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PDI in trouble with P400-M losses last year; plans to close print edition

THE Philippine Daily Inquirer (PDI), which has been practically the official organ of the Yellow Cult since 1986, is falling on very hard times. It suffered a loss after tax of P320 million in 2017, from its profit of P20 million in the previous year, according to its management in its stockholders meeting on June 8, 2018.

Sources in the company claimed that the newspaper’s finances hemorrhaged profusely last year to reach P400 million — hidden partly, however, by the P140 million sale of its property.

What fudged PDI’s bottom line for 2018 though was it owners’ move to hollow out the firm: they sold in November 2018 its main asset, its 2,000-square-meter (sqm) Makati property, including the building. That leaves such things as its brand name, its reporters, and mostly anti-Duterte columnist as its assets —which, however, many would even consider as negative assets.

In response to its financial crisis, the newspaper’s President Alexandra Prieto told the board members at its meeting on Nov. 21, 2018 that PDI would have to “fully migrate to digital mode” in four years and end its print edition.

The sale of the Makati property, where its offices and press sit, for P140 million was intended to avoid the red in its bottom line, and, according to Prieto, to raise funds for “new revenue-creating” projects.

Print edition
Both of these two management responses to the newspaper’s plight are very risky. The newspaper’s digital edition is totally owned by another company, Inquirer Interactive. Its plan to cease its print edition — which employs the personnel that produces the internet-edition’s content — raises serious questions on these employees’ future. Any Inquirer Interactive revenues would go to its owners, not to PDI as corporation, which is the entity that pays the employees who produce the news content.

Hard times for the favorite newspaper of Noynoy and Leni. (From stockholder’s complaint.)

But the worst thing is that Philippine digital news sites haven’t really yet proven to generate the same scale of revenues as their print editions, since hard copies are paid for, while internet editions in the country are free. No Philippine digital edition has dared to take the dangerous road that a few US papers have taken of charging viewers of their sites.

There has also been intense competition for advertising in the internet, with new news and feature sites, as well as YouTube sucking much of ad revenues away from newspaper sites.

On the other hand, the PDI’s sale of its properties has resulted in a criminal estafa complaint against its owners by its former columnist and minority stockholder Victor Agustin, filed two weeks ago with the Makati city prosecutor. Agustin claimed the price for the sale of PDI’s property — to a firm named Lexmedia, controlled also by the Rufino-Prieto clan — was scandalously low, and fraudulent.

Agustin claimed that the price for the Makati property (on Chino Roces Avenue) was in effect P70,000 per sqm, way below the P120,0000 zonal value set by the Bureau of Internal Revenue as well as the P195,000 per sqm price in a recent transaction in the area. According to the complaint, the selling price of the PDI was underpriced by P100 million. The columnist claimed the “purported sale of PDI’s land amounts to massive fraud against PDI and its shareholders.”

Zonal value
This is the first time I’ve heard of a property being sold below its zonal value. Is that allowed?

Agustin alleged that the Prieto-Rufino owners attempted to hide that they were the real owners of the buying firm, Lexmedia, through a scheme of corporate layering (See chart).

In its reply to Agustin’s initial demand letter, PDI’s lawyers claimed the sale of the property was the prerogative of management, and was approved by the majority of its stockholders. The lawyers also pointed out that the sale of the property was in order to raise much needed funds to ensure the viability of the corporation’s business operations.

The ‘corporate veil’ of the buyer of the Philippine Daily Inquirer property. From Agustin’s complaint

Whatever, it does appear to me to be a very clever move by the Rufino-Prieto clan to try to take advantage of their own newspaper’s financial crisis. PDI sold its property at P140 million — to themselves, through Lexmedia that they own.

With the property’s zonal value at P239 million, they could just turn around tomorrow to sell it even at that base price, to add P100 million to their wealth. Not bad. And PDI would have a P140 million kitty that could still be used to make a last-ditch effort to save it. Not bad.

A cynical view by one observer though is that the Rufino-Prieto clan, ahead already with least P100 million from the sale of PDI property, is now ready to abandon the newspaper. Any price for the newspaper’s sale would be pure bonus.

The icing on the cake is that PDI, no longer the property’s owners, would have to pay Lexmedia rental of P500,000 a month. The Rufino-Prieto’s lawyers, however, said that the company’s president would try to negotiate with Lexmedia “rent-free occupancy” for five years. That would basically mean Alexandra Prieto talking to herself.

However, PDI’s sale of the property could blow up in its face. Agustin’s law firm is the top-notch and influential Villaraza & Angangco law firm. A restraining order on PDI’s sale of its property would throw a monkey wrench on the newspaper’s finances at this time. That would get its creditors not just knocking on its doors, but banging on them.

The property at Chino Roces has become a very prime property recently because of developers’ rush to construct residential and office condominiums in the area. The Rufinos very well know this, as they are into property development. If ever the Rufino-Prieto clan sells it, a property magnate said he’d be willing to pay three times the amount PDI sold it for. “And I’ll still make a lot of a money when I build a condominium on it,’’ he said.

Paper and energy costs for print editions combined with falling subscriptions and revenues appear to be pushing PDI to the brink In its June 8, 2018 stockholders’ meeting, management reported that both revenues as well as those for advertising only dropped by 27 percent in 2017; circulation by more than a fourth, 26 percent; and classified advertisements by 23 percent; street sales by 9 percent; and agency sales by 9 percent.

But it certainly is not just the situation of the entire industry that explains PDI’s quagmire.

‘Corrupt Duterte’
A source in the newspaper also claimed that subscriptions have been canceled because subscribers have gotten tired of the pro-communist slant and anti-Duterte bias of its articles and columns. I myself just nod my head reading columns the likes of one entitled “The corrupt Rodrigo Duterte,” while its columnist John Nery claims in his pieces and in media interviews abroad that the Duterte is suppressing the press.

Some 83 percent of the ABC class, the sector that buys newspapers and 86 percent of college graduates who are newspaper readers, support Duterte, according to the September survey of the Social Weather Stations.

Did PDI’s management naively expect that they won’t be turned off and continue to shelve out P7,200 yearly for a paper that demonizes a president they support? PDI’s owners and journalists had been trapped in the halcyon days of the Yellow Cult: It grew not because of its “balanced news, and fearless views” but because it played to the anti-Marcos and pro-Yellow sentiment of the A class in the past three decades. The PDI maintained that stance even after the Yellow myths have been debunked one by one, and the A class had shed its pro-Yellow sentiments.

PDI had thought, that its free tabloid Libre launched in 2001 would be its savior, with both the Arroyo and Aquino governments allowing it to be sold at all MRT, LRT and Philippine National Railways stations. It never took off, and in 2017 its losses plunged by 70 percent, with PDI first reducing its frequency to weekly, and then this year selling it to unknown buyer. Its Cebu Daily News, whose boastful claim was that it was Cebu’s only independent paper, also didn’t fly, so that PDI closed down its print edition this year.

Digital version
While PDI was the first major newspaper to have its digital version, it has been unable in its 20 years online to post a single peso of profit, partly because US companies, mainly Google Ads, demand an atrociously high percentage of the ads that appear in the site, and there is still no solution to the problem of viewers being turned off by ads that they do not even read them.

Worse for PDI is that television networks have set up their own online sites to claim viewership, mainly because of their videos, news and entertainment, which newspaper sites don’t have. PDI’s market share has also been dented by the entry of US-backed, internet-only Rappler, whose growth has been financed and backed by US ideological entities wanting to mold Filipino public opinion.




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