Shanghai Media Group explores online

Shanghai Media Group is simultaneously one of the oldest congloms in Chinese entertainment and one of the youngest.

Company’s “old Shanghai” backlot has featured in hundreds of movies, and it has an exhibition circuit that operates some of the most historic theaters in China.

Yet the No. 2 Chinese entertainment group (after CCTV) was formed only in 2001 as the result of a state decree merging several other companies. It is run by the energetic Li Ruigang, who is only 38. And it is probably the country’s most developed operator of youthful consumer tech services, including mobile TV and digital pay TV nets.

SMG owns 13 analog channels, 16 national digital pay channels, a broadband online channel, a mobile television channel and five newspaper and magazine stables through scores of subsidiaries that include China Business News, Shanghai Dragon TV, Shanghai Oriental TV and Radio Shanghai. Through its Shanghai Film Group and its Shanghai United circuit, it bought up the modern multiplexes that Warner Bros. Intl. Cinemas sold when the U.S. conglom became frustrated with regulatory progress and pulled out of the country. (Shanghai Film Group is in turn the major backer of the Shanghai Intl. Film Festival.)

SMG last year had revenues of RMB5.1 billion ($735 million) and is understood to be one of the most profitable groups in the sector. It has not disclosed its exact figures, though that would change if the group heads for a listing. “SMG is now preparing for the IPO of a couple of its business sections, including animation. We are quite positive about catching hold of this opportunity,” Li tells Variety.

Under Li, the company has hatched progressive alliances with foreign media players including Dow Jones, CNBC and South Korea’s CJ Group in safe areas such as home shopping while steering clear of sensitive topics.

While TV is the dominant activity at SMG, the company aims to be the world leader in Chinese-language content, and film is a major part of that strategy. This involves building its library functions, followed by exhibition, distribution, production and finance. Shanghai Film Group enjoyed a decent hit with the February release “The Marriage Trap,” and it reckons its different production labels are delivering it one or two hits per year.

SMG has also moved into the digital film market by releasing four or five digital films a year. “We are hoping to be more substantially involved in the film production and distribution business in the future,” says Li, who does not rule out joint ventures or partnerships with foreign firms. “Of course, television, IPTV and mobile facilities are desirable platforms to optimize SMG’s returns on the existing library, but we are considering more substantial investment into the film industry.”

Li is very clear that he does not share foreign views about the regulatory climate in China and the difficulties of doing business in the media sector. “Today’s regulatory environment in its own right is the consequence of easing restrictions over the past years. If the current situation is compared against a historical backdrop, the evolution of the regulatory environment is more clear,” he says.

In the TV sector, he points to live newscasts as an example of progress. In the past, newsshows were prerecorded and passed to censors for vetting before airing. Now live news is commonplace.

Nor does he agree that the Olympic Games and the unrest in Tibet have meant more of a crackdown by authorities. “The fundamental media management principle hasn’t changed. It’s just that there are more things to report,” Li says. “China has its own basic sociopolitical structure; media controls differ from Western capitalist countries. But in the past decade, changes in the media have been enormous.”

While he is in favor of competition in the media — he says it improves efficiency of resources and can increase the size of a market — Li is also clear that media is not a normal business sector, but is one that the government sees as a strategic industry.

Li also is keen to redefine what a Chinese media company is about. He says that in the past, such companies have thought of themselves first and foremost as state broadcasters. He wants them to think of themselves as content providers and distributors as well as broadcasters.

Future efforts will focus on expanding content production for all Chinese markets around the world, developing new media and building media brands.

SMG’s China Business News is an example of all three. Born from the merger of two newspaper companies in 2003, the unit became a financial news TV channel. Branded as CBN, it expanded this year into Hong Kong and is broadcasting on digital 24 hours per day on IPTV platform Now TV.

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