Saturday, September 18, 2004

SPH and MediaCorp to merge TV and newspaper businesses 

After years of competition, Singapore Press Holdings (SPH) and MediaCorp will be merging their mass-market television and free newspaper businesses (read report).

It was inevitable. SPH’s television operation, MediaWorks, and its free newspaper, Streats, have both been losing millions of dollars every year for the past few years. So have their MediaCorp counterparts, MediaCorp TV and Today.

With the merger, MediaWorks’ television operations will become part of MediaCorp TV Holdings, for which SPH will pay $10 million for a 20 percent stake. MediaCorp will hold the rest.

Streats will cease operation as a separate paper and be incorporated into Today. SPH will pay $19.16 million for a 40 percent stake in MediaCorp Press, while MediaCorp will own the rest.

Many observers have lamented over the fact that with the merger, competition and choice will be reduced. One observer, a media consultant, was quoted by The Straits Times as describing the merger as “a real pity” and suggesting that media companies have “a responsibility to the nation”, implying that they should continue to absorb the losses. Easy for him to say, I guess.

Let us remember, though, that for the newspaper business, competition for Today will continue in the form of The Straits Times, still wholly owned by SPH, as well as from the Internet.

As for television, we need to be realistic. Singapore is too small for two television broadcasters. Television operators need to extend operations overseas to achieve scale. This is something that MediaCorp has long been trying to do, but has been distracted from doing by the competition from MediaWorks.

Bearing this in mind, viable competition for MediaCorp TV is most likely to come from cable television, which obtains its programmes from international sources. In fact, cable had provided competition even before MediaWorks was set up in 2000. Starhub CableTV, the cable operator, may conceivably benefit from the turn of events.

Incidentally, Starhub is holding a Digital Cable Upgrade Fair at The Atrium@Orchard over this weekend, highlighting yet another step in the development of Singapore’s media industry.


Nice to read a Singapore blog. Here's my opinion...

But where will be the competition for local content? And what happened to tough anti-competitive measures promised to stamp out monopolistic behaviour?

I can understand approving a merger if there are clear indications of a reduction in social welfare. That consumers have been made worse off, for example. In the case of railways, perhaps a case can be made. You can argue that privatisation has resulted in fewer stations and reduced social welfare. And we’ve had an increase in the number of breakdowns haven’t we? All these add up to social cost.

In the case of media, where are the signs that consumers have been made worse off? The quality of the TV programs or news articles as PM Lee suggests? Now who judges that?

So on what grounds has the government given approval of the merger? That 2 companies are losing money? Sorry, but last time I checked, SPH was still making loads of it. Anyways whoever gauranteed profit in business?

Its a dangerous precedent for the anti-competition laws due later. But then, viewed from a political perspective, I can’t say what unfolded was unexpected. It was a case of a change which changed nothing.

I think that once you consider the interests of all parties involved, it becomes apparent that there is no ideal solution here. The problem is that television broadcasting — especially with regards to local content — appears to be a natural monopoly for a small country like Singapore. In this sort of situation, the best solution is usually a regulated monopoly.

Allowing the two media companies to continue to lose money represents a waste of resources which economic theory says should be allocated elsewhere.


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