While traditional media in the United States have been reeling from the digital media revolution, registering millions in losses, shutdowns, and layoffs, their counterparts in Southeast Asia have been insulated from its devastating effects.
But maybe not for long.
Well aware that the window to adapt is fast closing, the region’s big media are finally getting more serious about investing in technology. Take this recent piece of news as an example: Scoop, a popular digital newsstand in Indonesia, has raised SGD 3M (USD 2.4M) in Series B funding from Kompas Gramedia, the country’s largest media conglomerate.
It’s certainly a good result for Scoop, which previously raised SGD 1M in Series A funding, hinting at a substantial increase in valuation for the company. The service currently has 210k monthly active users, with 90 percent coming from Indonesia.
Willson Cuaca, CEO of Apps Foundry, the company behind Scoop, says that this is the first non-controlling minority stake the media giant has taken in a foreign entity (App Foundry is based in Singapore). Prior to this, Kompas has either been developing its own products or acquiring other companies.
This significant development is no isolated incident.
Singapore Press Holdings (SPH), MediaCorp, and The Star Media Group — dominant in Malaysia and Singapore — have all increased their activities in the digital media space, venturing even beyond internet display advertising, which can hardly replace traditional ad revenues due to the ever-expanding amount of online inventory that’s available.
These three companies also face a more compressed timeline compared to Gramedia: Singapore and Malaysia are somewhat ahead of Indonesia when it comes to tech adoption. Combined with a smaller market in terms of population size, the pressure on them to change is also inevitably much higher.
Besides developing its own online products, SPH has been rapidly diversifying in the past year, investing in restaurant reservation site Chope and acquiring vehicle classifieds site sgCarMart for USD 48M, considered by many to be a fair valuation, and possibly even overpriced.
The company has been facing a slow but steady decline (see graphic below) in newspaper readership, and is counting on its events and property arms to boost its bottom line.
More recently, The Star Media Group, a media conglomerate in Malaysia, has gone a step further — it launched a RM 20M (USD 6M) startup accelerator that focuses on digital media startups. The move has garnered cautious praise from the country’s tech startup players, although some noted that the company might be better off partnering with an existing accelerator instead.
And then there’s MediaCorp, Singapore’s largest terrestrial broadcaster, which firmly believes it can innovate on its own. But its in-house attempts at daily deals and an e-bookstore have been disastrous — both shut down quietly after failing to attract much traction.
It recently started a couple of new ventures. The first is stylexstyle, a hybrid of an online magazine, a Birchbox clone, and an e-commerce store, and while it may yet succeed, MediaCorp’s traditional thinking and top-down management may prove to be its undoing.
The second is Toggle, an on-demand, multi-platform content delivery service that finds itself competing with the likes of mioTV, StarHub, iTunes, and not to mention the wide variety of free content (read: YouTube) that’s already available on the Internet, both legal and pirated.
We may soon see the broadcaster follow the route of its rivals — acquire digital natives with fresh perspectives, seed startups that exhibit great potential, and give in-house innovators more autonomy to made decisions.
It’s an inevitable path for long-standing giants hoping to survive large-scale disruption that is undercutting existing businesses.
But what’s bad news for the media giants is good news for the region’s tech startups. Digital newsstand apps like Scoop and Ookbee are great examples: Both have managed to secure publishing deals with big media who will experiment with anything just to stay relevant.
While the region’s innovators have traditionally suffered from the lack of exit options, we may start to see more traditional media companies act as the ecosystem’s white knights.
The question is whether startups will find themselves running willfully into their arms, or get dragged along kicking and screaming.
At the end of the day, a huge cultural gulf exists between traditional companies and startups: command-and-control versus soft authority, suits versus t-shirts, speed versus caution.
This is precisely why certain startups, even dying ones, have rejected acquisition offers from the big boys: They fear working under neanderthals with fossilized habits and mindsets — the very sort of attitudes they despise.
So, for both parties to profit from a disruptive environment, they’ll need to find a way to compromise.
But I wonder if the local organizations can muster up the will to adapt before its too late.
We’re already starting to see foreign MNCs make a play for regional startups, and my sense is that the most promising entrepreneurs, with their global ambitions and international connections, would rather work with a Japanese company like Rakuten or a global security firm like Gemalto — instead of languishing with dominant, single-market players with nothing much to show on the global stage.
This leaves local players in an unenviable position of fighting over second-tier startups.
Inevitably, geographical barriers-to-entry will give way to globalization’s rising influence. Not even the strongest fortresses can withstand a tsunami when it hits.
Photo: Julian Povey