Wednesday, June 23, 2010

Turning obstacles into opportunities

Jun 23, 2010

Patrick Daniel, Editor-in-Chief of Singapore Press Holdings' English and Malay Newspapers, opened the 19th AMIC Annual Conference on Monday. We carry an excerpt of his speech.

By Patrick Daniel

IN MY 25 years in the newspaper business, this is without doubt the most challenging period. The days of easy growth are gone. We are now confronting an almost existential threat. Will newspapers as we know them be around 10 years from now? All I can say is: I hope so. But my honest answer is: I do not know.

Two things are happening that are shaking the media business to its core. The first is technological changes. These have been rapid and unpredictable.

The second is the changes in people's habits, in particular their media consumption habits. We now have a multi-tasking younger generation, with short attention spans. Most are digital natives and consumers of social media. They are also more networked than any previous generation.

In fact, a recent article in the McKinsey Quarterly, entitled A Glimmer Of Hope For Newspapers, found that news consumption in Britain - as measured by time spent - rose by 20 per cent between 2006 and 2009, and the increase was driven almost entirely by people under the age of 35. For me, this is more than a glimmer of hope.

Some years back, I discussed these trends with an MIT media professor. He was a social scientist and his view was that there's not much point tracking technology changes because you can never tell which will endure. It was far more useful, he felt, to track people's changing habits - how they spend their time and how they live their daily lives.

In reality, the two are intertwined of course. It's the powerful combination of technology changes and people's changing habits that makes this such a fraught period for the media business.

For publishers, the bottom line of all this is the impact on revenues and on our business models. I get depressed reading about the state of American newspapers. Classified advertising has all but disappeared, while display ads have declined at double-digit rates. At the same time, circulation sales have plummeted as more and more readers get their news online or on mobile devices. The changes have been too swift, and newspaper managements have been too slow on the draw. This is not a criticism of managements, just a description. Part of the problem with incumbents is that they have too much at stake and often their preferred mode is to wait and see.

The financials are actually quite straight-forward. If you're in a business that's operating on a 15 per cent margin, and if revenues suddenly shrink by 35 per cent and there's nothing you can do to boost it, you have to cut costs by 20 per cent to stay above water. Many media companies have done this, but many have not been able to and have gone under.

Fortunately, papers in Asia have not suffered the same fate - yet. But the same trends will inevitably hit us too. The challenge for us is: how to be among the survivors.

We in Singapore Press Holdings are determined not just to be among the survivors, but to continue to thrive. SPH has been fortunate to be able to maintain operating margins in excess of 30 per cent for our newspaper operations. When I last checked, we had the highest operating margin among newspaper companies in the world. Part of the reason, of course, is that we're dominant in Singapore. But an equally important reason is that we're among the most efficient at newspaper production and distribution. Our overall daily returns of unsold newspapers, for example, are at the 5 per cent level when the international industry norm until recently was some 20 per cent. We also run our presses intensively but keep tight rein on newsprint wastage on the production floor.

Our challenge is how to stay in this position. When you've scaled the heights, it's so easy to slide down a steep slope. Doing nothing doesn't guarantee that you can keep your perch.

I tell my colleagues this is not a time for faint hearts. For while the threats loom large, there are also opportunities for the stout-hearted. In the inevitable shake-out that's coming, you can leapfrog from No. 30 into the Top 10. Or even from No. 10 into the Top 3. In the past, this was not imaginable. But now, it's an exciting prospect.

Another upside is that the recent changes have opened up all manner of entrepreneurial opportunities. These have been seized by the large technology giants like Google and Apple, on the one hand, and the small start-ups, on the other. Regrettably, most mainstream media companies have sat on their hands. At SPH, we've been fortunate in that our board agreed to commit $150 million to invest in the online and mobile space with the aim of being a leading new-media player. We've made progress but the results will show only in the medium term.

From what I've said thus far, the issues confronting the mainstream media might seem simple. In truth, they are complex - at least far more complex than what we're used to. But this calls for managements to make the right decisions on the challenges we have to confront.

# The first challenge is how to engage the young. This is, of course, a sub-set of the broader challenge of maintaining our readership. But the young - those below 30 - are a special challenge.

