Alibaba to buy South China Morning Post for $266M

Chinese e-commerce titan Alibaba Group Holding Ltd will acquire Hong Kong-based South China Morning Post (SCMP) among other media properties for HK$2.06 billion ($266 million), hoping to leverage technology to drive one of the oldest newspaper publishers in the region.

Alibaba would also acquire the magazine, recruitment, outdoor media, events and conferences, education and digital media businesses of the newspaper's holding company SCMP Group Ltd, it said in a statement during the weekend.

SCMP Group, which also has interests in the property market, said its board believes the future of traditional publishing is uncertain. It added that the value of the media business lies in rich digital media content and that Alibaba will be able to unlock greater value from the content and brand.

For Alibaba, this marks another move outside its core e-commerce business. Early this year, it had picked up a stake in a small Chinese smartphone maker. More recently, it also made a big bet on offline electronics retailer Suning with an aim to integrate it to simultaneously drive its e-commerce unit.

With the latest move to get into the media business, Alibaba is following the footsteps of the founder of its closest rival Amazon. Two years ago, Jeff Bezos had acquired Washington Post and he has been particularly trying to drive the digital side of the iconic newspaper brand.

However, Alibaba's move is different in two ways. First, unlike Bezos, who has invested in the American media property in his personal capacity, Alibaba is getting into the media business as a company. Second, Bezos has tried out different ways to push the paid online subscription business of Washington Post. But Alibaba intends to change the operating business model of the SCMP, which has a metered paywall or has limited free articles after which a reader needs to pay to access the content.

Joe Tsai, executive vice chairman of Alibaba Group, said in a letter to readers that SCMP.com's paywall would be taken down, making the website's content freely available.

"SCMP is unique because it focuses on coverage of China in the English language. This is a proposition that is in high demand by readers around the world who care to understand the world's second largest economy," said Tsai. "Our vision is to expand the SCMP's readership globally through digital distribution and easier access to content," he added.

SCMP is considered to be an independent voice in a region where most media is controlled by the state. However, critics say that SCMP has softened its stance on issues related to China in the last few years.

Besides the broadsheet, other SCMP titles include the Sunday Morning Post, its digital platforms SCMP.com and related mobile apps, and the two Chinese websites Nanzao.com and Nanzaozhinan.com. The acquisition also includes a portfolio of magazine titles including HK Magazine and the Hong Kong editions of Esquire, Elle, Cosmopolitan, The PEAK and Harper's BAZAAR.

SCMP has the most paid subscribers among English-language papers in Hong Kong. It is Hong Kong's biggest English-language newspaper.

SCMP Group's annual revenue rose from HK$1.1 billion in 2013 to HK$1.2 billion last year. Its net profit rose from HK$109 million to HK$122 million in the same period. However, it faces the similar set of challenges as other newspaper groups around the world as media consumption moves to the digital space.

Interestingly, SCMP Group was itself looking to venture into the e-commerce business by acquiring a majority stake in Hong Kong-based online fashion retailer MyDress. As part of the plan to sell the media properties, this deal has been simultaneously terminated, it said on Monday.