Reform in the Air for Chinese Broadcasters

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A spate of new television programs is likely to appear soon on CCTV's finance and sports channels following the introduction, at least on a limited scale, of market principles for the state-controlled broadcast system.

The State Administration of Radio Film and Television (SARFT) announced in a circular July 16 that, in the future, at least 30 percent of annual TV  broadcast hours must be content purchased from market players.

State-controlled CCTV will participate in the first round of market reform by adjusting programming on its finance channel CCTV 2 and sports network CCTV 5.

In addition, local broadcasters Beijing Television (BTV), Shanghai Media Entertainment Group (SMG), and Hunan Television Broadcasting Group will participate in the opening phase.

BTV has started working on a plan, while proposals drafted by SMG and HTV have reached final stages. SMG President Li Ruigang told Caijing his group plans to implement a project soon.

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The moves by CCTV and the smaller channels represent a first step toward separating broadcast and production roles of the nation's broadcasters. The reform would affect national broadcaster CCTV, which operates several channels, as well as stations backed by local governments.

The goal is to bring market competition to production of drama series and entertainment shows.
   
"The separation of broadcast and production is an important element of the ongoing reform of our cultural system," an official at the Central Propaganda Department's Cultural System Reform and Development Office told Caijing.

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Market Moves

Plans to separate broadcasting and production were first suggested for China at the end of the 1990s. But officials decided such a far-reaching reform required slow steps, leading to stagnation over the past two years.

Recent discussions over the proposed changes have moved beyond reviews of the production-broadcast relations to embrace reforming the cultural industry — an angle that the nation's private media sector has been seeking for a long time.

Promoters of separation say its power and attraction lie in its ability to generate hundreds of billions of yuan for the market economy.

SARFT hopes to quickly expand traditional television assets. They believe that as television and radio move toward an enterprise format, through the formation of market-oriented programming companies, "when the conditions are right they will attract social capital to form radio and television holding companies or go public."

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Content Control

The content of privately produced programs would by strictly limited under the reform. For now, the focus would be on entertainment and public service programs.

Content categories open for the purchase plan include radio plays, TV dramas, cartoons, children's shows and sports, as well as non-political, certain light news programs. But breaking news, government interviews and investigative programs would be excluded.

Moreover, SARFT's ruling says planning, editing, production, reviews and broadcasting may not be handled by stations independently, and cannot be commercialized. Outsourcing will be restricted.

SARFT said TV stations must retain power over "major decision making, asset control and allocation, appointments and removals of persons in leadership positions, content editing and publication, and reviews of all programs to decide which are to be broadcast."

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Wang Ran, CEO of the private investment firm China eCapital, said the reform cannot solve all potential problems but should help state media organizations develop resources to eventually enter the capital market.

Market force rumblings have already been heard. A public company last year planned to buy some assets of HTV, but the transaction failed, underscoring the challenges tied to broadcaster content pricing and trade – a problem all media players in a market environment would face.

"If a unified market can't be formed quickly, content assets pricing will be determined entirely at the whim of a majority shareholder," said one investor at a 2008 conference on financing broadcast media.

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Better Programming

An underlying reason for the reform is to encourage media organizations to offer top-notch programs to the public. Architects of the plan see more than just economic benefits.

The head of the Harbin Institute of Radio, Film and Television told Caijing on July 8 that 12 organizations are participating in this opening phase of the reform. A draft of the plan provided no names but said broadcast-production reform would affect central, provincial, and local radio and television stations.

A high-ranking official with one participating organization told Caijing the reform eventually would lead to nationwide implementation, although every organization would have to be approved by SARFT.

Market leader CCTV is the most visible participant. It reported 2008 earnings of tens of billions of yuan, and said its finance and sport channels were the most profitable.

SMG's participation is linked to its recent establishment of the Shanghai Fashion Media Group to handle content, operation and management of its EnjoYoung channel. Li said SMG officials have revised the draft plan more than 10 times.

Hunan TV's plans, under development since 2008, call for a new TV station governed by the provincial government to handle news, political programs and public service programming, while Hunan TV establish companies to produce entertainment and shopping programs.

SMG and HTV officials said they've already reached goals for attracting external investment

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Private Media's Slice

Private media firms are approaching the changes carefully. Dong Chaohui, president of private Joy Media, said he has long waited for this moment.

While Joy or another private firm Enlight Media will have some advantages, uneven rules governing market transactions may work against them.

Enlight President Wang Changtian held a calculator while showing a Caijing reporter July 21 that BTV is buying three or four hours of programs on the market, below the 30 percent threshold. In his opinion, private media still has a huge room to grow.

The plan to separate at least some broadcasting and production will also shake the nation's 70 billion yuan television advertising market.

"If you spend 50 percent of the money, or 35 billion yuan, on content, deducting 20 percent for news and 6 billion yuan for TV series, companies controlled by TV stations keep part of the remainder," said Wang. "Private production companies (who take the rest) will be able to immediately take a slice out of this multibillion yuan market."

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Wang has an ambitious plan that's drawn a lot of press coverage. Using resources at hand, in concert with television stations in many cities, he wants to create a "unified network" of content tied to the Enlight Media brand – a plan he shared with the media in October 2008, just as SARFT was researching its broadcast-production plan.

SARFT's formal indication that it plans to proceed with the reform scheme made it clear that Wang's plan had come of age.

At the same time, Enlight and others will have to be ready for competition. China eCapital's Wang thinks the reform will encourage more state-run media organizations to enter the market to compete with private enterprises, including Enlight.

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