Reaching the masses through new channels

PUBLISHED : Monday, 14 April, 2008, 12:00am
UPDATED : Monday, 14 April, 2008, 12:00am

There's no irony when 38-year-old Li Ruigang says he doesn't feel any sense of achievement to be running the mainland's second-biggest state-owned media company, Shanghai Media Group.

'These are my sincere words,' he said in an interview in Shanghai. 'I'm very dissatisfied with the current situation; there's a feeling of being a bit drained.'

Modesty? Perhaps. But the development of the mainland media industry hinges upon the central propaganda apparatus, coupled with a web of explicit and murky licensing and ownership restrictions for domestic and foreign investors alike.

This explains why SMG has entered into partnerships with foreign players in areas that are legally permitted - from Dow Jones & Company to CNBC to South Korea's CJ Group - and stayed clear of sensitive areas.

International pressure opposing mainland media controls is longstanding and outcries over tightening have mounted ahead of the Beijing Olympics this summer and after the recent riots in Tibet.

'The fundamental media management principle hasn't changed. It's just that there are more things to report,' Mr Li said. 'The outside world has speculated that Chinese media have come under more restrictions ... I don't totally agree with this view. China has its own basic socio-political structure, its own climate; [therefore] media controls differ from western capitalist countries. But in the past decade, changes in the media have been enormous.

'Take television. Before we could never have imagined live broadcasts, now it's a daily routine. Secondly, the scope has never been as broad and presentation formats are numerous.'

SMG owns 13 analogue channels, 16 national digital pay channels, a broadband online channel, a mobile phone television channel, and five newspapers and magazines through scores of subsidiaries that include China Business News, Shanghai Dragon TV, Shanghai Oriental TV and Radio Shanghai.

Controlled by the Shanghai government-backed Shanghai Media and Entertainment Group, SMG was founded in 2001 after merging Radio Shanghai, Eastern Radio Shanghai, Shanghai Television, Oriental Television Station and Shanghai Cable Television. The move was a result of Beijing's call to build media conglomerates that operate as commercial outfits, albeit under stringent government controls.

Mr Li is coy when asked about SMG's financial situation, except in offering 5.1 billion yuan (HK$5.68 billion) in revenue for 2007. Mainland investment banks say the group is the most profitable among domestic media players.

The country's biggest media group, China Central Television (CCTV), posted total revenue of 14.1 billion yuan for 2006, the latest available figure released by the State Administration of Radio, Film and Television.

The mainland has thousands of broadcasters - conventional and cable television, and radio stations - and nearly 2,000 national dailies.

But being state-controlled and a monopoly has benefits and drawbacks.

Access to resources is guaranteed, as are licences. The downside, however, can be perceived variably by different companies, Mr Li said.

'Maybe some media companies hope the situation will continue, and there's also no negative impact for a company like ours. It depends on how you view market competition.'

As a staunch believer of the benefits of market competition, Mr Li dislikes the complacency among mainland monopolies.

'On a superficial level, market competition can cause a loss in resources, but it creates a lot of new things. A new competitor may take a share of the market, but the market also expands at the same time. The telecom market is a good example,' he said. 'The media sector is not viewed enough as an industry.'

Commercialisation of the media industry is a guarded exercise for the fact that it entails information dissemination to the masses and it is a strategic industry. On the one hand, the government is encouraging the formation of big corporate groups under a controlled environment, despite the deepening paranoia that overhangs opening up to foreign investors.

Nearly four years ago, Viacom announced a television production joint venture with SMG and Orient Nickledeon, with optimistic projections. Today, the project has quietly dissolved into the background.

In contrast, other businesses such as television shopping and mobile data have boomed swiftly. SMG has a joint venture with South Korea's CJ Group to run television and online shopping business Oriental CJ, better known as Dongfang CJ.

Commercialisation, however, is a long journey and the mainland's concept of commercialised media has to be expanded.

Mr Li said as a media group, the expanded scope would take place on two fronts: from producing content for its own broadcasts, a media group should expand production to cater to all Chinese-speaking markets. The second was building and commercialising a brand.

For SMG, that test and early success would be its China Business News brand, which comprises a newspaper and financial television and radio channels.

CBN began in July 2003 as a financial media subsidiary and the following year, working with the Beijing Youth Daily and the Guangzhou Daily, the three parties forked out 100 million yuan to launch the newspaper. The CBN television channel last week entered into carriage agreements with PCCW's Now TV to debut in Hong Kong, marking its first foray abroad. CBN also plans to sell the flagship newspaper in Hong Kong in the second half this year.

Mr Li embodies the dilemma that state media groups face. The former assistant to a top Shanghai official is pay-rolled by the government, but he strives to be a progressive media leader with a mandate to generate commercial returns for the group, albeit within regulatory constraints.

He believes the next wave lies in the new media of mobile television and IPTV, for which SMG has 500,000 subscribers in Heilongjiang province.

'I used to think home shopping relied on a region's economic prosperity, but I later found that not to be the case. In China, northerners watch television more than southerners. Harbin is in the north and the winters are longer,' he said.

The Heilongjiang IPTV business was started by China Netcom staff, catering to the needs of families and friends. But the unregulated practice raised concerns at the State Administration of Radio, Film and Television (SARFT). With 100,000 subscribers at the time, regulators feared a forced shutdown would backfire. That's when SMG was asked to take over.

'Regulations aside, new media is the next trend,' Mr Li said. 'Technology is changing, but whether technology can change the media ... this is a complicated question. Technological success doesn't equal a successful business model because in between, the market has to face the issue of vested interests. It could tip the current balance of interests; stir up resentment.

'People think IPTV is great, but [we can't seem] to popularise it. There is resentment from the existing interests of cable television and cable television.'

Similar conflicts of interest have slowed the development of mobile television due to a tug-of-war between two regulatory bodies - the SARFT and telecoms regulator the Ministry of Industry and Information - as to who gets to call the shots.

Mr Li added that mainland broadcast media's self-perception of being traditional broadcasters meant they had neglected to build up their assets.

'From CCTV to local media ... we have viewed the media market as broadcasters. But if we see ourselves as a media group, the strategy is to be a content provider and distributor as well as a service provider [broadcaster],' he said.

Granted, the same also applies to SMG.

'What I feel should have value [in SMG] has not been achieved,' Mr Li said, referring to the group's library assets, which have been less profitable than he had hoped. 'It's not a big [earnings generator], but compared with other media companies [the assets] are strong.'