South Africa: Two deals set to alter media landscape

Change is afoot in the South African media industry, with two major acquisitions under way, and players increasingly looking to digital platforms. The country has one of the largest and freest media markets on the continent, but as in numerous other economies, print outlets have had to deal with slowing circulation and a rapidly changing online landscape.

On June 17, shareholders of Ireland’s Independent News & Media (INM) voted to accept an R2bn ($196.95m) bid for its subsidiary Independent Newspapers South Africa (INMSA) from the Sekunjalo Independent Media (SIM) consortium. SIM is led by – but distinct from – Sekunjalo, a Cape Town-based investment fund, and reportedly first made its bid in August last year.

INMSA has a large presence in the English-language newspaper markets in Cape Town and Durban, and has a substantial profile in Pretoria and Kimberley. The circulation of its daily newspapers topped 360,000 per day in the third quarter of last year, according to Print and Digital Media South Africa, an independent industry body, while its weekend papers sold nearly 460,000 copies. Its major titles include the Zulu-language Isolezwe, the biggest-circulation “vernacular” language (i.e. local, rather than English or Afrikaans) newspaper; its Saturday and Sunday editions; and The Star. INMSA’s magazines, produced in collaboration with Conde Nast, sold nearly 150,000 copies in third-quarter 2012, and include titles such as Glamour and GQ.

Given the group’s large circulation figures, the pending deal has attracted a great deal of attention, in part because INM has been grappling with a high level of debt. In late May INM put out a circular saying that, if the deal went through, a consortium of eight banks would write off €140m of debt; it added that INMSA would pay a final dividend of up to R20m ($1.97m).

In South Africa, however, attention has focused on the bidding consortium SIM, and the identity of its members, which were revealed on June 20. The lead shareholders are Sekunjalo Investment Holdings, the Congress of South African Trade Unions, the South African Clothing and Textile Workers Union, and the Food and Allied Workers Union, according to a statement by consortium chairman Iqbal Surve. Other investors include an unnamed Chinese syndicate, the Black Business Chamber Western Cape and various independent women’s business community organisations from around the country.

Meanwhile, in April, another major media conglomerate, Times Media Group, took full control of BDFM, which publishes business titles including Business Day, BDLive, Financial Mail and Summit TV, buying out its former partner London-based Pearson. The group, including BDFM, had a daily circulation of around 326,000 and a weekend circulation of 635,000 in the third quarter of 2012, supported by its ownership of The Times and the Sunday Times, both top-selling newspapers.

TMG hopes that it will now be able to reverse the fortunes of Business Day, which has seen its advertising revenues slip following changes to Johannesburg Stock Exchange rules regarding financial notices. However, the newspaper’s website, BDLive, has performed robustly, with around 500,000 unique viewers a month. In May BDLive introduced a layered pay wall, limiting the number of pages that can be seen by unregistered users to six in 30 days, while only paid subscribers have unlimited access to content.

Steve Matthewson, the managing editor of Business Day, told OBG that the pay wall is part of TMG’s long-term shift towards generating more income from content than from advertising revenues, which have fluctuated in recent years.

Like major periodicals in the US and UK, the South African press as a whole has been putting increasing emphasis on digital content as print circulation has slowly slipped in recent years. Major daily titles saw a 9.1% decrease in the year to the third quarter of 2012, according to INMSA. Although the decline may be slowing, a long-term shift online seems likely, and on the web big-name South African publications must compete with local niche websites, popular blogs, and of course international rivals. Through their acquisitions, SIM and TMG are taking on new challenges but with the possibility for substantial payoffs.

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