Economics king of Chinese TV
By Kate Bulkley
April 01, 2004
CANNES -- The axiom oft repeated in TV is content is king, but several industry executives working in China said Wednesday that the business model and the politics surrounding business in the burgeoning Chinese market is complex and takes a lot of patience — no matter how good your programming may be.
"Content may be king, but not in China," said Michelle Sie Whitten, CEO and president of Encore International, part of Liberty Media, which has had an office in China since 1995 and runs a block of programming on one of the national broadcaster CCTV's 15 channels. Encore barters for the block of time by distributing CCTV in the United States and also has a joint venture to sell airtime during the block. "In China, it's the economic model that is king," Whitten said during a discussion organized as part of MIPTV's China Day.
Yifei Li, managing director of MTV Networks China, added that the economic model is very straightforward in China. "It's not subscription. It's not program licensing. It's advertising," Li said. The Chinese ad market has been growing at about 17% a year, according to national statistics, while Li confirmed that MTV's ad sales in China grew 23% last year.
But China is not really one market. It is fragmented into local TV and cable stations and the Guangdong area accounts for 60% of the ad spend in the entire country, Li said. There are other hurdles: TV ratings are not gathered based on age demographics, which can make selling advertising for niche programming like the kind produced by MTV very difficult, and rate cards usually start at a 50% discount, making planning very difficult.
"We discovered that the best approach was if we want to do something in China then we want to do something for the government and for Chinese culture," Whitten said.
MTV's owner, Viacom, recently has tied up several new deals in China, including a co-production deal with Shanghai Media Group to produce local-language kids programming, the first time a major foreign company has been allowed to take an equity stake in a Chinese production company. Li said that the company is now talking about doing a local version of Nickelodeon program "Blue's Clues" as a co-production as well as several other flagship shows. "The demand for good specialist programming is high in China," Li said. "The government will not give up editorial control in the short term, so co-production is the best way to go right now."
The attractions of China are well-flagged: 1.3 billion population, an emerging middle class and a market that Nielsen research said will be the second-biggest ad market in the world in a decade. Its 2,000 TV stations need about 10 million hours of programming a year and China is reckoned to produce only 2 million hours a year itself.