Competition in Chinese Newspaper Industry

What was the point of the economic reforms in China?  A central premise must be that competition is good, because it brings out the best elements by the process of natural selection.  In the newspaper industry, the forces of the market are released and the successful newspapers will be the one who have bigger circulation and more advertising revenues.

How do you get bigger circulation?  Having better editorial content helps, but there are other things that can be done.  In The Beijing News (September 11, 2005), some other ways are listed:

  1. Low prices.  A newspaper with 60 pages may cost 3 RMB to print, but it is being retailed at 80 cents.  The newspaper kiosks also push the newspapers by offering package deals: 50 cents for two newspapers; one RMB for four newspapers.  Some newspapers offer fifty percent discounts on subscription.  Other newspapers increase the number of pages without price increases: 32 pages to 64 pages to 80 pages to 96 pages or even 100 pages.  Some newspapers offer special rates, such as an annual subscription price between 45 RMB and 55 RMB with about 70%-80% going to the distributor.  The newspapers themselves get very little.  The most extreme case is a provincial newspaper which advertises "Zero RMB for subscription: news for free."  
  2. Promotional gifts.  These come in a variety of forms: free rice, free noodles, free wine, free tea, free cash, free coupons and raffles for cars and apartments, but the value of the gifts has been going up.  Ordinarily, the gift value for a 50 cent newspaper may be as high as 1.50 RMB.  On the fourth day of the debut of one provincial newspaper, it announced: "Sign up for one subscription and you will receive a gift package valued at 128 RMB."  That gift package included white wine, drinks, tea seeds, etc.  Other newspapers send flyers that say: "Why receive rice or cooking oil when you can get cash instead?" and claim that a newspaper subscription will earn a 100 RMB coupon at a certain large shopping mall.
  3. False information.  In order to attract readers and advertisers, the newspapers play with their circulation numbers with exaggerations.  They even publicly show false numbers to mislead readers and advertisers.  In addition, many newspapers increased the number of advertising pages but without monitoring the contents, causing a lot of scams and false advertisements to appear.
  4. Mutual Attacks.  In the streets, the distributors disrupt the competitors, sometimes even getting into physical fights.  The editors and managers scrutinize the competitors and look for errors.  They even mobilize public opinion against the competitors.

So, was all this for the good?

Alas, the invisible hand of the market is going to be cut off.  On August 24, the Central Propaganda Department, the State Council's Office of  Rectification and the General Administration of Press and Publication issued a joint "Notice concerning the development of rules and regulations on newspaper distribution procedures."  The notice demands the various departments to implement steps to regulate the distribution of newspapers.  The newspapers themselves are asked to discipline themselves, to maintain the orderliness in distribution, to monitor and inspect and to develop long-range effective systems.

How does a true free market (say, Hong Kong) deal with these problems?

  1. Low prices.  Well, three newspapers (AM 730, Headline Daily and Metro) are given away for free.  Each newspaper has its own business and bottom line.  If a newspaper can continue to make a profit by free distribution, then why not?  There is nothing that says consumers must pay for newspapers.  After all, broadcast television is distributed for free.
  2. Promotional gifts.  Same as above.  If a newpaper can continue to make a profit with promotional gifts, why not?
  3. False information.  In Hong Kong, there is an independent Press Council, which promotes professional and ethical standards of the newspaper industry and deal with public complaints against newspapers.   In addition, the government may also step in to invesigate violations of the Control of Obscene and Indecent Articles Ordinance.  Beyond that, private citizens can sue for libel.  Similar laws must exist in mainland China with respect to false information, but the enforcement does not seem vigorous and consistent.  Self-discipline is not going to work unless it is obvious that there are consequences with certainty and no ambiguity -- if you won't do it yourself, someone else will do it to you and so you are better off doing it yourself.
  4. Mutual attacks.  It is a bad thing to see fist fights in the streets every morning for sure, but that has nothing to do with newspapers per se.  This might also occur with restaurants, for example.  There are criminal laws to take care of that.  As for opposition research, if the media act as the monitor of the government, then who can act as the monitor of the media except itself?