Date
22 July 2017
Staff work in the newsroom of Apple Daily in Hong Kong, in this file photo from June 2015. The media group has proposed new work arrangements for some employees as part of cost-cutting measures. Credit: Bloomberg
Staff work in the newsroom of Apple Daily in Hong Kong, in this file photo from June 2015. The media group has proposed new work arrangements for some employees as part of cost-cutting measures. Credit: Bloomberg

Why Apple Daily’s outsourcing plan is causing concern

Apple Daily newspaper, which has been a vocal supporter of the democracy movement in Hong Kong, is facing a tough time in its key market.

The outspoken daily, launched in 1995 by maverick tycoon Jimmy Lai, has seen its losses widen amid a fall in advertising revenues, forcing the management to resort to drastic steps to cut costs.

In recent days, there was much talk in journalism circles that Next Digital, the company that publishes Apple Daily and some other media titles, could scale down in-house operations and focus on outsourcing of content.

The restructuring will involve pain for the media group’s staffers as they may be asked to work under new contractual arrangements, observers feared.

Well, the apprehensions have come true as we have news that Apple Daily is encouraging staff at its newspapers to leave the company and rejoin as freelancers or sub-contractors.

The development was confirmed by the Next Media Trade Union after it was called for a meeting with the company’s management late last week.

According to a statement issued by the union, Next Digital plans to ask some employees to formally leave the company and become contractors or freelancers.

The restructuring is expected to affect staff working in the sports, finance, entertainment and some other sections as well as those involved in producing newspaper supplements.

Departments and teams will be encouraged to form their own independent companies, which will then be awarded work by the company under a sub-contracting system. 

Apart from Apple Daily, people working for the weekly Next Magazine could be asked to shift to the new work arrangement.

Meanwhile, there were reports that staff working for Apple Daily (Taiwan) have also been told by the company’s local office that it wants the employees to move to a new system where they will work on a contractual or freelance basis.

Next Media’s move, which is aimed cutting costs and giving the group more elbow room on the labor front, has sparked concerns among the employees and the wider journalistic community.

By shifting to an outsourcing arrangement, the media group will no longer be constrained by labor laws, saving money on things such as health insurance coverage and retirement fund contributions.

While staff who leave the company may be provided work under a new arrangement, it will however amount to a renegotiation of the rights and privileges of the workers. 

Besides, there are worries that if Apple Daily group is allowed to get away with its proposal, other media entities in Hong Kong could try to follow suit, endangering many journalist jobs in the city.

Next Media Trade Union said that while it acknowledges the challenges facing media groups, it doesn’t think sub-contracting is the right solution.

The new arrangement will remove a safety net for media personnel, the union said, adding that the new workflow system could also take a toll on the content and production quality at the newspaper.

These are legitimate concerns given that Next Media, as is the case with some other newspaper groups, could look for further cost cuts down the road due to shrinking advertising and circulation incomes.

While Next Digital has given no timeframe for the kick-off of the new outsourcing model, the plan has drawn fire from employees as well as various trade unions in the city, including the pro-Beijing Hong Kong Federation of Trade Unions and the pro-democracy Hong Kong Confederation of Trade Unions.

The trade unions have urged Next Digital to respect its media talents and withdraw the outsourcing plan.

Looking from the company’s perspective, it is not surprising why it felt it had to make some drastic changes in the way it conducts its business. 

Next Digital announced earlier this month that its net loss widened to HK$394 million in the year ended March, from a HK$324 million loss in the previous financial year, as revenue fell to HK$1.78 billion from HK$2.34 billion.

The company blamed the weaker result to a significant decline in advertising revenue at the group’s print media business in both Hong Kong and Taiwan.

Apple Daily (Hong Kong) saw its print advertising revenue fall 38.8 percent from a year earlier to HK$141 million, while its circulation revenue declined 9.2 percent to HK$207 million.

The paper saw its daily circulation slip to an average of 130,000 copies, compared with 150,000 copies six months earlier. 

Given the slide in ad revenues and circulation figures, the media group was at a crossroads, forcing it to reconsider its business strategy.

Some analysts had earlier raised the question as to whether Next Digital should abandon the loss-making print business and focus on driving the growth of its digital products.

Judging from the group’s latest financial results, it is clear that the management team has failed to find the right balance between the print and digital businesses.

Next Digital, which was formerly known as Next Media, aimed to be a leader in digital transformation as its traditional print media businesses faced massive challenge from New Media in recent years.

The group bet on its news portal, the online edition of Apple Daily, and its video news service Apple Action News, to drive revenue growth in the online segment and help offset weak print ad sales.

However, massive cost-cutting in its news operations affected the quality of the content, which in turn affected the traffic and advertising revenues in the digital business.

Though the group’s digital business reported HK$650 million revenue for the year to March, the figure was down slightly compared to the previous fiscal year.

A slowdown in digital business is a serious concern for the media group, already reeling from falling print revenues and advertising boycotts by some pro-Beijing enterprises.

With a growing number of online competitors in the market such as on.cc from Oriental Press and HK01 from businessman Yu Pan-hoi, as well as other offerings such as 100Most and myTVSuper, Next Digital’s online platforms are no longer an automatic choice for advertisers.

The group’s websites have seen a downtrend in the number of daily unique visitors over the past year.

For example, Hong Kong Apple Daily website recorded a total of 39 million page views and 2.3 million daily unique visitors in mid-June. That compared with 52 million page views and 2.4 million daily unique visitors three months earlier.

The number of unique visitors in Taiwan fell even more significantly, from more than 6 million previously to around 4 million now.

Now, what should Next Digital do amid this situation? How can it improve its business prospects and stem the losses?

It is amid these questions that the media group has opted to shift to an outsourcing model, deeming the arrangement as a good solution to bring down costs and reduce overheads.

While the company is justified in seeking changes, it should however ask itself this question: Is it right to ask employees to effectively renegotiate their contracts and settle for fewer benefits?

Is the staff being made to pay the price for the management’s faulty business vision and poor execution of business strategies?

The group should bear in mind that journalists are its only real assets, not the offices or printing machinery. All the exclusive news published on the front page of Apple Daily is the result of the hard work of the paper’s front-line journalists.

Letting go of the most important resource is unlikely to do any good for the newspaper group in the long run.

Getting work done through freelancers and sub-contracting arrangements may reduce the financial burden on the company, but is unlikely to enhance the company’s image or foster a sense of loyalty.

Also, it needs to ponder whether it might be sacrificing content quality in order save a few millions.

Instead of asking staff to leave and become freelancers or contractors, the company should streamline its operations and step up focus on digital, which is certainly the future. 

To boost online traffic, Next Digital can establish partnerships with independent online news platforms and distribute their content.

Increased traffic and pageviews will lead to more online advertising, helping the group improve its finances.

If the print media business is seen as having absolutely no future, it might be better if owner Lai pulls the plug on the segment as a whole and focus solely on expanding the digital business.

An expanded digital business can help save employee jobs while also ensuring the group can continue to do the bold journalism that it is known for. 

Hong Kong’s media landscape and the city’s struggling democracy movement certainly need an entity such as Apple Daily.

It is in the public’s interest that the newspaper group stays robust and expands its readership, using whatever medium — be it print or digital. 

– Contact us at [email protected]

RC

EJ Insight writer

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