It's clear from our data that the young have migrated away from print products and are true digital natives. But at SPH we are not giving up on Gen Y or even Gen Z. We have a good schools programme and we connect well with students in primary and secondary schools. Keeping this up is already a big task, but an even bigger one is keeping them after they leave school and go on to institutions of higher learning. By then, they rely almost exclusively on online and social media for their news. What we need is a good strategy to engage them on the platforms of their choice. I'm sure that if we put our minds to it, we will find a way.

I should add that fortunately for us, at the other end of the spectrum, older readers - those above 45 - have been loyal subscribers. Thankfully, they're living longer. So, thanks to this group alone, newspapers may be around for longer than many of us think.

# The second challenge is: How do you maintain quality journalism when budgets and resources are being cut? For instance, aside from the wire agencies, very few newspapers now have overseas bureaus manned by their own staff. Even the leading global names have long cut back on their overseas staff. SPH is one of the few media groups that still maintain a network of overseas bureaus which we consider our crown jewels.

I'm not saying there should not be budget cuts. If or when revenues fall, it's inevitable that costs must come down. But the challenge is how to maintain quality notwithstanding budget cuts. Editors and managements must think of new ways of doing things that bring costs down without too much loss of quality. Going forward, quality is what will endure and distinguish us amid the cacophony out there.

# Next is the advertising challenge: Will the overall advertising pie grow? Where will ad dollars go? Can we stem the flow of ad dollars from print and TV to online? The list of questions is long. But the answers will determine whether mainstream media survive, thrive or die.

What we do know now is that the higher the Internet penetration in a country, the higher the share of online advertising. But even in the US, the online share is under 15 per cent. The highest are the Scandinavian countries where it's about 20-25 per cent. In Singapore, total online advertising is paltry - less than 5 per cent - while print products take the lion's share - 50+ per cent. How these shares change over time will determine which products thrive and whether online will make a significant dent on print revenues.

# The fourth challenge is how to find the right business models for new platforms. After almost two decades, there's still no business model for our online news offerings. I belong to the camp that believes that newspapers made a fatal mistake giving away their content for free.

SPH went online in 1995. In 2003, we put The Straits Times and Business Times behind paywalls. We took a lot of flak. Most newspapers yielded to the free culture on the Net. But we took the view that it didn't make sense to charge for the print edition, which pays the wages of our journalists, but give away the online version free. Only now is there a growing consensus on putting content behind paywalls. How newspapers design their paywalls, and the response of users, will be key issues that we all need to track.

A related issue is the iPad challenge. Apple's iPad will be a game changer.

The 70-30 revenue split with Apple (with Apple taking 30 per cent) is an equitable formula. For Apple, it's a fair reward for the tremendous eco-system it has built. I remember in the early days, our telephone companies wanted 70 per cent for being just passive carriers. We said, thanks but no thanks. I hope newspapers groups won't become greedy and want all 100 per cent.

But there are issues that need to be addressed - like ownership of subscriber data. There is also a danger of Apple becoming a predatory giant and skewing the rules in its favour. This is why I believe technology companies need to be regulated. It doesn't make sense that media and telecoms companies are regulated, while the technology giants aren't.

# The final challenge is building brands and creating brand value. Media companies need to build trust, credibility and a reputation for professionalism.

The McKinsey study I cited earlier found that consumers trust newspapers more than any other medium. And surprisingly too, 66 per cent described newspaper advertising as 'informative and confidence inspiring' compared to 44 per cent for TV and 12 per cent for the Web.

As the author of the study, Mr Philip Nattermann, a McKinsey principal in London, put it: 'This suggests that newspapers have further scope to go beyond news, to drive reader interest and advertising revenues at the same time.' So don't write us off just yet.

As an aside, I would say that trust will be important for another reason. So many societies are becoming increasingly partisan and polarised. Never have I seen the United States so partisan as it is today. Whether it's health care or defence policy, it's as if the twain can never meet. The same is true nearer home - red shirts versus yellow shirts; even pro-PAP and anti-PAP. World views have grown so partisan, so far apart.

I believe newspapers need not themselves become partisan. This does not mean we sit on the fence. We must have the courage to support whichever position deserves supporting and argue against wrong-headed positions. But we have to do so objectively and maintain the trust that most readers have in our professionalism.

