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James Borton eyes the media

Face-off: China's Tom Group vs Star TV
By James Borton

Foreign media companies now accept the inevitable: Hollywood mass imports dubbed into Chinese no longer hold sway with China's nearly 350 million television viewers. Home-grown Chinese reality programs like Women in Control and TV Court are making serious inroads in the Middle Kingdom's march toward local program innovation and commercial viability. Then there's Xing Cong Cave quiz show, where contestants are hung upside down in a surreal labyrinth and asked questions: a wrong answer means they get dropped nine meters, onto a cushion.

There are plenty of Chinese social critics lamenting the fact that commercially successful Chinese television is simply derivative and is already plunging to the puerile depths of American TV. For example, the Asian subsidiary of Rupert Murdoch's News Corp, Hong Kong-based Star Group Ltd, last year rolled out a new Mandarin-language TV channel called Xing Kong Wei Shi (or Starry Sky). Since its debut, the new channel has already produced about 750 hours of original content. That is extraordinary in China, where the main TV fare is often mind-numbing cultural, economic and educational programming, aired on official China Central Television (CCTV), such as The Clarion Army Song, a 20-part TV drama series on the history of the People's Liberation Army.

Media analysts regard China's media market as one of the country's last profitable industry frontiers. There were about 2,000 television stations across China in 2002, airing almost a million hours of programs.

Seeing the need and deciding to fill it, Anthony Tse, a former News Corp Star TV executive, now is charting a new and expanded course in mainland China for Tom Group Ltd, the media company controlled by Hong Kong tycoon Li Ka-shing. Along with other recruited Star TV colleagues, Tse brings confidence and experience to Li's ambitious plan to establish an integrated publishing and entertainment corporation, Tom Group. Investments are approaching US$100 million on the mainland and Li has gained considerable respect in Beijing for his plans to establish a Greater China Media Network.

Li's wealth and political clout in Beijing allows Tom Group to join the ranks of other transnational media giants that are capitalizing on the relaxation of the Middle Kingdom's television rules permitted in provincial business deals. This already has led to a direct challenge to News Corp's Star Group, whose head, Rupert Murdoch, continues his decade-long courtship of China. Both Li and Murdoch know very well that China's media industry has already emerged as one of the country's primary arteries for pumping new revenues into the red-hot (too hot in some sectors, though not TV) Chinese economy.

While China itself is undergoing dramatic change in its media industry through reform, restructuring and reorganization, Tse has executed swift management reorganization since Tom Group acquired AOL Time Warner's shares in China Entertainment TV (CETV), a 24-hour Chinese-language television channel.

According to an agreement reached in May 2003, Tom Group now owns 64% equity interest in CETV, with the remaining 36% stake controlled by Turner Broadcasting System Asia Pacific, a subsidiary of AOL Time Warner. Tom Group purchased its interest in CETV from Time Warner at a fire-sale price of US$6.8 million. Time Warner had spent nearly $40 million attempting to gain a foothold in China's television market. Now the only indistinct footprint left of Time Warner's money-losing debacle in China is Turner Broadcasting System Asia Pacific.

Management shake-up
"We have replaced 90% of the former management and recruited senior executives from Hunan TV and also Star TV to assist us in our new development and to reshape our business model," Tse, now Tom Group's director of corporate development, told Asia Times Online in a telephone interview from Guangzhou.

The transformation of Tom.com, a Chinese web portal, was necessary after the Internet bubble burst. The new name, Tom Group, enabled the corporation to redefine itself as a formidable media and advertising empire. Beijing-based Tom Online's website is China's fourth-largest Internet portal. Last year it earned most of its US$19.7 million profit from $77 million in revenue from wireless value-added services.

"What's noteworthy is that in our first quarter of 2004 we surpassed in revenues almost a half million US dollars, comparable to what Time Warner realized in an entire year of business operations," Tse said. Other foreign-owned mainland TV companies are also posting triple-digit gains in advertising revenue this year as the entertainment industry's local production programs garner more viewers.

China's advertising market considers television, with its array of quiz shows, serialized dramas, and beauty contests, a compelling medium to deliver its products to those newly converted consumers. Some of the new local programs include:
  • Women in Control, for the first time in Chinese television, reverses female-male roles. It's a male beauty context. Males have to win the hearts of an all-female audience with intellectual, physical and talent-based tests with cash prize awards of up to US$1,500.
  • TV Court, a knock-off of the popular American program, Judge Judy, offers re-enacted court cases in front of a People's Republic of China judge who dispenses justice on a variety of issues, primarily focusing on family issues.
  • Xing Cong Cave revolutionizes quiz shows as we know them. Set in the heart of a surreal cave, the contestants are hung upside down and must swiftly answer a series of questions, or be dropped nine meters (onto a cushion, it should be noted).

    Across busy Victoria Harbor in Hong Kong's Kowloon district, Tse's former employer and now formidable rival, Star TV, also has seen a surge in advertising sales as part of the corporation's inexorable push into China. As part of its China television expansion, Star has launched two new channels - Xing Kong and Star Chinese Movies - by repackaging existing self-produced Chinese-language television content and adding a catalogue of more than 800 film titles.

    Star TV, acquired by Rupert Murdoch in 1995, is one of the most prominent regional satellite and cable television operations in the world. Its global coverage reaches from the Middle East to South Asia to China.

    Murdoch's satellites deliver TV programs to five continents, all but dominating Britain, Italy, wide swaths of Asia, and even the Middle East. He publishes 175 newspapers, including the New York Post and The Times of London. In the United States, he owns the 20th Century Fox studios, Fox Network, and 35 television stations that reach more than 40% of the US.

