Alibaba acquires flagship newspaper
Alibaba Group Holding Ltd., the e e- commerce giant headed by billionaire Jack Ma, agreed to buy Hong Kong’s South China Morning Post and other affiliated media assets as the Internet tycoon follows in t he footsteps of Jeff Bezos in p- ursuing the revival of a cen tury-old newspaper.
Though financial terms weren’t disclosed, Alibaba said in a statement on Friday that the purchase will include the flagship newspaper and related businesses including the Hong Kong editions of Esquire, Elle a-nd other magazines, and recruitment. The Chinese company also said it will scrap the publication’s Internet pay wall and that editorial decisions will be made “in the newsroom, not in the corporate boardroom.”
The SCMP, once the envy of the industry in terms of profitability, has in recent years joined other mastheads in struggling to attract advertise-rs amid the rise of free publi cations online. Control of the city’s premier English- lang-uage broadsheet has been un changed since media magnate Rupert Murdoch sold most of his stake to Malay-sian billion aire Robert Kuok in 1993.
“Jack Ma i-s such an innova tive and visionary figure that the future of the South China Morning P-ost under his con trol may actually be somewhat brighter,” said Peter Schloss, managing partner of CastleHill Partners LLC, a Beijing-based a-dvisory and investment com pany. “Robert Kuok has lost interest in it. Jack would come in and invigorate it to move it firmly in the digital space.”
For Alibaba, the purchase of the publication would raise the profile of its growing media e- mpire. In June, Alibaba an nounced the purchase of a stake in one of China’s- most influen tial business media companies and months later, helped set up a media and entertainment company called CMC Holdings.
I t’s not just news. In November, Alibaba agreed to buy video service Youku Tudou Inc. to stream more content to Chinese Internet users through control of the YouTube-like site, and also invested in Paramount Pictures’ latest Miss-ion Impos sible movie through its Alibaba Pictures Group unit.
Alibaba’s Ma also follows Amazon.com Inc.’s Bezos — who bought the Washington Post in 2013 — among Internet tycoons snapping up storied brands at a time printed media struggles to c-ompete with Web-based com petitors for advertising. Chris Hughes, one of the co-founders o-f Facebook Inc., bought a ma jority stake in the New Republic magazine in 2012. Axel Springer SE, the German media company led by Mathias Doepfner, bid for the Financial Times earlier this year, which was sold to Japan’s Nikkei Inc. for $1.3 billion.
Back at the SCMP, the sale g ives the 112- year- old news paper an owner armed with more than 100 billion yuan (-$15.5 billion) in cash and in vestments. S P Group, the paper’s listed parent, has seen three years of profit declines and had it not been for some extraordinary gains, its latest semiannual profit would have plunged more than 40 per cent.
Alibaba is taking on the media business, which includes the newspaper and magazine p-ublishing operations that gen erate more than 90 per cent of the SCMP Group’s revenue and about 65 per cent of adjusted operating profits. Be-sides news papers and magazines, the SCMP- also has a business seg ment that leases out various real estate properties.
Bu-t the pace of Alibaba’s ac q-uisitions has made some in vestors uneasy. Just this year, Alibaba has 27 deals pending or completed, excluding the SCMP, totalling $15 billion. Investors worry Alibaba is not focused enough on its core business of e- commerce, according to Henry Guo, a Summit Research Partners analyst.
“Investors are increasingly concerned about the company’s spending,” Guo said. “It’s hard t-o predict how the media con t-ent is going to play out for Ali baba for the next three, four, five years.”
Alibaba’s U.S.-traded shares s-lumped, along with the broad er markets. The stock fell 5.4 p-er cent to $79.74 at the mar ket’s close in New York, bringing the decline for the year to 23 per cent.
Still, given the newspaper’s influence, the deal may have i-mplications beyond just prof its and sales. “Jack Ma would view an acquisition of the South China Morning P-ost as a na tional service,” Schloss said. “-He’d be doing the central gov ernment a favour by ensuring that the South China Morning Post is in friendly hands.”
SCMP- Group has been sus p-ended from trading since Feb ruary 2013 after the company failed to have at least 25 per cent o-f shares held by minority in v-estors, the minimum proportion required for a company to trade its shares in Hong Kong.