"Fifty-seven channels and nothing on." It's a familiar story for any traveling executive pushing the buttons on the hotel TV remote.
But multiply Bruce Springsteen's complaint by a factor of about 50, and you begin to get an idea of what some call the content hole facing the explosive growth in China's TV sector. With almost 3,000 channels and growing, China's airwaves are in need of quality programs to maintain growth in ad sales and transform state-owned broadcasters into viable commercial entities.
Enter State Administration for Radio, Film and Television (SARFT), with its latest ownership regulations.
Under the new laws unveiled in late November, foreign media companies complying with certain guidelines – like stearing clear of news, which is off-limits – will be allowed to take up to a 49% holding in JV production enterprises with Chinese partners. But it's hardly an invitation to go wild dreaming up lineups: Two thirds of programming output, says another guideline, must have "China themes."
Still, for foreign media groups who have long been pressing on China's media door it's a significant move forward. The JVs, which must be at least 51% owned by a single Chinese party, will be regarded as domestic companies and have the same rights.
"This is a very big step," said Zhao Xiaobing, head of Beijing-based Global China Media Consulting, a firm that helps foreign firms enter the Chinese market. "For the big international media companies with TV business all over the world, China is the market they have all been waiting to enter."
With China's economy continuing to surge ahead – and pushing up advertising revenues – the easing of restrictions will fuel a growing international involvement in China's media expansion, Zhou said. According to Nielsen Media Research, China's TV advertising sales will grow by about a third in 2004, to US$24bn, after jumping by about 45% in 2003.
Among the first to move was US-based media giant Viacom with a joint venture tie-up with the Shanghai Media Group (SMG) – a company fast emerging as a prospective Chinese Time Warner. Li Yifei, Viacom's chief China representative, said the move was a "huge step in the reform of China's TV and radio industry", adding that the company has begun discussions with several other Chinese broadcasters. Other JVs will likely follow, if the SMG model proved successful, she said.
News Corp China, part of Rupert Murdoch's global media empire, was equally optimistic, its president, Jamie Davis, predicting alliances between foreign and local players would deliver "new, innovative content."
With about 2,900 channels at the last count, and the world's largest television audience, China's TV market has grown phenomenally. But so what? As Vivek Couto, Executive Director of Media Partners Asia, pointed out, "China's distribution infrastructure is very developed, but as yet the quality channels just aren't there to fill all that space."
So the new rules come as a big break: the flood of foreign capital and expertise to build up the Chinese media industry, but without the government relinquishing overall control, Couto said. The changes also give domestic production companies a good kick after years of lolling about in what was largely a monopoly industry.
"SMG group for one is realizing that in order to break out of their local markets they need compelling content," Couto said, "and foreign skills and capital are the most likely way to get that.
"It's all geared to the fact that Chinese TV is facing a growing content shortfall," he said. "China has big ambitions to create a strong media economy, but it needs to build up its production assets in order to make programs to draw advertisers and draw viewers who are willing to pay for premium content."
That, in turn, is also tied to the increasing commercialization and digitalization of Chinese TV – an ambitious project to turn the whole country over to digital broadcasting by 2015. In the West, where digital has been delayed time and again, that transition date might seem overly bold, especially in a country the size of China.
In China, however, people march smart when the government is of a mind, and Beijing wants digital to happen, so few see the digital switch missing its scheduled launch date.
Either way, for foreign players the profusion of new specialized channels that digitalization offers is a tempting prospect – but that still leaves the tricky matter of what kind of content to produce.
With China's strict control on news output, current affairs will be strictly off-limits to foreign producers, although business and financial news is expected to be allowed – an area that Zhao Xiaobing of Global China thinks could prove especially lucrative, especially in big cities.
Initially, at least, the biggest focus is likely to be on the fluffier and less controversial variety and entertainment side of programming, Zhao said.
Although even that is not without risks. State broadcaster CCTV recently decided to shelve plans to air US sitcom Friends, citing the show's "sexual content." In the West, Friends might be cited for leaning to the sophomoric, but the label the CCTV bureaucrats attached to it provides lessons in the difficulties of crossing cultural boundaries.
Early evidence suggest foreign entrants are playing it safe. Viacom, for instance, has put only the minimum US$2m of registered capital into its venture with SMG. The new company, dubbed Orient Nickleodeon, will produce cartoons and children's entertainment for SMG's 8m viewers, and sell it to other cable networks in China – not high risk, but an important test from Viacom's standpoint.
"What Chinese companies need is experience more than anything," Zhao observed. "Until recently, most TV stations didn't look at programs as a product and as a creative exercise. As a result, they don't have the knowledge of how to make commercial television programs, how to exercise cost controls, and how to market and sell the finished product."
Media Partners's Couto agreed. "Groups like SMG are looking to expand well beyond China's borders, leveraging their content into the global marketplace. To do that, they need help and expertise from foreign partners."
Zhao argues that foreign JV producers who prove themselves capable of producing sufficient quantities of officially approved content will eventually be the first ones allowed to operate their own channels – the holy grail for companies like Viacom. "At the moment, China has a lot of channels that do little other than repeat old programming. But if these new ventures prove capable of producing enough content, say five or six hours a day, they could be first in line when the option to start up new channels becomes available."
That's a long way down the road. "But the new regulations make it much easier for foreign media players to now seriously start building up some solid partnerships in China."
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