China’s tech giants are not afraid to burn cash in pursuit of a greater market share, and Alibaba’s newly acquired media asset, Hong Kong-based flagship newspaper South China Morning Post (SCMP), has dropped their paywall to do just that.
While newspapers across the world are looking to business model innovation and paywalls to boost revenue, the SCMP officially threw out their subscriber system in a bid to boost readership and ad revenue.
“Our focus now should not be on finding the right media business model,” said Alibaba chairman Jack Ma in a SCMP article yesterday. “Our priority should be on how we should change to better adapt to the reading habits of our readers.”
“With the paywall removal, it paves the way for the SCMP to grow its readership globally,” said SCMP editor in chief Tammy Tan.
The strategy parallels current trends of expansion across technology companies in China. Lowering entry barriers in hopes of securing a large market share is a tactic Alibaba has employed across their own e-commerce platforms, as well as their affiliated products. The company has been a primary player in China’s on-demand wars, funding massive subsidies for startups and services with a high cash-burn rate.
It’s a strategy that was conceived and born in China for a reason. Massive market saturation and a highly-mobile population bred the need for revenue burning tactics. It’s the same market that saw Xiaomi rocket to one of the world’s most valuable startups by providing a low-cost, market friendly entry point for China’s growing mobile population.
However Ma’s strategic focus on expanding their consumer base over profitability is an unproved theory in the world of print media. “Free services do not mean cheap services,” said Ma in reference to the paywall removal. “Rather, offering free but quality services is how we can succeed and sustain our growth,” he said, drawing parallels with the growth of TaoBao, the company’s flagship consumer e-commerce platform.
One of the primary benefits of expanding the readership of the SCMP by lowering the paywall would be increasing their advertising reach, which could in turn drive more consumers to their e-commerce platforms. Alibaba has expanded heavily into entertainment and other IP content on the same premise, driving traffic through the SCMP and other peripheral assets could help attract a higher-end clientele to the company’s increasingly global platforms.
SCMP’s total group revenue, which also includes a handful of other publications, was $160 million USD in 2015, which in a drop in the ocean compared to Alibaba’s other revenue streams which generated over $12.3 billion USD in 2015. The company will be hoping to convert any lost paywall revenue into ad revenue or sales revenue on their e-commerce platforms.
Alibaba’s purchase of SCMP has some parallels with the purchase of the Washington Post by Amazon founder Jeff Bezos, however it’s worth noting that Bezos focussed heavily on business model innovation for the US newspaper, with restructuring programs and digital-only features including their own news reader application. Alibaba and Ma have remained tight-lipped on any further possible changes to the SCMP.