News analysis

S'pore to get a media player apt for the times after shareholders agree to SPH restructuring

Over the next few weeks, the new management of the former SPH media will have to explain how the entity will tackle challenges faced in both print and digital media businesses, says the author.ST PHOTO: GIN TAY

After much debate and soul searching over the past five months, some 97.5 per cent of Singapore Press Holdings (SPH) shareholders voted in favour of the two resolutions for the restructuring of the company which will see its media and associated businesses hived off to a not-for-profit company limited by guarantee (CLG).

So what happens next?

For SPH, this ring-fences the listed entity and its property assets from the media business, which has been in a secular decline in its traditional print space over the past decade.

Also, the company will no longer be bound by the provisions of the longstanding Newspaper and Printing Presses Act (NPPA), which restricted shareholding in SPH to 5 per cent per shareholder.

With the shareholders' backing for hiving off now secured, SPH will now be more focused on being a listed property-based entity that could ultimately be bought over by Keppel Corporation, which already has a $3.4 billion offer on the table. SPH shareholders will vote on this separately in November.

Formed following the amalgamation of various disparate media assets and newspapers, SPH has been the flag bearer for Singapore's mainstream media, including this newspaper, for almost 40 years. For much of that period, it has been very profitable as the dominant player in the Singapore media duopoly.

But things started changing over the past decade as digitalisation swept across the world. Media consumption habits evolved as well.

The rest, as they say, is history.

Operating revenue in the past five years has halved, and in FY2020, the SPH media business posted its first-ever loss.

The financial first half of 2021 has seen the situation worsen further, as it posted a pre-tax loss of $9.7 million. SPH media ad revenue fell 39 per cent from FY2018 to FY2020.

With a portfolio comprising SPH Reit, purpose-built student accommodation in the United Kingdom and Germany, aged care assets and others, SPH moves on with assets in the region of some $4.33 billion, post demerger. These give the company a net asset value per share of $2.08, post restructuring.

SPH will also be giving up 6.6 per cent of its assets to the CLG. Besides two major media properties and four digital assets, SPH will hand over to the media entity $80 million in cash, 24 million SPH Reit stock and almost 7 million of SPH treasury shares.

So SPH is taking a one-time hit to free itself of future losses and untangle itself from the restrictions of NPPA, while the CLG gets some funding to move ahead for at least two more years on its own.

The inescapable irony, as SPH chairman Lee Boon Yang noted, is that the origins of SPH's property portfolio and wealth are rooted in the earnings of the company's media business over the years.

Going forward, the new not-for-profit media business will have to survive on a combination of private and public funding. Of course, advertisements will also contribute to the kitty.

But freed from having to constantly chase for advertisements as its main source of income, it can now focus on the news business.

Of course there are concerns about how these sources of private and public funds could influence the reporting. But business acumen was always a consideration even when the media was looking to add funding from commercial entities.

The CLG will have to find ways to smartly navigate the challenges.

If one were to look at media organisations overseas such as the BBC in the UK, Le Monde in France, ABC in Australia or PBS in the United States, they all work on a similar public-private partnership model.

But they have maintained their credibility with bold, balanced and believable news reporting. And all have regular run-ins with their respective governments, when the latter feel that the reporting is unfair or incomplete.

The same has to happen here.

This is something the CLG media company will also have to navigate.

In fact, given the credibility that populations of other countries, near and far, expect of news reported and generated by the mainstream Singapore media, there is strong potential for the CLG to capture the regional market digitally and become a pan-Asian player.

The bottomline is this: Singapore, as a global financial node, needs a strong and credible media.

SPH has already spent some $235 million on digital transformation initiatives. In fact, 53 per cent of total media sales are via digital platforms. Yet, revenue fell 12 per cent between 2018 and 2019, and accelerated southwards to 31 per cent between 2019 and 2020.

Much of this is due to the fact that the digitalisation effort has not been enough to stave off the "big boys" such as Google, Facebook and numerous other digital news aggregators who have muscled in on the media business, not just in Singapore, but globally.

Over the next few weeks, the new management of the new CLG will have to explain how this new entity will tackle the challenges it will continue to face in both print and digital media businesses.

Can the media in Singapore be profitable? If so, how will this be achieved? What funding avenues are available two, three or five years and down the road? More critically perhaps, how will the CLG attract and retain talent (read: journalists, columnists, editors, as well as others with news skills needed to push ahead with digital content offerings audiences want) amid the challenging business outlook? What will this media company in Singapore look like in, say, five years?

As the old adage goes, every challenge brings opportunities. That has been the story of Singapore, a seemingly impossible success story going back 56 years. The restructured former SPH media, now a CLG, has to replicate this transformation and success, albeit within the Petri dish of public opinion.

Come Dec 1, it will be a new dawn for a major media player, and indeed the media industry, in Singapore.