    News Corp the Goliath, Tom Group the David
    Star TV's parent company, News Corporation Limited, had assets as of December 31, 2003, of $52 billion and total annual revenue of almost $19 billion. Star TV's initial news focus and dominance proved challenging in China. The tabloidization or shift from hard news to soft news, and especially local programming in China, has resulted in an increase in Star's advertising revenue.

    Jamie Davis, president of News Corps' China operations, saw its advertising sales grow more than 180% in the past year alone. "With the growth and increased competitiveness in the TV arena, the TV pie [in China] is growing," Davis said.

    The new Mandarin-Chinese TV channel, Xing Kong, is gaining popularity. "We are very excited by the feedback we have received from the audience and our increased advertising has proven that it is connecting with our target audience," Davis told Asia Times Online in an online interview.

    Additional foreign media and publishing groups, like Germany's Bertelsmann, Disney, and Viacom, are all in daily negotiations with Chinese media companies on a range of cooperation deals, made possible by a loosening of government control over the industry last year. All of these deals are sparked by more than 320 local, private television-production companies in China.

    For example, a 24-hour channel run by China's state television, CCTV, was established in September and follows the Western model of live news reports. This might lead to further innovation in news programing.

    "The Chinese want to establish reputable brands like Columbia Broadcasting System [CBS] in America. There is a huge pent-up demand for quality TV programs in China," Terence Graham, a research fellow at the Center for the Future of China in Beijing, wrote in an academic paper titled, "The Future of TV in China".

    Television programs and movies made by foreign companies are now aired in China as long as the companies find a domestic partner. To meet the challenges from these market-oriented reforms, the country's biggest network, state-owned CCTV, announced that it would spin off its production and non-broadcasting businesses.

    Don't rock the boat and you'll succeed
    "One has to understand the logic of the Chinese system in its own terms, and if you put yourself in the position of a Chinese television producer, program planner or other executive who is resigned to not trying to upset the political boat ... then they have enormous flexibility in program choice - entertainment, sports, dramas - and so that is what they do," Kevin Latham, director of Eight & Eight Ltd, a media research company, said in an interview with Asia Times Online.

    To meet the opportunities and challenges of China's media frontier, Tom Group is finding ways to level the playing field against media giants like Star TV and Viacom by reducing its CETV losses, developing an effective sales team, and building local production.

    Senior management anticipates that by late 2006 Tom Group will break even. Its station, CETV, earned a modest $1.4 million in advertising sales in the past year.

    A key part of Tom Group's strategy, unlike that of the behemoth myopic corporate culture of Time Warner, is the production of local programing, and directing its own sales staff. The future of Chinese television includes the rise of independent production houses, the education of screenwriters and the nurturing of onscreen local talent, Tom Group believes.

    Tom Group's decision to relocate production from Hong Kong to Shenzhen in Guangdong province reinforces this localization edict. The move not only reduces expenses, but also shortens the distance with the audience in the Chinese mainland. Tom Group also plans to add more local content as needed when CETV develops the capacity to broadcast six channels with a digital network. Along the way, Tom Group believes that the local talent pool will add measurably to its growth.

    "There's a phenomenal amount of talent in China," said Tom Group's Tse. "Sure, it's a now widely accepted fact that the previous mass import of Hollywood films and Disney's cartoons into China no longer holds," he added.

    Most programming privately produced
    Since the passage of last year's new broadcast regulations, allowing private investment in film production, almost 90% of television programing is privately produced instead of being made by one of China's 38 state-owned film studios.

    This strategy of investing in local talent is also widely accepted by other foreign media companies, including Discovery Networks Asia (DNA), the Asia-headquartered arm of global media and entertainment company, Discovery Communications Inc. Earlier this year, the company launched its first-time filmmakers (FTFM) project in China, including the Special Administrative Regions of Hong Kong and Macao. The initiative is a partnership with the emerging global corporation, Shanghai Media Group, or SMG. (Expect a future column on SMG.)

    This is the only time that FTFM has been held in the same country for two consecutive years, following the successful 2003 FTFM in China, where three filmmakers received prestigious Asian TV Awards.

    "This partnership with Discovery Networks Asia offers us a great opportunity to learn from an internationally renowned media company," said Li Ruigang, president of SMG. "I sincerely hope Discovery's FTFM initiative can gather the new force of Chinese documentary industry and deliver the unique observation and insight of young people to the global audience," Li said in an online DNA press release.

    Since DNA is educational, there have never been any issues about censorship. "We are a culturally and politically neutral channel with a focus on science and history and have never experienced any problems," David Leavy, senior vice president of corporate affairs, at Discovery Communication's headquarters in Bethesda, Maryland, said in an Asia Times Online telephone interview.

    With the continuation of localized programing, foreign media entering China may want to read their tea leaves or consult the A C Nielsen rating service to see if next year's US broadcast of the Emmy Awards, which recognizes such popular television shows as Sex and The City and The Sopranos, will be tuned into by Chinese viewers. That is now possible, after a licensing deal was signed in September between the China Movie Channel (CCTV-6), a nationally distributed television service, and the Academy of Television Arts and Sciences, the group that airs those awards. Those Emmy-winning TV programs, meanwhile, still cannot be viewed in China due to their sexual content and violence.

    No one disputes that media reforms and the entry of transnational corporations will provide more choices for the Chinese consumer. However, the picture might get a little fuzzy if the masters of the media universe dish up the wrong brand of local color and political content for China's television viewers.

    James Borton is an author, freelance journalist and director of Asia-Pacific projects for Foreign Affairs journal, published by the Council on Foreign Relations in New York. He welcomes media news releases, tips about trends, story ideas and comments. He can be reached at asiareview@yahoo.com.

    (    Copyright 2004 Asia Times Online Ltd. All rights reserved. Please contact content@atimes.com  for information on our sales and syndication policies.)
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