China adjust to post-Olympics life

Digital TV a big winner thanks to the games

BEIJING With a haul of 51 gold medals and hundreds of millions of dollars in sponsorship and ad revenues for state broadcaster CCTV, it’s probably fair to say that China has good reason to be happy with the success of the Beijing Olympic Games.

So what long-term effects in the media landscape in China have the Olympics wrought? Who are the big winners and losers in post-Olympic Beijing?

“From the media perspective, it’s about how to maximize resources and content. One of my clients gave a very dramatic description of the Olympics — he said it was the longest Chinese New Year ever. But the only thing is, after Chinese New Year you have to get back to life,” says Michael Zhang, managing director of MediaCom China.

The post-Olympic situation certainly indicates an expanded role for the Internet — the Games brought about real efforts by Chinese media owners to experiment with new ways to win auds.

Webco Sohu spent $14.5 million on a marketing campaign to make Sohu the “portal of choice” for the Games with the aim of taking long-term market share from rival portals such as Tencent, NetEase and Sina.

“People really benefited from digital media — there was lots of blogging, 3G, new angles, which got people to see a new perspective on this kind of great event; things like new media and direct and real-time media (grew),” Zhang says.

Post-Olympic strategy has the Net in mind. Companies such as our client Audi, which cooperated with CCTV during the Olympics, are thinking about how to leverage content (in new media),” Zhang says.

A big winner of the technologically sophisticated way the Games were presented was digital TV. China aims to switch from analog to digital by 2015.

“The big surprise is how big the increase is — five-fold in some cases,” says Manpreet Singh, CEO of Universal McCann, China. “The challenge is to keep the numbers up. The Olympics was event-based traffic; it will slow down. The challenge is how to get the first-time visitors to keep coming back — to create a platform for increased traffic for future.”

Digital TV looks to get a boost from the Games. At the end of 2005, there were 80 digital TV channels, with digital TV in nearly 40 million homes. This year, Chinese media regulator Sarft held a conference on promoting digital in eight cities, including Beijing and Shanghai.

The plan is for all cities to have digital cable by the end of this year, with service rolling out to other cities and towns in the next couple of years.

There are currently 150 million households with pay-TV, of which 24 million are digital cable. Yet Sarft and the government have some work ahead of them on the regulatory side, say observers, because TV companies need the freedom to expand subscription revenues and introduce the same kind of commercial pay TV models seen in other countries.

Although the digital move is a topic that comes up again and again, government control remains as tight as ever. Market liberalization has not translated into greater freedoms for newspapers and TV stations as to what they can report, and cable TV is notoriously difficult to control.

Mobile phones were also big media winners in the Games.

One quarter of the Internet population of China used a mobile phone as a source of information about the Olympics, which is much more use than other countries. More than 10 million Chinese citizens watched the Olympic Games on their mobile phone screens.

Pubcaster CCTV completely dominated the Games, with exclusive rights to live broadcasts, while other regional and local TV stations had restricted rights. Other regional broadcasters, including some private channels such as Hunan TV, have been giving CCTV a run for its money in recent years with their “American Idol”-style shows and reality TV programming, but the deal that CCTV managed to negotiate left the others standing in the dust.

Private broadcasters are increasingly a presence in China, but they are limited by the strict regulatory environment and are regularly taken off air if they are off-message. Competition and consolidation has seen the number of TV channels drop by 20% in the past four years. China’s huge domestic market remains largely untapped, and it is this that persuaded the world’s biggest corporations to spend hundreds of millions of dollars on sponsorship and advertising during the Games.

Not bad for a marketing business only a quarter of a century old.   

Post-Olympics, for ad agencies, there are challenges ahead. While China is not expected to be hit as badly as other countries by the global financial crisis, it’s not a great time to be looking for ad revenues anywhere.

Most Olympic sponsors spent their budgets during the Games, and have little cash to splash around in a time of financial slowdown. But it’s not all bleak. Many Chinese companies decided the Olympics was not the right platform for them and held back sponsorship, or did Olympic-related events separately from the organized program. In provincial and smaller cities, Univeral McCann’s Singh expects that ad spend revenues will be slow, and may fall by as much as 6%. In the large cities, where increases have been more than 20%, there will be a flattening out, but it won’t fall drastically. Packages tend to be sold for longer term, so it’s more likely that ad spend will bounce back to normal levels.

China, even before the Olympics, was emerging as one of the world’s fastest-growing markets for televised sports. The success of the Games has kick-started an interest in sports that is unprecedented in the country. Sports marketing giant IMG Worldwide struck an exclusive 20-year deal with CCTV that gives the U.S. company the right to develop and market new sports events in China.

“For CCTV, the next step is how to monetize (sports) by (airing) better programs,” Singh says.

You would expect sports marketing to be a big winner, and it had a good Olympics, but central to the success of sports marketing in China is a change in the way the industry is run. Currently, athletes come up through the nationwide network of state-run sports schools, and there are no private clubs or sports federations to help, despite occasional efforts to set up private organizations.

The big sport in China is basketball, but local leagues, like the Chinese Basketball Assn. must pay area TV stations if they want their games beamed to fans. Rather, the league that piques the interest of most Chinese fans is the U.S.’ National Basketball Assn., in which the Houston Rockets franchise is led by Chinese star Yao Ming.

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