Friday, June 18, 2010

What would Churchill and de Gaulle do now?

Jun 18, 2010

By Timothy Garton Ash

IN LONDON today, French President Nicolas Sarkozy and British Prime Minister David Cameron will join war veterans from their countries to celebrate the 70th anniversary of Charles de Gaulle's historic radio appeal to the French to go on fighting against Hitler.

On the same day that de Gaulle broadcast his message from London on the BBC, June 18, 1940, Winston Churchill delivered his 'finest hour' speech to the House of Commons, declaring that the Battle of France was over and the Battle of Britain about to begin.

Summer 1940. Churchill and de Gaulle. Here is the moment, here the men, that have shaped Britain and France ever since. All British foreign policy since 1940 is footnotes to Churchill; all French foreign policy, footnotes to de Gaulle.

The myths of Churchillism and Gaullism, initiated by the two orator-writer-statesmen, never cease to grow, like mighty oaks. The myths of all other post-war British and French politicians, even of Mrs Margaret Thatcher, are mere saplings in their shade.

The question is: What should we make of this legacy now? What does it mean to be Churchillian or Gaullist today? Is it not time for Britain to go beyond Churchillism and France beyond Gaullism? If so, to what? Together or apart?

In London, outside de Gaulle's wartime headquarters at 4 Carlton Gardens and in a grand muster at the Royal Hospital in Chelsea, today will be cast as the joyful celebration of a wartime comradeship in arms. Unmentioned, I suspect, will be the fact, which Jonathan Fenby records in his new biography The General, that the British Cabinet initially decided de Gaulle's proposed broadcast would be 'undesirable'. The ban had to be reversed by Churchill, who had been absent from the Cabinet meeting to prepare his 'finest hour' speech.

Unmentioned too, or skimmed over, will be the tragic British decision to sink the French fleet at Mers-el-Kebir a few weeks later, to prevent it falling into German hands. Lightly passed over also will be the volcanic rows between Churchill and de Gaulle, which led to the story that Churchill said the heaviest cross he had to bear during the war was the Cross of Lorraine - the symbol of de Gaulle's Free French.

Unmentioned or skimmed over - and rightly so! For the larger story of those years is one of a great shared struggle. Furious though the arguments were between the two wartime leaders, if sometimes given a comic turn by Churchill's macaronic French - si vous m'obstaclerez, je vous liquiderai! he once admonished the general, 'if you obstacle me, I will liquidate you!' - Churchill knew that he would have done exactly the same had he been in de Gaulle's shoes.

Anyway, both were themselves past masters of sweeping inconvenient facts under a gloriously embroidered carpet of inspiring myth. Churchill's myth was the sempiternal comradeship of the English-Speaking Peoples; de Gaulle's, that of the one, true, eternally resisting France, beside which the collaborationist reality of Vichy and occupied France was a mere aberration.
Both knew exactly what they were doing in creating these myths. 'I raised the corpse of France with my arms, making the world think it was alive,' Andre Malraux recorded the general saying at the end of his life.

In a subtle new book called Le Mythe Gaullien, Oxford historian Sudhir Hazareesingh uses some of the many letters sent to the general by ordinary citizens to show just how deeply his example and myth penetrated the popular psyche. Exactly the same could be said of Churchill and Churchillism.

The two statesmen-bards told their peoples stories about who they were - and because they believed them, the British and the French became, in some measure, the peoples Churchill and de Gaulle invented.

The trouble, however, is that the national myths led in different directions. The contrasting lessons drawn by Churchill and de Gaulle from the trauma of 1940, and what followed, have formed the two countries' foreign policies to this day.

Simply put, Churchill concluded that Britain could no longer rely on France and must secure its own survival, security and, so far as possible, continued greatness, through a special relationship with the US. De Gaulle concluded that French greatness must be restored through a fierce independence from the US and Britain, and by finding partners on the European continent.
Shortly before the D-Day landings, Churchill told de Gaulle that every time Britain had to 'decide between Europe and the open sea, it is always the open sea that we shall choose. Every time I have to decide between you and Roosevelt, I shall always choose Roosevelt'.

