the core business by delivering multimedia and radio content. Located at 1 Utama Shopping Centre (Rainforest), visitors to the shopping mall get to watch DJs hold interviews and spin music, which can be broadcasted live to radio and internet. Other activities like checking out the news and content on The Star Online & its various portals, games consoles are also available.

Today, Star Media Group is a large media entity with a strong newspaper and online presence, popular lifestyle portals, a selection of magazines and a stable of innovative radio stations.

Star Awards

Star Online runs Windows Server 2003

Malaysia's most popular news website, The Star Online, deploys Microsoft .NET Enterprise Servers to increase content offerings and capabilities to better serve web surfers all over the world.

The Star, Malaysia's most-read English news daily, was the first to offer readers an online version of their newspaper. Starting out with two PCs and a hosted server, The Star Online (http://thestar.com.my) has grown to 200,000 registered users, 20 million page-views per month, and has won the @MY award for Most Popular Local Website for two consecutive years (2000 and 2001).

To keep up with this intense growth and to be able to handle mission-critical functions as well as 24x7 availability, I.Star adopted the .NET Framework, which has allowed them to maintain constant availability, introduce a wide range of customer services, manage mounting traffic and obtain significant savings in administrative time and cost.

The Star Online

Online Version of Malaysia's Most-Read Newspaper, The Star and winner of The @MY Most Popular Local Website Award for 2000 and 2001 (Source: http://thestar.com.my)

W - Weakness

In the past, newspapers have tried to increase circulation in outlying and scattered areas. By touting circulation figures they hoped to attract advertiser. The cost of generating these numbers has proved to be heavy for the newspaper. On the other hand, over the years, advertisement media buyers and planners have reduced their dependence on absolute readership numbers.

Instead, they look they look at the qualitative aspects of the targeted readership. No wonder the elusive advertiser is much more inclined to use other less expensive media for the quality and quantity reach instead of depending on traditional media like print.

Thus, if inconsequential circulation can be reduced even by a percentage, it would be a great savings for the beleaguered industry. Yes, it also means leaving vacant spots to smaller local players. But then perhaps it is the only way for the market to evolve.

Secondly, the revenue earned from the cover price after distributor commission recovers only a small part of the cost of production and distribution. If the cover price cannot be tinkered with for fear of losing circulation, then the industry must look at the question of page level. In these tough times it would be a folly to assume that advertising revenue will make up for all the shortfalls.

O - Opportunity

This is an important factor to identify opportunity as a result of external influence. It is often leads to more business or investment as well as opportunity for innovation of products and services. Due to the fact it is external, many assumptions is used. In real life application, there are cases where opportunities derived from operation are classified in into this Opportunity factor.

Higher economic growth will translate to higher ad spend and as The Star authorize a large share of the adex market, Star Publications (M) Bhd executive deputy chairman Datuk Clement Hii expect that trend to continue give the improvements that they have undertaken to make The Star a fresher and better read. Cost will likely to be reduced as newsprint prices come down apart from rising advertising revenue.

Their investments and expansion into the Internet will gather speed built on the momentum already established by the Daily Chilli and their various online portals. More resources will be ploughed back to tap the synergistic benefits of these ventures. They are mindful of the costs involved in building an impactful online presence.

The Star is intense to monetize its online ventures by a greater degree, going forward, by tapping into its existing large database. They are also acutely aware that the vernacular newspapers especially the Malay papers have made huge strides in circulation. In this light, they own a Malay newspaper license and plan to gingerly test the market to see how best they can reap benefits from such a venture. Their successful M Star is only the tip of their plans.

Besides, The Star now has RM750mil in cash or cash equivalent. It has the highest cash reserves in its entire history. This comes about because of a new prudent purchasing policy, cost-cutting measures and careful utilization of cash resources. The huge amount of cash reserves must be managed carefully.

The financial muscle has served them well in ensuring operations remain smooth for being primarily a publisher. As for the extra cash, it enables us to make acquisitions and undertaken expansion to widen their future revenue and income base. But, this plan will thoroughly examine and scrutinized. They will squeeze every drop of profit from every ringgit they invest.

Their healthy cash position will also come in handy as it gives them the option of redeeming their bonds due next year which should they decide not to turn over their debt obligation. There's also the option of hitting up dividends to reward their loyal shareholders but of course, that's a decision for the board to evaluate.

New Strategy for Print Media

Today web is a data retrieval tool for the people who are looking for specific information. They know the basic facts of news as it happened and would be interested to know what would happen tomorrow. They would spend more time on a newspaper, if the content is more compelling. It is the transient nature of the message on electronic media that drives audience to look for corroboration and authenticity in print or visual text. Therefore, editors could craft a new, forward looking role for print, alongside what is happening-right-now focus of digital news.

