Media heavyweights take on Internet rivals

By Doug Young Source:Global Times Published: 2015-6-15 19:08:02

Traditional giants increasing online presence

Illustration: Luo Xuan/GT

Two of China's leading regional broadcasters have been in the headlines over the past two weeks, as they scramble to transform themselves to compete with a new generation of Web-based private companies that are rapidly stealing their viewers and advertising dollars.

Both stories involve new tie-ups with industry outsiders, reflecting the need to bring in new expertise to help these State-run broadcasters leverage digital and Web-based technologies that will dominate the media landscape of the future.

The first big story came two weeks ago, when Shanghai Media Group (SMG) signed a landmark deal with e-commerce titan Alibaba Group to develop a financial news and information service that could someday take on the likes of global giants like Bloomberg and Reuters. The second came last week, when media reports said that Hunan Satellite TV had raised 500 million yuan ($80.51 million) in the first private funding round for its fledgling paid video service Mango TV.

In both instances, these State-run broadcasters were looking to support growth that has stalled, largely due to new challenges from Internet-based companies like LeTV and Youku Tudou. These newer companies offer far more flexible services like video on demand (VOD), usually over the Internet, using newer technology. The new companies also face lighter regulation than the more tightly controlled traditional media sector.

The traditional broadcasters should be commended for these latest efforts, and should move even more aggressively to form similar new tie-ups, especially with private new media companies that can greatly assist in their transformation. The central government could also help by giving these traditional broadcasters more leeway in their shareholding structures, and by easing limitations on their operating activities.

China's traditional broadcasters don't typically publish extensive financial information due to their non-public status. But the nation's broader TV advertising market is rapidly slowing, with growth mostly in the mid-single digits over the last two years after years of strong double-digit growth.

At the same time, the broadcasters are coming under pressure as they increasingly have to share the limited market with the Internet-based up-and-comers that are increasingly attractive to TV advertisers. Youku Tudou is typical of the newer group. The company reported that its advertising revenue rose 43 percent in its latest reporting quarter to $144 million. Its mobile advertising revenue grew by an even faster 200 percent, as the company expands rapidly into an area that many traditional broadcasters have yet to tap.

Against that backdrop, SMG, China's second-largest broadcaster, took a major step two weeks ago when it announced its landmark tie-up with Alibaba, China's leading e-commerce company and also a major innovator in online financial services. Details on the tie-up were relatively preliminary, with Alibaba saying it would invest 1.2 billion yuan in the tie-up for a stake in SMG's China Business Network (CBN) financial media arm.

Alibaba has relatively limited experience in the media realm, but has a far richer background in creating products and services that take advantage of the Internet's many interactive capabilities. It has recently parlayed that experience into the financial services realm, creating a wide range of innovative new products that are now challenging China's big banks and the UnionPay financial transaction network.

Meantime, Hunan Satellite TV, also considered one of China's most innovative traditional broadcasters, was in the headlines last week with reports of the new fundraising for Mango TV, its answer to the challenge from the Internet companies. That deal saw leading mobile carrier China Mobile emerge as the lead investor in Mango TV's first major round of fundraising, providing a partner whose vast wireless telecoms network could become an important resource for Mango in the future.

Both SMG and Hunan TV have formed smaller partnerships and taken other recent steps to try and fight off the Internet TV challenge. But these two new moves mark some of the first major equity tie-ups where broadcasters have sold stakes in core assets to outside partners, which in turn could provide valuable new resources to help them expand beyond stagnating core businesses.

These new tie-ups should serve as a call for China's other regional broadcasters to take similar steps or risk becoming obsolete as a younger generation eschews traditional TV for Internet-based products. The central and local governments could assist in this movement by loosening some of the many ownership, programming and other restrictions that limit the ability of these companies to forge such tie-ups. Such moves could help reverse the stalling growth of some of China's more innovative traditional broadcasters, providing a strong and healthy new challenge for the fast-rising Internet newcomers.

The author writes about China's company news at

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