De Gaulle never forgot this, and cited Britain's chronic preference for the transatlantic relationship as one of his reasons for saying 'non' to Britain's application for membership of what was then the European Economic Community. Instead, de Gaulle forged France's special relationship with Germany.

There have been departures from this pattern, under Edward Heath and Georges Pompidou, for example, or in the early years of Tony Blair. But when push came to shove - over Iraq, for example - London and Paris reverted to (stereo)type.

Mr Blair blamed treacherous France so he could march with the US into Iraq. Mr Jacques Chirac blasted away at 'the Anglo-Saxons'. In the Iraq crisis, Mr Blair and Mr Chirac behaved like appalling parodies of Churchill and de Gaulle. It was the reduction to the absurd of Churchillism and Gaullism.

To his credit, Mr Sarkozy, has decisively gone beyond the Gaullist default position in relation to the US. The question now is whether Mr Cameron can go beyond the crypto-Churchillian, euro sceptic default position of always siding with the United States as opposed to the European Union. And whether, together, they can develop what both countries urgently need - a new, Churchillo-gaullist or Gaullo-churchillian strategy.

This would consist of building up an EU which speaks with a stronger, more united voice in the world - but as a strategic partner with, not a jealous rival of, the US. Germany, in its current, sullen, nationally defensive mood, will not lead that charge. Only Europe's two former world powers, with their continued habits of thinking and acting globally, can provide the impetus - though obviously they cannot achieve the result on their own.

One is told that the British and French governments are looking for areas of strategic cooperation, especially in defence and security policy. It would be a good start if - 70 years after the British Cabinet proposed a complete union between the two countries - the two nations could at least tell each other where their nuclear submarines are, so they don't bump into each other by accident, as happened only last year.

It is also vital that Franco-British defence cooperation is understood as a contribution to a wider European effort and not, as British Defence Secretary Liam Fox seems to want, an alternative to it.

In a world of unprecedented global challenges and rising non-Western great powers such as China, and with the existential crisis of the euro zone, Europe now faces a kind of civil 1940.
The question to ask of Churchill and de Gaulle is not: What did they do then? It is: What would they do now?

The writer is professor of European Studies at Oxford University and a senior fellow at the Hoover Institution, Stanford University.

Wednesday, June 16, 2010

Thai turmoil: Lessons for S'pore

Jun 16, 2010

By Kishore Mahbubani

AS I watched the dramatic developments in Thailand over the past year or two, I often asked myself what Singaporeans thought as they watched these developments.

Did they think: 'Thank God we are not like Thailand. Such political instability could never characterise Singapore.' Or did they think: 'We should watch out. What happened in Thailand could also happen here.'

[I think Singaporeans who thought about it were thinking: dammit! I wanted to go shopping/for massage/for holiday in Bangkok!"]

Unless an opinion poll were taken here, we will never know the answer. In my view, it would be unwise for Singaporeans to dismiss the events in Thailand. There may yet be lessons in them for us.

Superficially, Thailand and Singapore could not be more different. Thailand is an ancient kingdom. It has a more ethnically and religiously coherent polity, with the exception of its southern provinces. It has also been blessed with a monarchy that has for several decades provided it with social stability.

By contrast, Singapore is a truly modern republic with little of the history that Thailand has. We have had a Westminster-style parliamentary government since independence. In short, there is little in common, superficially, between Thailand and Singapore.

However, we do share one attribute in common: For a long time, Thailand was perceived to be the most stable society in South-east Asia. It was the only South-east Asian state to escape colonial rule. This took great political wisdom on the part of the Bangkok establishment. And after South-east Asia was decolonised, Thailand remained stable despite the military coups that came and went.

From time to time there was unrest in the southern provinces, but the heartland of Thai society remained stable. The reverence that both the Bangkok establishment and Thai peasants had for King Bhumibol Adulyadej served as a stabilising force. After a failed coup in 1991, Thailand had a pro-democracy uprising that led to several peaceful transfers of power, making it one of the first countries in South-east Asia to experience this.

Thailand was seen to have safely crossed a political threshold to achieve modern political stability. Through all this, the Thai economy continued to grow, attracting valuable long-term foreign investments. Remarkably enough, though Thailand went through a wrenching economic and financial crisis during the 1997-98 Asian financial crisis, it remained stable. Thais accepted peacefully great economic deprivation. Contrast this with the social and political upheavals that Greece is experiencing today.

