SATELLITE & CABLE: China TV regulators in new plans to divide content and distribution

<p>While China scrambles to deal with the multiple challenges which </p><p>will come with the accession to WTO, major broadcasters are moving ahead </p><p>with a series of crucial internal reforms. </p><p><BR><BR> </p><p>The reforms are being driven by State Administration of Radio, Film and </p><p>TV (SARFT) policy initiatives released over the last few months, which </p><p>called for the separation of TV production and broadcast functions. </p><p><BR><BR> </p><p>Under the plan, production resources will be released into the market, </p><p>while the state will retain control over broadcast signal delivery. </p><p><BR><BR> </p><p>The reforms will have imminent impact on advertising sales and TV </p><p>production infrastructure. </p><p><BR><BR> </p><p>National network China Central TV (CCTV) started its separation process </p><p>in April with satellite-delivered cable channels CCTV-5 (Sports) and </p><p>CCTV-8 (Drama) acting as trial cases. </p><p><BR><BR> </p><p>If successful, the reforms will be extended to other channels with the </p><p>exception of news. </p><p><BR><BR> </p><p>The separation of production from broadcast is the first in a </p><p>three-stage reform process being instigated by CCTV under the leadership </p><p>of president Zhao Huayong. </p><p><BR><BR> </p><p>The second stage will see the elimination of slots with the lowest </p><p>ratings. </p><p><BR><BR> </p><p>The third stage will be to develop multiple revenue streams for its </p><p>satellite and cable channels rather than to rely on advertising. </p><p><BR><BR> </p><p>The move towards establishing production companies is not new in </p><p>China. </p><p><BR><BR> </p><p>The SARFT policy places a definite time period of two years on real </p><p>practical action and most leading broadcasters have started to roll out </p><p>details of their new production relationships. </p><p><BR><BR> </p><p>Beijing TV (BTV) re-launched its third terrestrial channel as BTV </p><p>Science & Education late last year. </p><p><BR><BR> </p><p>Recent reports have suggested that the network's second channel may be </p><p>relaunched as BTV Culture & Sports. </p><p><BR><BR> </p><p>The relaunch of these leading local channels with a semi-niche remit is </p><p>designed to facilitate a commissioning-based system, which BTV leaders </p><p>said will be in place within a year. </p><p><BR><BR> </p><p>In southern China, former provincial powerhouse Guangdong TV (GDTV) has </p><p>now completed an internal restructuring. </p><p><BR><BR> </p><p>This has resulted in a series of production units or "offices", with </p><p>responsibility for production and with the ability to earn directly from </p><p>advertising revenues. </p><p><BR><BR> </p><p>Whatever the specific interpretation of "separation" in different </p><p>places, the release of state production resources into the market is </p><p>designed to contribute to the growth of batches of professional TV </p><p>programme production companies. </p><p><BR><BR> </p><p>In turn, these companies should open the national production market to </p><p>civil capital investment. </p><p><BR><BR> </p><p>This, at least, is the theory. </p><p><BR><BR> </p><p>"State TV must overcome a large number of fundamental problems before </p><p>they can declare any of their assets independent, according to even </p><p>Chinese legal understanding of that concept," said Mr Rowan Simons, </p><p>chairman of TV investment consultant RSA Media Relations. </p><p><BR><BR> </p><p>Among the biggest problems, he said, was the "basic paradox" that faces </p><p>all China's state TV resources. </p><p><BR><BR> </p><p>"On one hand, everyone agrees that production forces must be able to </p><p>develop their businesses according to market conditions," he said. </p><p><BR><BR> </p><p>"On the other, everyone knows they must maintain 'exceptional </p><p>relationships' with regulators and broadcasters, or risk losing their </p><p>licences and scheduled positions." </p><p><BR><BR> </p><p>With Beijing, Shanghai, Guangdong and CCTV moving ahead with their own </p><p>versions of separation, firmly within the cocoon of the total ban on </p><p>direct foreign investment, all the domestic action has yet to translate </p><p>into the emergence of properties with real potential to the outside </p><p>world. </p><p><BR><BR> </p><p>If the SARFT is to be believed, that particular programme has yet to be </p><p>scheduled. </p><p><BR><BR> </p><p>CABLE MARKET IN CHINA </p><p>Year No. of Cable TV TV Advertising </p><p> Household Sub ('000) Penetration Rev Market </p><p> ('000s) (Rmb bn) </p><p>1996 330,800 45,000 85.9% 36.7 </p><p>1997 335,000 50,000 86.5% 46.2 </p><p>1998 341,957 70,000 87.7% 53.8 </p><p>1999 400,000 80,000 </p><p>Source: Merrill Lynch. </p><p><BR><BR> </p>