Uncovering the forces behind CCTV's auction

The recent event earned CCTV a whopping Rmb 6.7 billion (US$852 million), an increase of almost 16 per cent compared with last year's figure of Rmb 5.9 billion.

Media inflation, a generally-accepted indicator of the state of the advertising nation in China, rebounded somewhat after a flat 2005 to level off at 12 per cent, although it is still some distance from achieving the heady levels seen in the first few years of the new millennium.

But scratch beneath the glossy façade of CCTV's PR spin, and many believe the picture is not so rosy, with some going as far as saying that the broadcaster's dominance may actually be declining.

One CCTV auction veteran, who declined to be named, says that if you take away the Olympic component, along with one-off, special projects, the level of interest in CCTV was surprisingly flat — indeed, some segments of its programming offer actually registered between one to three per cent deflation.

"Although CCTV makes sense for some global brands, especially considering the fact that broadcasters in tier-three and tier-four cities don't have good programming, CCTV is certainly not having everyone's lunch by any stretch of the imagination," says a source.

So where is the real, long-term interest from advertisers going?

Personal care giant Procter & Gamble, which topped the auction's spending league with Rmb 420 million — the third consecutive year it has led the market — is a case in point. While its CCTV spend is undoubtedly impressive and its national focus undeniable, it has become more overt in its strategy in deepening its connection with other segments of the China media landscape. It recently inked deals with Hunan Satellite TV and Chongqing TV, along with News Corp's Star Network and Viacom's MTV China, despite the latter two being foreign players with far less reach.

Networks like Shanghai Media Group (SMG) and Anhui  Satellite TV, among others, have also received increasing interest from other buyers on the back of strong programming and, crucially, as industry pundits point out, it's not just interest from the global brands.

"If you have a look at all the big players like Hunan and SMG, they have great teams, great talent and improving content and coverage, so their ratings are going up," notes Bessie Lee, CEO, GroupM China.

The deals themselves, media experts say, while comparatively small in terms of actual dollars spent when compared with the general level of investment in CCTV, signal the rise of local and provincial networks, through their ability to successfully carve a defendable niche for themselves in much the same way as CCTV has maintained a national focus.

Put simply, they're not challenging CCTV for revenue — but neither is CCTV challenging them.

"CCTV is not necessarily in direct competition with local and provincial stations, especially not with stations in the East and South of China," explains Elaine Ip, managing director, OMD China.

"They understand that their key strategy as local stations, in order to sustain advertisers, has to revolve around good quality programming and high rating performances."

While CCTV will undoubtedly maintain the market leader position for the foreseeable future, Lee notes that local and provincial networks are facing a tricky time in taking the next step.

In 2001, she points out, the China Government approved the first wave of media consolidation, which ultimately led to the creation of companies like SMG, which is itself a conglomerate of 12 previously-separate entities.

The logical step, she notes, is for local companies to experiment with similar models in the future on an even larger scale, should the Government push for an increasingly sophisticated market.

"By forming an alliance among themselves, they can compete with bigger players," she says. "It's really about maximising their resources, and purchasing better content and programming, so they can attract more consumers."

But not everyone agrees. Many point out that while such a move would work in a market economy, the political stakes are too high, with many local and provincial media chiefs unlikely to enter into an alliance should it mean a weakening of their power base and influence.

A second issue local and provincial broadcasters need to address is talent, with the current crop of comparatively inexperienced leaders at the helm effectively hindering the industry's growth.

But, as with all things China, nothing stays the same for long.