China's Ban on 'Overly Entertaining' TV Expected to Spur Already Ballooning Ad Prices

Coming soon to China, along with new restrictions on popular-entertainment programming: ever more expensive TV advertising. While the restrictions announced a few weeks ago were shrugged off by marketing execs in the country as business as usual, executives note they'll lead to high prices, and suggest there may be a silver lining in that they will encourage better-quality shows. According to the recent missive from China's State Administration of Radio, Film and Television, programs that are vulgar or "overly entertaining" -- including dating, reality, talent, game, variety and talk shows -- will be partially phased out. China's 34 satellite TV stations on the whole can show no more than nine of the restricted programs each night between 7:30 p.m. and 10:00 p.m. Individual channels are limited to two programs each per week, not exceeding 90 minutes in total. The government said the rules stem from "the mass audience's complaints of too many entertainment shows" and that replacement programs should focus on news, along with economic, cultural and educational programming. The restrictions, which go into effect Jan. 1, were announced just as national broadcaster China Central Television and a number of influential provincial satellite broadcasters prepare to hold auctions for ad spots in 2012. Costs for advertising on CCTV have been increasing by double digits year on year. For the satellite channels -- which focus more on variety and dating shows, compared to staid CCTV's politically correct programming -- inflation is expected to be even higher for the most popular shows as the amount of commercially attractive ad time declines. "The only constant for us in China is that something's going to change. And this is just another one of those things that 's coming along," said Seth Grossman, managing director of Aegis Media's Carat China. "The advertising demand for provincial satellite channels ... has been continually rising, driven simply by the fact that as distribution expands to tier 3 to 5 markets, broader footprint channels like provincial satellites or CCTV become a more significant portion of an overall media budget allocation." The annual CCTV auction Nov. 8 is widely seen as a benchmark for not only the ad industry, but the Chinese economy as a whole. Last year, marketers pledged $1.86 billion at the auction, a 17-year high and a 15.5% increase over 2010. The diminishing supply of attractive programs will be one factor driving up prices, which were already expected to rise perhaps 20%. "It's going to put extra demand on the high-premium shows that have the good ingredients and deliver good ratings . In China the ratings can fluctuate a great deal. Once you've got that magic formula, it can drive a lot of demand further," said Andrew Carter, president of investment management at Group M Trading in China. TV continues to be the most attractive medium for advertisers in China, making up about 60% of ad spend. Digital marketing stands at 10 to 15%, though it's growing at close to 40% a year. Some predict the soaring prices for airtime will spur some marketers to spend more of their budget on online video sites and social media, though many Chinese companies will continue to pay big bucks for the influence of national TV and the legitimacy it implies. "All they want is the best, the highest-rated program. They want the impact," said Cary Huang, managing director of UM China. "But international clients have a different system, a very strict system focusing on figures ... and they cannot tolerate huge inflation every year." Mr. Huang predicts that although there will be fewer entertainment programs for now, the nimble satellite broadcasters won't slow down for long. "They must comply with the law and some have already made some kind of adjustments to their programming," he said. "But I think for satellite TV, they have experience in how to attract the viewers, so maybe it'll be just six or 12 months and their ratings will be picking up very quickly." Industry executives said new shows might also include scripted programs, concerts and events, and "edu-tainment" such as quiz shows. The potential silver lining is that it will force TV networks to develop quality programming, frequently lacking in China's crowded media space. Said Bertilla Teo, Greater China CEO for Starcom MediaVest Group, "Right now I think what they tend to do is they look at what the West is producing and they will then reproduce the format hoping this format will have some resonance with the consumers." China's Communist government has traditionally wielded tight control over the country's state-run media, such as CCTV. Provincial satellite broadcasters were given some latitude to create commercially pleasing programming, though authorities have yanked shows that crossed the line -- an "Idol"-style singing program that attracted 400 million viewers was canceled, with speculation that its audience voting system too closely resembled an experiment in popular democracy. Beijing's current drive to stamp out vulgar entertainment gained momentum last year when a bachelorette on popular dating show "If You Are the One" rejected a potential suitor on Jiangsu Satellite TV saying, "I'd rather be crying in a BMW than laughing on the back of a bicycle." The statement sparked collective soul-searching about moral decay in China. The program was able to remain on the air after complying with government orders to cut out "incorrect social and love values." Ratings have soared more than 400% in the last two years, with advertising rates going up by about that much as well, Mr. Huang said. A 15-second spot costs about $31,500. Anhui Satellite TV was the first provincial broadcaster to hold its ad auction this year. It brought in $72.7 million in bids on Oct. 29, about $31.5 million more than last year, according to UM. A Chinese spirits brand won the rights to be the commercial partner of the evening news for $5.7 million, paying 523% over the opening bid. International brands, including Kraft and KFC, participated in the auction for the first time.

China's Ban on 'Overly Entertaining' TV Expected to Spur Already Ballooning Ad Prices

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