Why Next Digital is raising the price of Apple Daily

With the growing popularity of mobile devices, people are increasingly turning to digital platforms for their information needs rather than pick up a copy of a physical newspaper. This is posing a big challenge to the traditional media on the revenue front, especially as advertising, too, is shifting to digital along with the readers.

Most newspapers today operate online editions to serve the internet savvy readers, but their core revenue still comes from the sales of print edition, which makes for a tricky situation when it comes to pricing of the products.

Price the newspapers too high, circulation will fall even more. But price the print product at sub-optimal level, and your losses will mount.

Thus, it all boils down to a delicate balancing act, a fact that Apple Daily, the only pro-democracy newspaper in the city, can attest to.

The Chinese language daily has announced that it will raise its cover price by 25 percent starting from next Tuesday as it grapples with rising costs and falling advertising revenue.

The paper, part of the Next Digital group — which was formerly known as Next Media — announced its price hike plan on Monday with a full page advertisement in its main section.

Proclaiming that “Hong Kong people need a true voice to reflect the real situation of Hong Kong” and that it is “in the front line to report all the news in Hong Kong and overseas”, the media outlet urged readers to continue supporting the paper despite the higher cover price.

Apple Daily, founded in 1995 by maverick tycoon Jimmy Lai, has made a name for itself with its bold reportage over the years and its support of Hong Kong’s democracy movement.

In recent months, the newspaper has been transforming its content, moving away from “yesterday’s news” and focusing more on articles such as personal interviews, and local and international full page feature stories. That is helping Apple Daily to further differentiate its product against other paid and free newspapers in the market.

The last time Apple Daily raised its cover price was in 2016 when it increased the price from HK$7 to HK$8. At that time, Apple Daily operation was deeply affected by lack of advertisements as well as dwindling circulation, making the newspaper a loss-making business.

As per the figure put out on Thursday, Apple Daily had print-run of 99,000 copies that day. Its average daily circulation was 110,177 copies in the first half of 2018, according to the Hong Kong Audit Bureau of Circulations.

In the second half of 2014, Apple Daily’s average daily circulation stood at more than 170,000 copies, as readers flocked to it for all the news related to the Occupy Central pro-democracy protests in the city.

But after that the circulation began falling in the subsequent years, with the accumulated decline at 35 percent between the second half of 2014 to the first half of 2018.

It seems that Apple Daily management strongly believes that 100,000 copies a day should be its minimum circulation to stand well in the market and lure enough advertisers. Meanwhile, the price can be stretched only up to a point so as to protect its existing readers.

If readers deem the print edition too expensive, they will turn to free online version of Apple Daily, or switch to other newspapers like Oriental Daily News or Sing Tao Daily. And one shouldn’t forget, that there also free newspapers in the market like Headline Daily.

The price hike decision shows that Next Digital management is facing escalating pressure to turn around the print edition of Apple Daily. The newspaper has been losing money for several years, and there is no sign of a quick return to profit, given an advertising boycott by pro-Beijing elements.

Given the paper’s anti-establishment stand, many local companies have refused to place ads in Apple Daily, with the boycott seen as a show of political loyalty to Beijing. Amid this situation, the price hike should help bring in some additional cash into the print operation to ease the financial pressure.

Market watchers say Apple Daily can get an additional HK$1.2 on each copy from the price hike, which could bring around HK$43 million a year.

According to the media group’s results for the six months ended September, Apple Daily generated circulation revenue of HK$84 million, while advertising revenue was only HK$32.5 million. Circulation revenue accounted for more than 70 percent of Apple Daily’s revenue during the reported period.

Be it out of choice or compulsion, Apple Daily is no longer an advertising-driven business like many other newspapers in the city. The Pro-Beijing camp’s boycott harmed the paper’s revenue model and forced the company to turn to its loyal readers for financial support.

Should Apple Daily manage to maintain its average daily circulation of 100,000 copies after the price hike, it would help Next Digital to narrow the loss of its print business. But whether the segment can return to profit will still depend on advertising revenue.

Looking at the overall situation, the price hike of the print edition should be just the first step for the group to transform its revenue model from advertisers to readers. The company has been toying with the idea of charging readers for access to its online edition to support the business. But charging for online access will be an uphill battle as the firm has been making its portal available for free since the online edition was launched two decades ago.

The free access of its website and mobile app makes Apple Daily the most visited online news portal in Hong Kong with daily unique visitors of 2.34 million and total daily unique views of more than 45 million. The main problem is that Hong Kong people have taken free news for granted. They think all the content online shouldn’t be charged. So, Next Digital needs to come up with a plan to charge users in a hassle-free way. Else, the paywall could lead to a sharp fall in online traffic.

Apple Daily has been suffering from a sharp decline in both advertising and circulation revenue in the past four years after the failure of the Occupy Central political movement in Hong Kong. Beijing has been tightening its grip in Hong Kong and putting pressure on local companies not to place their advertising dollars to Apple Daily and other group publications.

The price hike and continued support of its readers can help the paper keep alive the last few voices in the city’s opposition camp.

As Apple Daily makes some difficult but necessary moves to ride out of its financial woes, there are many people in Hong Kong who are wishing it success and hoping that it remains unbowed.