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

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

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