CHINA: China's media shake-up

Restructure, re-organise and reform - that is the word from the top to newspapers and broadcasters in China

The Straits Times
Saturday, April 10, 2004

By Jason Leow

BEIJING - Restructure, re-organise and reform - that is the word from the top to newspapers and broadcasters in China.

The order has been given as much to ensure their survival and help the government communicate better with the people as to secure a place in the world market for China's media industry.

As a result, local conglomerates such as the China Radio Film and Television Group, whose members include China Central Television, and the Shanghai Media and Entertainment Group (Smeg), which includes Radio Shanghai and Shanghai Television Station, have sprung up.

Print media too is being shaken up. In the past two years, many newspapers were closed down, annexed or transferred from one group to another.

Result: Today, there are just 39 groups controlling 2,137 newspapers across the nation, according to the State Press and Publication Administration.

While they enjoyed state subsidies before as propaganda instruments, newspaper groups now have to operate as businesses, with an eye on the bottom line like any other.

The push to become more market- and consumer-oriented came straight from the top.

In March last year, Chinese Communist Party chief Hu Jintao told the media - both print and broadcast - to cut back on the hitherto lengthy but boring reporting of political leaders' every speech or activity, however mundane.

He knew that was turning people off, a minus for any political leader who needs to reach out to the masses. He wanted newspapers and TV networks to re-invent themselves, reflect better the people's concerns and aspirations, and give them what they like to read or watch.

But when many newspapers took that as a licence to increase circulation by offering titillating gossip and other fare that appealed to the baser instincts, the authorities felt compelled to step in.

On Tuesday, they issued a reminder to newspapers to cut back on 'low class' material in their entertainment and cultural reports. So, less pop star-gazing and more features on Chinese art.

But unlike the case in broadcasting, there is no indication that the authorities will allow any injection of foreign capital or expertise in editorial operations, however much they desire livelier papers.

Foreign investors are not exactly queueing up to put their money in newspaper groups either, not even in the non-sensitive advertising part of the business.

'Foreign parties probably believe returns on their investment in the print media will not be as great as those in broadcasting,' said Professor Yu Guoming, a media analyst at China Renmin University.

The picture in broadcasting is altogether different.

The authorities have not said no to joint production of some programmes.

Not that China's broadcast media groups are in a parlous state. They have billions of dollars in assets, huge economies of scale and the ability to produce, distribute and sell content not only in China but also overseas.

But none of them really knows how a global-minded conglomerate should behave or make money - 'drive profitability', in finance-speak - said Mr Vivek Couto, executive director of Hong Kong-based Media Partners Asia, a consultancy.

It is for this reason that China has decided to open up selective parts of the media to foreign players even though it is not required to under the terms of its membership in the World Trade Organisation.

But it is doing so only very cautiously. Unlike in Japan and India, where foreign media groups came in and consolidated their media industries, China allows foreign companies to own only a small slice of the media pie.

The reason: It wants eventually to grow its own global media brands.

To gain experience, Chinese broadcasters have been given the nod to behave, in some instances, like Western cable stations.

During the Iraq war, for example, the China Central Television network or CCTV broadcast round-the-clock on its international channels, 4 and 9, with live feed from Baghdad.

Clearly, while China sees a need to protect local conglomerates from over-competition, it also acknowledges they are not good enough to go it alone.

So in February, Beijing made its most radical ruling - by allowing foreign companies to take a minority stake in joint ventures to co-produce content with Chinese players.

'They really want to get international companies like CNBC, Viacom and Universal to help them create services that Chinese consumers would be willing to pay for,' Mr Couto said.

Last month, US media giant Viacom announced plans to partner the Shanghai Media Group in producing Mandarin programmes for children and young adults over Shanghai Media and other Chinese cable channels.

The deal was the first foreign investment in China's media content industry since February's ruling.

Viacom chairman Sumner Redstone said the agreement was still subject to the State Administration of Radio, Film and Television's 'soft approval' but told China Daily he did not see a problem getting the nod.

Viacom also signed a se- cond agreement with state broadcaster CCTV to air two Nickelodeon shows - Cat Dog and Wild Thornberrys - for 90 minutes a day on CCTV's new children's channel.

Viacom will also co-produce Nickelodeon's Kids Choice Award for Chinese viewers, reaching a potential 386 million households.

The pact follows last April's strategic partnership between US business channel CNBC Asia Pacific and the Shanghai Media Group, whose assets total 10.7 billion yuan (S$2.2 billion). The two companies now exchange programmes for use over each other's channels.

In 2002, Mr Rupert Murdoch's News Corp signed an agreement with Hunan Broadcasting Group, another local conglomerate formed under state mandate, to co-produce and broadcast television programmes.

And only two days ago, News Corp told the Asian Wall Street Journal that it was discussing other possible ventures with Chinese companies in print and radio.

In all, foreign help, and content, will go into a package deal involving eight CCTV and 16 provincial pay channels, each charging between US$3 (S$5) and US$4 a month, some time this year.

While China gains from foreign players, what is in it for the outsiders? The honest answer is, for now at least, not much. For one thing, foreign companies, playing second fiddle to local companies, are unlikely to get the lion's share of profits. Industry experts say China's TV ad pie is US$3 billion - Asia's second-largest after Japan.

'You can say all of them are losing money in China. But the point is, China is a green field,' said Mr Couto, adding that every major player would want a toehold.

But foreign players have also been cautious and thus far have refrained from plunging in headlong from the word go.

Mr Murdoch, for instance, is on record as saying more than a year ago that he hoped to use Hunan as a base to expand his Star TV network into central China. But that has not happened yet.

Xingkong Weishi, Mr Murdoch's Chinese-language cable channel, is also still limited to broadcasting via cable in southern Guangdong province, where Viacom's MTV is similarly confined.

Mr Couto said expanding into China's north might take another 10 years.

'It is very much a market where you have to be comfortable with taking a very long- term view,' he noted.

In the north, foreign cable channels enjoy limited 24-hour distribution, mainly in hotels or through syndication.

So does that mean foreign media companies have limited impact in China?

Mr Jin Minhua, an editor based in Shenzhen, does not think so. 'They help local broadcasters to play by international rules and adopt management principles,' he said. 'And their programmes expose Chinese viewers to global content. I think they are transforming China in a very fundamental way.'

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Govt needs vs readers' demands

In March last year, Chinese Communist Party chief Hu Jintao told the media to refrain from reporting every single speech or move that political leaders make.

He knew that was turning people off, a setback for any political leader who needs to reach out to the masses. He wanted newspapers and TV networks to re-invent themselves.

But many newspapers took that as a licence to increase circulation by offering titillating gossip and other salacious fare.

This alarmed the authorities, who stepped in last Tuesday and reminded newspapers to cut back on 'low class' material in their entertainment and cultural reports.

Date Posted: 4/10/2004