cultural and regulatory challenges, precious little programming from “Hollywood” and other nations finds its way to the 370 million TV households in the Middle Kingdom (as China is sometimes called). Understanding those challenges, and applying a hybrid model toward monetization, can help foreign content owners build long-term profitability in China. The television industry in China is booming. According to Beijing-based research firm China Media Monitor Intelligence (CMM-I), an independent business-to-business intelligence resource for Chinese media, viewers watch 135 minutes of the boob tube on workdays and 175.7 minutes on days off. Revenue is also soaring. The Annual Media & Entertainment Report from PriceWaterhouse Coopers noted faster annual growth in China (15.7 percent) than any other territory in Asia. That represents $5.1 billion and a forecasted annual growth rate of 13.4 percent through 2011. Chinese audiences crave sappy dramas. According to Beijing-based CVSC-SOFRES Media, an audience measurement company, dramas accounted for 24.1 percent of the content broadcast on all TV channels last year and 33.9 percent of audience ratings. This mirrors the results for 2006, with 22.9 percent of the content and 32.3 percent of the audience devoted to dramas. Of course, there are differences for age and gender. While female audiences prefer entertainment and drama programs, the guys prefer military, news and financial programs. CCTV is the only network with a national footprint (Shanghai Media Group is the second-largest media group), and has 15 distinct national channels. Unfortunately for foreign content owners, CCTV is particularly conservative. “The one thing the government doesn’t want is for people to be ‘Americanized.’ The government prefers non-offensive content, like Discovery and National Geographic,” said Michael Polin, a Chinese media consultant and author of the DVD-series Teach Me China. Most of the remaining 3,000 local TV stations have a limited reach and extremely limited acquisition budgets. One exception is the Shanghai Media Group, which acquired a number of stations in the affluent Shanghai region. The satellite channels with the largest reach in China are depicted in the chart on page 54. However, before scheduling sales meetings at Beijing’s Great Wall Sheraton hotel, it is important to know that all content and programming in the Middle Kingdom is regulated by the State Administration of Radio, Film and Television (SARFT). These bureaucrats are so tough they even went after animated SpongeBob SquarePants. Beginning this May 1, all foreign cartoons were banned from the 5-9 p.m. slot. SARFT Director Wang Taihua promised to “provide a favorable environment for the innovation of China’s cartoon industry,” by increasing the daily broadcast ratio to 7:3 for Chinese-made cartoons and foreign product. Since local stations are limited in the amount of foreign programming they can show, there has been an increase in locally produced, original content. The most popular weekly show in Chinese television history was SuperGirl , a localized version of Pop Idolproduced by Hunan Satellite TV. The finale of the 2005 season attained an audience of 400 million viewers. Two weeks later, SARFT banned the show. Several popular shows, including Chongqing TV’s First Heart-Throb, Guangdong TV’s Date with Beauty and Shenzhen TV’s Super Datewere removed by the authorities. SARFT followed these closures with a rigid new set of restrictions on TV talent shows. For example, no reality shows between 7:30 p.m. and 10:30 p.m., no voting via mobile phone or the Internet, competitions cannot run for more than two months, and each episode must finish within 90 minutes. In 2008, the central government gave the green light to several new talent shows: Jiangsu TV’s Absolute Singers , Beijing TV’s The Disciple and Zhejiang Satellite TV’s competition to select the cast for the TV remake of the classic Journey to the West . One potentially profitable approach for foreign rights holders is licensing formats for local productions. Hunan worse, “95 percent of the time they want you to pay for the dubbing,” said Michael Polin. Added Maggie Zhou of Shanghai Media Group: “most deals are fee-paying in the form of a one-time payment. There can be a minimum guarantee or revenue share but barter is seldom used unless the sponsor requires it.” Given these unfavorable economics, most major production companies tend to forego the Chinese market. Equally important are the cultural preferences of the Chinese audience. Beginning in 1999 with dramas like Jewel in the Palaceand Winter Sonata, Korean dramas connected with Chinese viewers. These shows had less character development and more sentimentality than American serials like Desperate Housewives . V I D E O • A G E MAY 2 0 0 8 (Continued from Cover) China’s Foreign TV 50 The stars of Desperate Housewives China Entertainment TV’s Anthony Tse Granada’s James Ross SpongeBob SquarePants: Banned in primetime TV scored big ratings in January with a local version of Granada’s Saturday Night Take-Away, renamed Happy 2008. James Ross, regional director at Granada International, cited “making local versions of our entertainment shows as part of our strategy to develop our presence in China.” Selling original content directly to local TV stations is much less lucrative than other foreign markets with fees from the local stations around 10 percent of international prices. Even Rather than showing one episode per week, Desperate Housewives aired four episodes per day for six consecutive days. Polin, the Chinese media consultant, who has been doing business in China for over 20 years, recommends comedy. “I Love Lucy is great. The Chinese love Seinfeldbut it isn’t what you think…they are actually laughing at Kramer’s physical comedy.” I Love Lucy and Seinfeldare examples of a branding platform upon which to monetize video assets in China. Because acquisition budgets are 90 percent lower than international rates, it may actually be a better long-term strategy to give the content away for free to local TV stations and make the money on the back-end. That includes merchandising, mobile, retail, etc. According to Polin “Once they know the brand, you can convert money from short, funny clips. There are 650 million cell phone users growing at 50 million per year. If I have a partner that can reach that audience, how much do I have to charge for a download? A nickel or a dime is enough. I just give them 500 clips, ask them to post on their site and then promote virally.” Monetizing on the back-end is risky, but ultimately China is a volume story. Practically speaking, “you cannot shop around a show to 3,000 different (Continued on Page 54)
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