TV biz set for restructuring, consolidation as it modernizes
BEIJING — The Year of the Rooster has just begun in China, and it’s already shaping up to be another important year for television in the world’s fastest-growing media market.TV penetration has finally reached 99% of homes — that’s 400 million TVs — and cuts across the rural/urban, rich/poor divide in a way that has content providers giddy and advertisers drooling. In fact, the tube accounts for nearly three-quarters of the country’s ad spend. But it truly is a fragmented market. There is one nationwide broadcaster, CCTV, with 14 channels, plus 32 provincial satellite stations and 31 provincial TV stations. However, there are also more than 700 cities in China, and each has its own TV station with several channels. Add in a few foreign channels operating in China and you get more than 2,100 TV channels, compared with 100 just 20 years ago. China’s TV market is state-controlled, heavily censored and difficult to crack. But things are changing. With the 2008 Olympics looming, media investment rules are being relaxed, and access to the TV market is opening up. Since China opened movie and TV production to meet its World Trade Organization commitments, Sony, Viacom, News Corp., Disney and other foreign firms have stepped up investment. Foreign media companies can now buy stakes in domestic TV program production companies as long as Chinese partners keep a 51% stake. Market analysts are forecasting an influx of more than $100 million in foreign venture capital into Chinese media in 2005, most of it going into TV production. “TV production is shaping up to be a very competitive market,” says Frank Shi, an analyst at CLSA in Hong Kong. “The government opened the TV production market to private and foreign investment not long ago. Enticed by the potential, capital is flooding in.” This will have a knock-on effect “To counter the potential market erosion by foreign rivals given China’s WTO accession, the government may help the state-owned media companies become more market-oriented and thus more competitive,” investment bank Goldman Sachs said in a recent research note. Analysts also reckon that the changes in the market will inevitably lead to consolidation and some of the smaller, less competitive channels will go under. The bedrock of Chinese TV is CCTV, which is the only source of TV news on politics or international affairs for mainland viewers. All provincial and municipal broadcasters are required to switch to CCTV’s primetime news at 7 p.m. each night. But even this massive state organ is waking up to change. CCTV prexy Zhao Huayong recently told the Communist Party journal Qiushi (Seeking Truth) that CCTV was an “important battlefield of public opinion” that needed to “cater more to the diverse tastes and information needs of domestic and foreign audiences.” Zhao also wants snappier programming to lure more advertisers, and he’s interested in exploring other media, such as digital pay TV, video-on-demand and online services. TV stations are under a mandate to broadcast the 2008 Olympics on digital TV, and China wants to run it on its own domestically produced standard. Big telecom operators such as China Telecom are keen to launch Internet Protocol Television (IPTV) in most Chinese cities this year. It’s already begun in Shanghai using programs from existing TV stations, although the powerful State Administration of Radio, Film and Television, keen to retain control of output, denies IPTV is coming anytime soon.