So what went wrong in Thailand? The full story is too long to be told here. And the roles, for good or bad, of key personalities, like former prime minister Thaksin Shinawatra, have to be recorded in full too. But while the full story is complex, the systemic or structural explanation may be quite simple.

For decades, despite all the political ups and downs, the Bangkok establishment had dominated the political system of the country and assumed that this was its birthright. This establishment never understood that Thaksin had used all the instruments of democratic electioneering to wake up a rural electorate that had been politically quiescent.

Once this political genie was let out of the bottle, it could not be put back in. The old socio-political contract between the Bangkok establishment and the rural masses broke down. In its place, a new socio-political contract needs to emerge. This is what Thailand is struggling to achieve now. And it does not help that King Bhumibol's health is poor at this moment of great political need.

Like the Thailand of the past, Singapore, too, is perceived to have one of the most stable political systems in South-east Asia. The question for Singapore is: Will such political stability continue naturally? Or will it require, like Thailand, new socio-political contracts as society changes with modernisation and growth?

As a student of politics, I have come to believe that political stability is not a natural development. It requires great effort and often great political wisdom - especially the wisdom to make changes ahead of time.

And Singapore suffers from unique political vulnerabilities: It is the world's only city-state with a very diverse ethnic population. It also has the most globalised economy in the world, making it vulnerable to external shocks.

I have no doubt that in 2015, we will celebrate 50 happy years of independence and peace and prosperity. There are no imminent dangers at our doorstep. But we must also think beyond 2015 and of how Singapore would fare if it is subjected to new strains and stresses.

Can a socio-political contract that did well in the first 50 years of our independence serve us equally well in the next 50 years? And will our HDB heartland continue to accept this old contract? Or will it at some point demand more? Who knows?

And why do I ask such uncomfortable questions? Because the very first minister I worked with was a great man called S. Rajaratnam. He told me: 'Kishore, we must think the unthinkable.' And political instability is now unthinkable in Singapore.

All these thoughts about potential political instability have also come swirling into my head because I have just finished reading Meira Chand's brilliant new novel, A Different Sky. It is a gripping read. It captures well all the stresses and strains that Singapore experienced in the turbulent period from 1927 to 1956.

Although I was alive for only eight of those years, the novel nonetheless surfaced in my mind a rush of childhood memories I had forgotten: gangsters ripping one another apart with broken beer bottles in Joo Chiat Road; me creeping inside a monsoon drain in violation of a curfew imposed because of ethnic riots so I could buy bread from a bakery; watching a Malay neighbour return home with blood on his shirt after being beaten up by a Chinese mob.

Chand never lived in Singapore during this period. Despite this, she has successfully resurrected memories of a turbulent period I had long forgotten. This is why I believe her novel - which will be launched by President S R Nathan on July 8 - should be read by all junior college students in Singapore.

I say this despite the sex in the novel. Come to think of it, given Singapore's procreation problems, I should say 'because' of the sex in the novel. No, it is not a steamy read. But it does not flinch from describing brutal realities. Scenes of torture are always difficult to describe. But Chand has succeeded. My stomach turned with each scene.

She did not intend to write a didactic novel. This is not a book about good and evil. It provides a vivid description of the messy world that Singapore experienced for more than three decades from 1927.

We have not experienced political messiness for almost 50 years now. So the obvious question we need to ask is: How will we handle it if political messiness returns again to Singapore, as it has to Thailand?

The writer is the dean of the Lee Kuan Yew School of Public Policy, National University of Singapore. Think-Tank is a weekly column rotated among eight leading figures in Singapore's tertiary and research institutions.

Saturday, June 12, 2010

Why $106b isn't enough to keep China stable

Jun 11, 2010

To stem social unrest, Beijing should learn to watch less, listen more
By Ching Cheong

WHAT price social stability? For China, it is spending 514 billion yuan (S$106 billion) this year to maintain cohesion in society. This amount is nearly 9 per cent more than that spent last year.

Beijing has upped this expenditure annually in recent years but so has the number of incidents of social unrest and other conflicts.

To break out of this vicious circle, China needs to change tack, according to a report by the Tsinghua University Social Development Programme released in April.

