Newsprint Price Hike: "Damage" or "Rebirth" (Ⅱ)

(NPES International Printing E-Commerce Website 2008-09-16) Based on comprehensive analysis, the change of supply and demand relation is just only one item of factors that driving the paper price rose, the supply constraints of raw materials and the rigid constraints of policy, which means that this round’s price hike of newsprint is rigid. According to the inference of experts, the current round’s newsprint price increase are likely to persist into 2011, neither we should to pine our hope on the price fall in the short term, nor we can imagine the price drops to historical low.
Given the domestic and international development situation in paper, the newsprint industry has begun to recover on the whole, it is expected that price will become stable after a period of consolidation, but the price of paper will remain high in the short term. With the easing of supply and demand contradictions, it will gradually transit to normal market situation of balance production, stability of supply and demand.

Changes in the media, which aggravated the plight of newspaper

Ⅰ.changes in the media are unbeneficial to the development of newspaper
At present, under the impact of radio, television, internet and other media, the newspaper market share is shrinking; the dominant position in the media industry has been severely impacted, the development environment of traditional newspaper has become increasingly severe. Especially since 2005, fluctuations occurred in Chinese newspaper business, the economic growth range of newspaper fell from high to low, the growth rate slowed down. Due to changes in the market of raw materials and adjustments of related policies since 2008, the operation model of newspaper is facing an even grimmer situation.
Traditional media advertising business is weak on the whole, newspaper ads continue to run a negative growth, which showed a sustained downturn trend. After 20 years of rapid growth, Chinese Newspaper come into the 21st century and faces the lack of development. This confusion, first of all, demonstrated by the growth rate of newspaper ads fell significantly. The National Bureau of Statistics revealed that China's GDP growth rate is 11.9% in 2007, which increased 10.4% compared to the first half of 2008, "the national economy continue to develop in the expected direction of macroeconomic control." However, against the background of smooth operation of China's economy, the traditional media advertising market has showed weak trend, China's traditional media advertising market amounted to 312 billion yuan in 2007, increased only by 9%, setting the lowest increasing rate in recent years, far less than 18 % in 2006, also lower than China's GDP growth in 2007. The release proportion of newspaper ads in Anhui advertising market in 2007, which increased less than 2% compared to the same period of 2006
Internet participates in the competition for advertisers, which carved up more and more market share. With the passage of time, the plight of the newspaper advertising market will be increasingly serious, and the shrinking of readers is becoming increasingly obvious. The "China's Media Industry Development Report (2007 ~ 2008)" revealed that the rapid growth of new medias make great changes happened in China's media industrial structure, the proportion of new media in the media industry in 2007 increased to 28.07%, while traditional media fell to 71.93%.
The overall growing rate of newspaper advertising revenue slowed down, there is no fundamental improvement in the operating system, industry fierce competition led to polarization, and the growing impact of new media, all the things augured that "inflection point" of newspaper business has not yet passed.

Ⅱ.Paper price hike makes the press experienced serious "Damage"
First, the newspaper distribution losses have been intensified. Most of the newspaper adopts the profit model of "selling twice”, that is, the losses caused by issuing newspapers cheap make up by operating profits of ads., the new cost can not be effectively digested after newsprint price rose, the distribution deficit of newspaper will be even greater. At the same time, the growing rate of ads operating result slowed down since newspaper operating experienced "inflection point" in 2005, the actual increase in newspaper ads revenue is lower than the growth of the GDP in the third consecutive year,. The rising price of paper makes the new profits of newspaper ads unable to make up new losses of newspaper’s distribution, resulting in serious imbalance between revenue and expenditure of newspaper offices, financing chain become tense.
Second, the budget overdraft is difficult to support. Newspaper subscription contracts are signed basically at the end of the former year and the whole year printing contracts are signed with printing factories at the same time. Subscription price and the printing price are earlier agreed, if newspaper manufacturers increased the price at any time or the increasing range is too large, the press and printing enterprises are all unable to bear the pressure.
Third, the growing gap between the regions. Currently, region characteristics of newspaper operating are still evident. The impact degree on newspaper offices of different regions due to newsprint price hike is different. In developed areas, printing enterprises is near to paper manufacturers, so the freight cost is lower, so that the paper price is relatively low on the whole; there are less paper manufacturers in central and western regions, the distance is far and freight cost is high, so that the paper price is higher. So, the unbalanced development of the national newspaper offices will become more widening.
Fourth, the decline in competitiveness of the press. Against the background of price increase and the implementation of labor contract law, the traditional media operators face significant cost pressures. Only to deal with the fierce market competition has made the press to bite off more than it can chew, newsprint price hike makes the press operation even "worse." Economic base determines the superstructure. The dual nature of the press is ideology and the market economy, the weakening of profitability and economic strength, which directly lead to the decline of the influence and competitiveness of the press; it will even have an impact on the ability to guide public opinion.
Newsprint price hike brought in serious "Damage" to newspaper industry, if it is not dealt with promptly and correctly, it will jeopardize the survival and development of the press.

Increasing revenue and reducing expenditure, and exploring the road to turnaround
Ⅰ. The exploration of domestic newspaper groups
Faced with the cost pressure of newsprint price increase, the press of many provinces are increasing revenue and reducing expenditure, reducing costs and increase profits by strengthening internal management and layout control; seeking effective distribution through a more scientific and rational marketing strategy; Seeking and cultivating new economic growth points through multiple operation, non-newspaper operation,.
Deepening the reform of the press under the pessimistic operating circumstances of the Hubei Daily Newspaper Group. Implementing reduction and control of plate and color to "Chutian City Newspaper" and "Chutian Golden Newspaper”, make efforts to compress the operating costs of major newspapers.
Sichuan Daily Newspaper Group increased the price of "Western China City Newspaper" from 0.5 yuan to 1.0 yuan each. In addition, they strived for the optimal paper price and appropriately increased the newsprint inventory through consultations and negotiations with the paper manufacturers.
Chongqing Daily Newspaper Group paid more attention to the quality of content, not to increase the newspaper format, and control the circulation at the same time. Printers will purchase the relatively low price of Yibin Paper as far as possible, but the quality of printing is obviously decreased. (Author: Wang Jiasi)