Pay TV sector to open wider
(China Business Weekly)
Updated: 2004-09-12 10:25

China's broadcasting regulators late last month revealed the country is to open the pay TV sector to overseas investment, in a bid to promote its further development.

Tian Jin, vice-director of the State Administration of Radio, Film and Television (SARFT) said the country will lower the threshold of pay TV programme productions.

He said overseas capital can be introduced into the sector, as long as the Chinese partners hold the dominant share.

Public relations officials with the SARFT declined to confirm the statement, saying they have yet to receive a formal document on the move.

The TV sector has been a heavily-guarded area in many countries, but does belong to the framework of the World Trade Organization.

In China there are so far no clear opening-up policies in the TV sector. Overseas investment enters the country through methods like directly investing in programme production, establishing media joint-ventures and selling programmes.

The operational and broadcasting parts of the sector are not open to foreign investors, except for South China's Guangdong province, which is the only pilot area for broadcasting a few overseas channels.

The pay TV policies are still being drafted by the SARFT. But insiders believe there will be no change on regarding editorial control.

The operational part will not open to overseas investment either, predicted Zhao Xiaobing, president of Global China (Beijing) Media Consulting Co.

Despite this, experts say opening-up is essential for the development of the pay TV sector.

"The future of pay TV needs a combination of domestic and overseas, such as capital, management and technology," Zhao said.

He said the demand for the current free-to-air TV programme is 9 million hours each year, while the supply is only 2 to 3 million hours. "If 50-80 pay TV channels are launched by the end of next year, as the government plans, the gap will be even larger."

The first batch of first six pay TV channels will start commercial operations this month.

Good content is the only factor to persuade viewers to pay for more channels while they already have about 60 channels to watch, said Zhao.

"Programmes with good content cost a fortune, and domestic capital cannot meet this demand," Zhao said.

However, domestic producers do not agree.

He Shaowei, public relations manager of China DTV Production Co Ltd, said that the bottleneck is in the distribution network, rather than in funding.

"Good distribution can ensure enough funds for the production," He said.

He further explained that a good programme idea can attract a huge amount of capital even before any work starts. Thus, with numerous buyers and enough funds, a good quality programme can be produced.

Domestic producers should not limit themselves to serving domestic viewers only, but also look for buyers on the international market, He said.

Domestic producers should also strengthen the abilities in producing technology and marketing strategy, he added.

DTV Production, a wholly owned subsidiary of China Central Television (CCTV), is the first firm that wins a pay TV digital licence.

Compared with DTV, Shanghai Media Group is more open to foreign co-operations.

"We must work with international media giants to get enough good content ... we cannot launch this business (pay TV) unless we can give viewers more choices than before," said Li Ruigang, president of the media group, which is expected to gain China's second pay TV licence.

Shanghai Media is currently working with the US-based Viacom International Inc and Discovery Communications Inc on programme production for free-to-air TV.

Meanwhile, overseas firms think it is a golden chance to grab profits from pay TV, which is perceived as the precursor of digital TV.

"Digital TV creates needs for content that are so vast there will be many opportunities," said Jamie Davis, president of Star China, Sydney-based News Corp's China television unit.

He said the pay TV requires more and higher-quality programmes than State-owned broadcasters can provide.

The firm plans to form two to three "solid joint ventures" in China next year to better serve the market, according to a Bloomberg report.

It currently broadcasts channels including Star Movies and the Channel V music station in Guangdong Province.

The pay TV market is huge, said Wang Yan, general manager of DTV.

There are currently 100 million Chinese TV subscribers. If only 10 per cent of them subscribe to pay channels, the monthly income would be US$1 billion, he said, adding the annual advertisement revenues of CCTV, China's most profitable station, are 2 billion yuan (US$241.55 million).

Although industry insiders are optimistic about the future, some experts say the business is not that easy.

Pay TV brings more complications to the sector. An appropriate profit distribution method plays an important role, said Liu Xiliang, vice-chairman of the China Radio and Television Society and former deputy director of SARFT.

He pointed out the free-to-air TV has a simple relationship between the television station and viewers. But pay TV involves programme providers, channel integration runners, network operators and viewers. "The balance of the benefit will directly influence the business," Liu said.

The reason why viewers in Beijing cannot receive the pay TV so far is that the pay TV division of CCTV has not reached an agreement with Beijing Gehua CATV Network Co Ltd.

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