Singapore Press Holdings bloodied and confused, part 1

The deterioration of Singapore Press Holdings’ (SPH) fortunes has long been expected. As the monopoly publisher (now that Mediacorp’s Today has gone totally digital) of all Singapore’s print newspapers, not only is it suffering the same headwinds from digital that newspapers around the world have been experiencing, it has lost all sense of journalistic mission. Partly, this loss was due to demands of the Singapore government for government-friendly coverage, but partly too, its monopoly position — the flip side of its Faustian bargain — has eroded whatever competitive instincts it might once have had.

For these reasons, I am very doubtful that there is any blue sky ahead however many cost-cutting exercises SPH’s management performs. The problem isn’t cost; the problem is the brand and the impossibility of doing a proper journalistic job. Part 2 of this essay will expand on this.

In this Part 1, I will talk about cost-cutting.

SPH’s financial results for FY2017 (i.e. the year ended 31 August 2017) show that revenue from its media operations declined 13.0% from FY2016. Even though revenue from property — its other major operational activity — remained stable, (+1.2%), overall operational revenue declined 8.2%. Without corresponding reduction in operating costs, operating profit shrank 32.7% from the year before.

Profit before taxation increased 19.5%, but this was mainly boosted by a one-off gain from divestment of a joint venture. The $149.7 million gain came from the sale of the group’s stake in the online classifieds business in Malaysia, Vietnam and Myanmar. One wonders: Is this the start of jettisoning assets to raise cash? Stripping off the boost, pretax profit for FY2017 would be 22% below that for the preceding year.

It should be noted that the fall in operating revenue from its media business is all (or almost all) due to the fall in advertising revenue. Circulation is holding up, as noted in this blogpost. In the case of Straits Times/Sunday Times, SPH’s leading title, there is a steady migration from print to digital. It may be that digital has much less acreage for advertising, and/or that reader behaviour in digital is very different from print. Digital readers may spend less time, and may be more selective of what they choose to read; and advertisers calculate accordingly. This issue — digital behaviour — cries out for more detailed study. That said, it is not a phenomenon limited to SPH. In this CNN post, the same situation is described for the New York Times.

Almost as soon as the results were announced, it was also announced that SPH would accelerate its job cuts.

Media company Singapore Press Holdings (SPH) said on Wednesday (Oct 11) it would cut 230 jobs by the end of the year as it accelerated a plan to lay off staff.

Like other media organisations worldwide, SPH’s core newspaper business has been hammered by the proliferation of online publications, with its advertising revenues and circulations falling.

The job cuts unveiled on Wednesday were part of 400 lay-offs previously announced, about half of which had already been made.

But SPH originally planned to axe the remaining jobs by the end of 2018 — now all the cuts will be made by the end of this year.

— Today newspaper, 12 October 2017, Singapore Press Holdings to cut over 200 jobs by year-end. Link.

Many comments on social media focussed on how the retrenchment exercise is being directed by SPH chief executive Ng Yat Chung, the same chap who led Singapore’s erstwhile shipping line Neptune Orient Lines into the Mariana Trench. NOL’s FY2015 loss (continuing operations) was US$218 million on revenue (continuing operations) of US$5,383 million, i.e. a loss equivalent to 4% of revenue. NOL was sold to French group CMA CGM in 2015/2016, right at the bottom of the maritime business cycle, when global overcapacity was at its worst.

SPH indicated that it aimed to reduce 15% of its staff in its core media departments to reduce costs by 8 – 9%. The axe began to fall in the same week.

Cutting payroll costs

It is possible that SPH has been operating with too much fat and the payroll really needs to be trimmed. But the main suspicion is that Ng does not know how to run a business, particularly a media business. For example, there is no hint that cost reduction via across-the-board salary reduction was ever considered. The same 8 – 9% payroll cost reduction can be achieved by everybody taking a pay cut in view of lean times. In such an arrangement, the lowest-paid may have to take, say, a 2% pay cut, while the highest, perhaps 25%. You’d still achieve the 8 – 9% payroll cost reduction overall.

Many companies have taken this route in hard times. The big advantage this method brings is that skills and institutional knowledge are retained in readiness for the upturn. Having many hands on deck can help power a recovery. It also has the advantage of reinforcing esprit de corps, a much-needed asset when things get tough.

In fact, if circulation is holding up, as pointed out above, then cutting back on newsroom headcount may be self-defeating. The cut-back may mean less content, and in due time, subscribers may then think it isn’t worth their money. So not only is advertising revenue in crisis today, before long subscription revenue may also follow suit.

In any case, the two methods are not mutually exclusive. One can have a mix of absolutely minimal retrenchments — of those positions which are not ever going to be needed in the future restructured business, and if the individuals cannot be fitted anywhere else in the organisation — and across-the-board pay cuts for those remaining.

One drawback of across-the-board pay cuts is that your best talent — the ones who can command better pay elsewhere — will likely look for new jobs rather than stick with a lowered salary. Unlike retrenchments, management therefore cannot control who leaves and who stays. But actually, even in ordinary times, people come and go. My life experience is that the majority of people aren’t looking exclusively for best available pay; job satisfaction is just as important. Leadership and inspiration in an organisation can make up for better pay elsewhere. In any case, if we wish to be brutal about the truth, how many other media organisations in Singapore are there to defect to?

Of course we all know that the downturn suffered by SPH is not a cyclical one. There may be no point retaining talent for the “expected upturn” when none can be expected. However, if one really takes this view, then one has to admit that the long term future is one of closing shop. I don’t think SPH is yet thinking this thought. On the contrary, there is this snippet of information about “long-term growth”:

Beyond cost savings, the company is also looking to position itself for longer-term growth, by stepping up investments in digital, data analytics, radio and content marketing. This means investing in technology, but also in technical headcount and expertise, said Mr Ng.

“Even as we are streamlining, we are also investing. In fact, we are beefing up our newsdesks in various areas so that we can improve our regional reach and flagship products beyond Singapore,” he added.

— Straits Times, 12 Oct 2017, SPH to step up staff cuts and focus on long-term growth. Link

These are very vague ideas. Firstly, I don’t see how radio is every going to make much money. As for “content marketing”, what content does SPH have that is really saleable? Then, to be frank, “regional reach and flagship products beyond Singapore” is just pie-in-the-sky. The idea cannot be fleshed out without tripping over SPH’s editorial culture — a problem which I will discuss in Part 2.

Yet, SPH is going ahead with hiring ten more foreign correspondents. They are rushing headlong into greater costs without a properly articulated and critiqued business plan. (As an aside, I know there is much criticism about SPH hiring “foreigners”. This misreads what it actually said. The ten new foreign correspondents do not necessarily have to be non-Singaporeans.)

I am no fan of SPH and its chief title, the Straits Times. It think its duopoly with Mediacorp has held us back, by deadening Singaporeans’ minds and suppressing political engagement. But for now I rather like my ringside seat, watching it as it staggers about, bloodied and confused.

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