THE future of the print business has been widely debated as newspapers across the world face readership declines and plunging advertising revenue amid this era of technology. In Malaysia, the turmoil has claimed its latest victim in the form of Malaysian Newsprint Industries Sdn Bhd (MNI), which is in the process of being wound up.

After 21 years in business, the owners have decided to shutter the country’s sole newsprint manufacturer amid declining newsprint demand and three consecutive years of losses.

Hong Leong Industries Bhd (HLI), which has 33.65% equity interest in MNI, and Media Prima Bhd, which has a 21.36% stake through 98.17%-owned subsidiary The New Straits Times Press (Malaysia) Bhd, made the surprise announcement to Bursa Malaysia last Tuesday. Norwegian company Norse Skog Papers (M) Sdn Bhd also holds a 33.65% stake in MNI, while Rimbunan Hijau Group, controlled by Sarawak tycoon Tan Sri Tiong Hiew King, owns the remaining 11.34% stake.

MNI was Media Chinese International Ltd (MCIL)’s largest supplier. The latter publishes Chinese newspapers Ming Pao, Sin Chew Daily and Nanyang Siang Pau, among others.

However, many media analysts do not think local newspaper companies will have difficulty in sourcing newsprint from other suppliers.

According to AmInvestment Bank Research analyst Lavis Chong, MNI’s liquidation is not going to change the cost structure of print newspaper companies significantly.

“There are many foreign suppliers in Asean, such as Indonesia and Thailand, from which our local media companies can source their newsprint. From what we’ve gathered on the ground, prices offered by MNI and the foreign suppliers are largely the same,” he tells The Edge in an email response.

Another media analyst, who declines to be named, says MNI’s selling price was only marginally higher than its international counterparts.

“The premium pricing MNI commanded (compared with its competitors) is very minimal, so we don’t expect much cost savings there. If at all, it would be negligible,” he says.

“The current situation is understandable, [it’s] not that people don’t want to read [the news anymore] but they have alternative media sources. As such, local media houses have got to embrace a digital platform. That’s why Media Prima recently spent over RM100 million to buy Rev Asia Bhd’s advertising and social media business and Star Media Group Bhd launched [all-Asian video-on-demand (VOD) service] dimsum [last year].”

In May, Media Prima paid Catcha Group and Youth Asia RM105 million for Rev Asia Holdings Sdn Bhd. Digital assets under Rev Asia include Malay, English and Chinese-language portals such as OHBULAN!, SAYS, Viral Cham, Rojaklah, JUICE, 8Share, MyResipi, KongsiResipi.com and SirapLimau.

Still, MNI’s voluntary liquidation signals tough times ahead for print media as circulations continue to decline and tepid advertising expenditure (adex) affects the bottom lines of some media companies.

Bloomberg data shows that out of the 16 analysts who cover Media Prima, 10 have a “sell” call, four have a “hold” recommendation and two have a “buy”. Out of the 11 analysts who cover Star Media Group, three have a “sell” call and eight, a “hold” call. Meanwhile, out of the seven analysts covering MCIL, two recommend a “sell”, three have a “hold” and two, a “buy”.

“Adex has been stabilising, but remains low. Although the financial and property industries have recovered slightly, companies are still adopting a wait-and-see-approach in their ad spending,” says another analyst.

“Media Prima’s earnings have been dwindling as well, so it is not a surprise that it couldn’t support MNI much,” he adds.

For the first quarter ended March 31, 2017 (1QFY2017), Media Prima slipped into the red with a net loss of RM38.47 million, or 3.47 sen per share, versus a net profit of RM17.25 million, or 1.55 sen per share, a year ago, amid subdued adex. Revenue for 1QFY2017 dropped 10% to RM272.2 million from RM304.06 million in 1QFY2016.

Pacific Mutual Fund Bhd CEO Teh Chi-chuen thinks the newspaper business will continue to face headwinds. To navigate these challenges, economies of scale are needed, he says. “We (Malaysia’s newspaper industry) are small compared with many other countries and will need an integrated supply chain, with customers that have sound financial backing.”

An analyst with a local brokerage expects more media companies will be reporting weaker earnings in the near term. “While we don’t expect more liquidations, we see more media companies reporting weaker earnings as business conditions are becoming increasingly challenging,” he says.

“We see the media companies putting more focus on digital media, but that is a tricky path as it is more difficult for media players to monetise their content through [a] digital [platform],” the analyst adds.

However, Mercury Securities Sdn Bhd head of research Edmund Tham is more optimistic about the future of the newspaper industry. Although it is behind in terms of digital adoption, the local media industry will be able to catch up with the global digital media, he opines.

“Over time, things will change. It may take some time to follow the global trend, but local online media is growing very rapidly,” he adds.

Tham does not expect any more liquidations. “MNI is just a newsprint producer — it is different from news. News is a platform, everybody needs news all the time. It is just that fewer people are reading from print material … the industry is shifting already,” he adds.