Media mergers, buyouts ramping up

BEIJING — After the deadly SARS virus put the brakes on China’s rapidly expanding economy last year, 2004 is shaping up to be a bumper one for mergers and acquisitions in the entertainment and media industry in the world’s most populous nation.

The TV industry should make entertaining viewing as players try to capture subscriptions and advertising dollars in China, no easy task in the difficult regulatory environment.

A deal expected to make big waves is the merger of five TV and radio stations in the southern province of Guangdong, a groundbreaking effort to streamline business and recapture market share from Hong Kong and foreign broadcasters.

It’s the most significant restructuring ever in the wealthy, modern region, which is the main testing ground for regulation changes.

The merger groups 19 local television, broadcast and network companies to create a broadcasting giant that covers 9 million households for cable television and 10 million households for terrestrial television.

Viewers should also keep watching Rupert Murdoch’s Star Group. Its chief executive, Michelle Guthrie, who took over from James Murdoch last year, has made no secret of her ambition to build the firm’s TV business in greater China.

A key project for Star is Xing Kong channel, a fast-paced mix of lifestyle, drama and gameshow programs that is very popular in Guangdong.

“The key is to make sure that we keep on producing something that viewers are willing to pay for,” she told the South China Morning Post newspaper.

“You can have the best distribution network and best platform, but if you don’t have good content that people want to watch, the business still doesn’t work,” she said.

Rivals have been watching Xing Kong closely, including listed multimedia investment firm Tom.com, which bought control of CETV, another mainland pay TV channel, from Time Warner last year.

Analysts expect CETV to relaunch this year, and Tom.com wants 40% local production by the end of 2004 compared with 15% at the moment.

Pay TV is expected to be a major growth area after the state broadcaster CCTV held trial operations of China’s first paid channel on Sept. 1. There are expected to be 80 pay TV channels by the end of 2005.

MTV China, a subsidiary of Viacom, made a major breakthrough in May when it was given rights for a 24-hour music channel on the cable network in Guangdong.

However, despite interest in the region, broadcasting is the most politically sensitive of all media, and changes and restructuring are unlikely to weaken government control. Strategists warn that bureaucratic red tape still poses obstacles.

However, investment bank JPMorgan’s analysts describe China as the “most intriguing locale for Asian M&A.”

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