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Blood On Hong Kong's Newsstands (Int'l Edition)


International -- Int'l Business: HONG KONG

BLOOD ON HONG KONG'S NEWSSTANDS (int'l edition)

The Ma empire takes a hit as its Hong Kong English daily folds

Officials of the Eastern Express newspaper waited until most of the editorial staff left on June 30. Then, they rejiggered the front page to break the day's big news: The Hong Kong daily, founded in 1994 as an English-language rival to the South China Morning Post, was folding. Ma Ching-kwan, who had launched the Express with a lavish $13 million promotional blitz, was resigning as chairman of its $210 million parent, Oriental Press Group Ltd. Ma, 39, will take the post of executive director and will be replaced as chairman by his younger brother, Ma Ching-fat.

Losses at the Express, which was bleeding $500,000 a month and never reached more than 40,000 readers, may have been too embarrassing for the Ma family. While their main property, the Oriental Daily News, is Hong Kong's dominant Chinese-language paper, its earnings have plummeted, partly because of a fierce price war that Ma started last December. In a bid to take out the upstart Apple Daily, Ma slashed prices for his Chinese flagship from 65 cents a copy to 26 cents. For the year ended Mar. 13, that contributed to an estimated 70% drop in earnings, which have yet to be released, from 1995's $55 million. On July 1, the Oriental Daily's new chief threw in the towel, restoring the paper's price to 65 cents. Competing Chinese dailies quickly followed suit.

Even before the price war crippled group earnings, the Express was stumbling. Bitter feuds had erupted between management and the Western-dominated editorial staff, who complained that Oriental Press Group tried to interfere in news decisions and never provided adequate marketing and distribution support. "We had a honeymoon period. Then, things just disintegrated," says former foreign editor Karl R. Wilson. After just six months, Ma sacked the editor-in-chief, and a housecleaning of the expatriates soon followed.

Last spring, when it became clear that the Express had not broken the Post's stranglehold on English-language classified advertising, Ma tried a new strategy: He dropped most of the Express' political coverage and vainly recast the paper as a financial daily.

By pulling the plug on the Express, the Ma family is suffering a setback in its ambitions to be Hong Kong's top media power. Despite the success of the Oriental Daily, whose unaudited circulation is estimated at 550,000 by analysts, the smaller English-language market ruled by the Post is more profitable because it reaches a more upmarket readership. Moreover, many observers regarded the venture as an attempt to legitimize an empire that has been tainted by drug charges. The group's co-founders, Ma's father and uncle, fled to Taiwan in 1978 while under investigation for alleged heroin trafficking. Ma's father is still alive, and a police spokesman says he is wanted for "serious narcotics offenses."

AD REVIVAL. After the demise of the Express, the Oriental Daily may still emerge as a winner in the Chinese-language price wars. It has managed to boost circulation by at least 20% and force several small competitors to close. What's more, Hong Kong newspaper advertising is expected to grow 10% this year after dipping 12% in 1995, and the Oriental Daily has improved its editorial product. "We are now looking for good growth at the group," says Morris Macleod, a media analyst at ING Baring Securities Ltd. in Hong Kong.

But rival Apple Daily is still standing. By forcing Apple to cut its prices by 20%, Ma kept the 300,000-circulation startup from breaking even. That scuttled publisher Jimmy Lai's plans to raise capital by taking his Next Magazine public. But within two months, Apple will expand its presses to boost circulation to 350,000--within striking distance of the No.1 spot. "We lost a lot more money than we should have," says Lai, "but not to the point where we can't succeed with our business." After two big-spending years on the attack, it may be time for Oriental Press Group to defend its own turf.By Pete Engardio in Hong Kong


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