MEDIA: Alibaba’s Ma Eyes Stake in Iconic HK Newspaper SCMP

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Bottom line: Jack Ma is unlikely to tamper with content at the South China Morning Post if he buys a stake in the iconic Hong Kong newspaper, but instead will look for ways to leverage its content using more dynamic new media platforms.

Jack Ma eyes HK newspaper stake

A sketchily-sourced report from 2 weeks ago is suddenly getting major new credibility, with word that Alibaba (NYSE: BABA) founder Jack Ma is near a deal to take a major stake in Hong Kong’s SCMP Group (HKEx: 583), publisher of one of Asia’s oldest and most profitable English language newspapers. The biggest twist in the latest reports is that Ma himself and not Alibaba would invest in SCMP, owner of the South China Morning Post newspaper.

The earlier reports were based on a story citing vague rumors that Ma was in talks with the SCMP, leading me to say that such a move looked logical even if sourcing in the reports was quite shaky. (previous post) The newest report has far more solid sourcing and comes from the reputable Bloomberg, meaning the chances are high that a deal is really happening.

If that’s the case, this particular investment would look similar to a personal investment by Ma last year in one of China’s leading soccer clubs, which went on to recently list on China’s year-old over-the-counter (OTC) board in Beijing. (previous post) In that case Ma probably chose to invest by himself rather than through Alibaba because the club, now called Evergrande Taobao, was losing money and its business wasn’t very related to any of Alibaba’s other core focuses.

With this latest case, Ma’s decision to personally invest may be a bit more political, since ownership of the South China Morning Post by a mainland Chinese company would be a highly sensitive issue in Hong Kong, where people are wary of excessive influence by mainland Chinese. We’ll discuss shortly what Ma might do at the SCMP if he really buys a stake, but first let’s take a look at the actual reports on this latest deal for Ma.

The Bloomberg report says talks are at an advanced stage, and a signing ceremony could be announced soon. (English article) There’s no additional detail on a price or the size a stake that Ma would purchase. But I would expect it would be around 30 percent, which would carry a price tag of about $100 million based on SCMP’s latest market value. That amount would be a pittance for Ma, who is one of China’s wealthiest men.

I previously said that such a purchase looked relatively logical for Alibaba, which has been moving into the media and entertainment space with several major tie-ups over the last 2 years. Among those, 2 of its most relevant ones to an SCMP stake purchase include its recent formation of a financial news joint venture with China Business Network (CBN), one of China’s leading business dailies; and Alibaba’s purchase of a major stake in Weibo (Nasdaq: WB), a leading social networking site that’s often called the Twitter of China.

Politically sensitive

The fact that Ma, rather than Alibaba, will personally invest in SCMP is probably mostly due to the politics I’ve previously mentioned, and wouldn’t stop SCMP from working together with Alibaba’s other media assets. That said, SCMP could certainly use some fresh ideas from someone with Ma’s perspective, as the company faces similar issues to other traditional media that are being challenged by newer Internet-based rivals.

I do expect that Ma will tread carefully at first due to political sensitivities, and we’re unlikely to see any big changes at SCMP for at least a year after he buys his stake. But after that we could start to see a bit more experimentation in the online and mobile realms, including potential tie-ups with the CBN joint venture and Weibo, and also perhaps even with Alibaba’s core e-commerce platforms.

At the end of the day I doubt Ma will try to tinker too much with actual content being created by the older SCMP newspaper, which would probably create uproar from both the paper’s reporters and Hong Kong society as a whole. Instead, I expect Ma will look for ways to leverage and repackage the newspaper’s content into more dynamic and interactive formats using new media platforms.

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