The report suggests that the Chinese government should revamp the political system to give more room for expression to those disenfranchised by the country's rapid economic development.

The report is perhaps the first public acknowledgement that setting aside bigger sums of money for the purpose of maintaining social stability has not been effective.

The huge sum is spent solely on maintaining a security apparatus to keep people under surveillance and discourage travel to Beijing to lodge complaints.

Tellingly, none of this money to maintain social stability is earmarked for income distribution efforts - suggesting that for China, cohesion is viewed more as an issue of monitoring and suppressing dissent than one of proactive measures to bridge social inequalities.

Despite the rising budget, Chinese society is not any more cohesive - in fact, society seems less stable, going by the more than 90,000 'mass incidents'.

The report noted that this annual expenditure had been increasing at a rate faster than that for national defence. As a result, the annual budgetary appropriation for internal stability is almost the same as that for external security.

For example, the budgetary allotment for social stability went up by 16 per cent last year compared with 14.9 per cent for defence. The increases this year are 8.9per cent and 7.5 per cent respectively, which translate into 514 billion yuan and 516.6 billion yuan.

For the first time in 60 years, the burden of preserving social stability is equal to that of maintaining external security.

In manpower terms, China's military has two million troops. In contrast, a 20-million-strong police force, a one-million-strong military police force and another four million security agents - known as guobao in Chinese - are responsible for maintaining the peace.

The guobao is a recently created semi-police force responsible for monitoring citizens and for tipping off the authorities on possible social unrest.

A Xinhua news agency report last year showed that a small county such as Kai Lu in Inner Mongolia, which has only 400,000 residents, maintained a 12,000-strong network of informants.

Not counting a quarter of its population who are below 18 years of age, it means that for every 25 adults, there is at least one informant monitoring their activities and behaviour.

The presence of such 'people monitors' is no secret. Public Security Minister Meng Jianzhu revealed two years ago that to guarantee absolute security for the Beijing Olympics and the Shanghai World Expo, a six-layer security net covering every aspect of the public spaces was set up and maintained.

These six layers included, in addition to regular police patrolling at street level and audio-visual monitoring systems in open spaces, elaborate surveillance systems in the neighbourhood, the community, the workplace as well as cyberspace.

On top of this elaborate surveillance system, government heads at the grassroots level were told to observe two hard-and-fast rules: 'Zero outbreak' (of mass events) and 'one outbreak vetos all' (of their promotion prospects).

Put under such pressure, local governments were forced to employ draconian measures to prevent any outbreak of mass events and to stop people from reporting complaints. Yet such measures simply made things worse, hence the vicious circle.

The Tsinghua report does not indicate how serious internal rife is. The last time there was an official figure was in 2005 when the Public Security Ministry admitted that there were about 87,000 cases of mass events that year.

Since then, no other official figures have been released. But judging from the rapid increase in budgetary allotment, it would be safe to surmise that the number of mass events has been on the rise.

Professor Yu Jianrong, research fellow of the Chinese Academy of Social Sciences, said recently that a source told him that since 2007, the annual number of mass events stood at about 90,000.

The Tsinghua report says most social conflicts involved expropriation of peasants' land, forced eviction of city dwellers to make way for urban development, migrant workers not getting paid, as well as infringement on labour rights.

The report adds that most of these issues were non-political to begin with, but improper handling by the officials turned them into thorny political issues that undermine the government's legitimacy and image. The situation also causes a severe drain on public money.

The report says that in the rust belt in north-eastern China which is especially prone to labour unrest, the cost of preserving internal stability could run as high as 15 per cent of the provincial government's annual expenditure.

'The greatest mistake is to treat people's defence of their legitimate rights as a threat to social stability,' the report said.

'Numerous studies show that what's lacking in all the mass events is an effective mechanism to allow expression of people's rights. If there is no fundamental solution to social injustice, and draconian measures are used to stifle people's expression in the name of stability, this could only result in greater conflicts and lead to greater social instability,' it added.

Thus, the Tsinghua report calls for revamping the political system to give the disgruntled more freedom of expression.

Such a revamp could start with setting up a mechanism that allows anyone with a grievance to vent his unhappiness or to seek redress for his problem.