Modern newspapers must be compact; a less-is-more approach would help cut newsprint, printing, distribution and other costs that do not add to the journalism.

As for the revenue to sustain print media, it will have to come from a high degree of integration between the static and the dynamic mediums. For example, a dynamic browser tool-bar may aggregate news from different sources, allowing not only targeted advertising but also for charging micro-payment from readers.

In the true sense of the word no two media can be rivals. New technology rarely replaces the previous technology completely. As both print and digital media is completely dependent on computers for their production process it would be easy for both to be complementary to each other. The wise perspective would be one of digital and print media rather than digital versus print media.

T - THREAT

Present

According to the Financial and Market Share Performance stated in the Annual Report 2008 of Star Publication (Malaysia) Berhad, the company enjoyed encouraging growth during the first half of 2008. But it was not secured the onslaught that came in the second half of the year. The global economic downturn has affected the revenues of the company for the year ended 31 December 2008. The Group revenue rose by a mere 3.1% to RM831.04 million from RM805.87 million in 2007. Besides, the company's pre-tax profit fell 9.8% to RM201.46 million from RM223.37 million. These will result as the impairment losses on goodwill from achievement of subsidiaries. A higher tax rate of 31.2% in 2008 compared to 24.4% in 2007, mainly due to the reinvestment allowances being fully utilised in 2007, further contributed to a lower Group profit after tax of RM138.70 million against last year's RM168.88 million. Apart from that, the net asset backing per share as at 31 December 2008 dropped one sen to 164 sen against 165 sen the year before.

Prospects

2009 is expected to be a tough year for the Group with the impact of the global financial crisis according to Annual Report 2008 of Star Publication (Malaysia) Berhad. This is due to the global financial crisis is being more severe than triggering concerns of recession and lack of financial liquidity in the economy.

According to the Malaysian Institute of Economic Research ("MIER"), monthly indicators have been losing momentum and industrial output has contracted. It also reported that consumer and business confidence have dropped sharply. Consumer Sentiments Index dropped by 17.5 points compared to 88.9 points in the third quarter of 2008. This has greatly affected The Group's newspaper sales. The dismal sectored indices compelled MIER to adjust estimated GDP growth for 2008 from 5.5% to 5.1%.

After carrying out extensive research on this industry and company, if I was the investor of company, I will NOT invest in this company. Even though the economy recovering which according to the ECM Libra investment research, the sign of recovery in economy could result in further improvement in adex figure for 4Q 2009.

Economy recession took a long period to recover so we will not take the risk to invest in this company. The revenue increase from 3Q 2008 to 3Q 2009 was due to advertising expenditure (adex) which Hari Raya holidays in September could have contribute positively to the improved year-on-year and quarter-on-quarter performance.

Since the revenue increases during the 3Q, it doesn't mean that the revenue will continue to increase to the next quarter.

Meanwhile, Star's net profit for the third quarter ended Sept 30, 2009 (3Q 09) fell 17% to RM32.61 million from RM39.09 million a year earlier due to lower revenue from the print and electronic media division, higher printing cost and lower margins from the events, exhibition, interior and thematic division.

KUALA LUMPUR: The New Straits Times Press (M) Bhd posted net profit of RM18.49 million for its third quarter ended Sept 30, 2009, an improvement from a year ago and on-quarter basis, underpinned by higher revenue, lower operating expenses and higher other operating income.

NSTP said on Tuesday, Oct 27 that 3Q net profit rose 14.9% from RM16.09 million a year ago and up 74.7% from the second quarter's RM10.58 million.

Earnings per share were 8.51 sen compared with 7.41 sen a year ago. Its net asset per share was RM4.60.

For the nine-months ended Sept 30, 2009, the group posted net profit of RM26.16 million, down 35% from RM40.24 million in the previous corresponding period due to operating loss in the first quarter amid the weak economic scenario at the beginning of the year.

On the prospects, NSTP said the continued stabilisation of the economy seen in 3Q and the expected improved economic conditions would enable the group to continue delivering better operating performance for the remaining quarter of the year.

"The improvement in advertising revenue, lower newsprint costs, strong performance of Harian Metro and the impact of the effective cost management initiative implemented early in the year should enable the group to register better financial results in the fourth quarter of this year," it said.

On Oct 16, MEDIA PRIMA BHD (MPB) announced the notice of conditional voluntary take-over offer to acquire all the remaining NSTP shares, not already owned by MPB at an offer price of RM2 per NSTP share.

This would be on the basis of one new MPB share for every one existing NSTP share held at RM2 per MPB share and one new free MPB warrant for every five offer shares accepted. NSTP said of to date, MPB had not yet formally issued the offer document.

Malaysia scrambles to head off reces


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