What's Jimmy Lai's gameplan to revive Next Digital?

December 20, 2017 12:19
Jimmy Lai will return as chairman of his media company Next Digital from February next year. Photo: Reuters, Wikimedia Commons

Last Friday, Next Digital Ltd. (00282.HK) issued a stock exchange announcement that its founder Jimmy Lai will return as the media company's chairman from February next year.

Lai's return came three years after he stepped down from the post following his arrest in connection with his participation in the Occupy protests in late 2014.

The market is interested to know what the media mogul has up his sleeve to overhaul the company's business strategy after the disposal of Next Magazine, and how he sees the future for its remaining publications – the Apple Daily newspapers in Hong Kong and Taiwan.

Aside from Lai, Next Digital also appointed veteran journalist Cheung Kim-hung as its chief executive officer, replacing Cheung Ka-sing, also effective from February. Cheung Kim-hung is a former editor-in-chief of both Next Magazine and Apple Daily, and is currently the publisher of Apple Daily's Hong Kong edition.

What are the implications of these new appointments?

Next Digital is a listed company with an experienced management team overseeing its daily operations. Any change in leadership is not expected to have any significant impact on its business. But Lai's return should boost staff morale as he is highly respected not only in the company but also in the industry, and is regarded by many as the only person who can turn around the company's flagging prospects.

The new leadership's first priority is the completion of the disposal of Next Magazine to Kenny Wee. The deal has been postponed several times, from September to November and now the latest expected completion date is Feb. 28 for the Next Magazine's Taiwan edition and Jan. 2 for the Hong Kong edition.

Lai had said before that the magazine business was outdated in the internet world. But has he changed his view as he now wants to maintain control over the business?

Remember that the magazine's Taiwan edition is still doing well in terms of coming up with scoops and hard-hitting stories about government officials and politicians.

In fact, keeping the magazine, at least the Taiwan edition, is not a far-fetched possibility. Lai pulled out from a deal to sell the company's entire Taiwan business back in 2013.

It will be a tough act for Lai to turn Next Digital's business around after the company posted losses for several years. The company's flagship product, Apple Daily, is still struggling with shrinking advertisement revenue amid alleged political pressure from Beijing.

Next Digital is also facing tough competition in the online market. Moreover, some market research firms note that even if there is strong economic recovery, most advertisers still prefer television stations to online media.

That said, Lai must come up with a sustainable business model for Next Digital's online media business. He also has to decide whether to maintain the print versions of Apple Daily in Hong Kong and Taiwan, or shift the savings from printing costs to invest in his online enterprise.

The truth is, both the print and online media businesses of Next reported losses for the six months that ended on June 30. The online media unit incurred a loss of HK$23 million with HK$294 million revenue, while the print business reported a loss of HK$76 million with HK$388 million revenue.

The weak interim financial figures reflect the shrinking advertising pages of Apple Daily.  

Next Digital is trying to expand its advertiser base by partnering with small and medium-scale local merchants through the launch of "Apple Offer" which offers shopping discounts to readers. 

Lai has to come up with something better. He should explore new revenue streams including subscription fees as well as a new advertising model to support the business.

When Lai decided to dispose of his Next Magazine, he was giving notice of his intention to transform the company into a new media venture. In an article published in October, he noted that Next Digital's operation was being dragged down by its traditional success model, making it hard for the company to tap into online media.

“The current structure of Next Digital is outdated, dragging our steps to move forward just like an elephant dancing," he wrote. "We need to keep innovating and maintain an entrepreneurial mindset for new business development. If we cannot change fast, we would be killed in these fast-changing times.”

It’s still uncertain how Lai plans to transform Apple Daily and its online platform. But Lai knows the problem with the current business model and would like to take action amid the mobile digital trend.

He believes the company somehow got lost initially as it used its newspaper experience to venture into the mobile media arena.  A decade ago, the company launched Apple Action News, bringing animated video to the smartphone screen. It was a breakthrough in mobile media, and Lai believes that Action News is just the beginning.

It is likely that Lai will focus on developing the Action News model to enhance the company's revenue stream, rather than invest more in its print products.

What would be Lai's next move in mobile media? Is he still capable of disrupting the media industry in the 5G era?

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EJ Insight writer