How China Buys and Sells TV

CCTV: National Network's System Helps Advertisers Go Beyond Big Cities

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With so much talk in the U.S. of changing the annual TV marketplace known as the upfront, Advertising Age decided to look into how TV ad time is bought and sold in key markets around the world. This is the second in a series.

BEIJING ( -- Multinational marketers ironically owe a debt of gratitude to one of the most famous Communists in history, Mao Tse-tung.
Chinese TV's 'American Idol'-like 'Supergirl' show was a smash hit.
Chinese TV's 'American Idol'-like 'Supergirl' show was a smash hit.

Chairman Mao, who grasped the power of TV as a mouthpiece of his party, created a national TV network, Beijing-based China Central Television, in 1958. Today, it has 16 channels and has been ad-supported since 1979, with national distribution focused on topics such as sports, movies and even agriculture.

He also made sure locally produced TV sets were affordable even for the country's impoverished rural population. As a result, 347 million households -- virtually the entire country -- have access to TV programming today and tune in for about three hours a day, according to CSM Media Research.

Helpful to advertisers, not programmers
China's developed TV market hasn't helped foreign programmers, blocked from local airwaves by fears about the influence of Western-style programming in a tightly controlled political environment. But CCTV's national network has been enormously helpful to advertisers as a way to promote brands beyond the largest cities.

"If you want your spot to be seen by the largest number of people in China, you probably want to run it right before CCTV's main evening news or evening weather report, because those programs run in just about every city in China," said Rita Chan, Shanghai-based client-service director, China, at Nielsen Media Research.

The broadcaster has evolved over the past decade from backward state-controlled behemoth into savvy commercial entity. About four-fifths of the $37 billion spent on advertising in China goes to TV, according to Nielsen; much of it to CCTV. Up to 90% of CCTV's revenue comes from advertising, so to rake in as many dollars as possible, an auction is held every November to sell prime-time slots for the following year.

Media buyers complain the auction is too long. Participants deposit a sealed paper bid in a box. After bids are read by CCTV, the three or four companies behind the highest offers for a time slot take part in an open-auction process by raising hands to increase the bid price.

'Pretty spectacular'
"[It] could be quicker, but it's still pretty spectacular," said Philip Beck, CEO of China Media Exchange, Shanghai. The holding company for Publicis Groupe's media divisions in China, namely Zenith Optimedia, CME spent more than $30 million at the auction in November 2005 on behalf of marketers such as China Mobile and Shanghai General Motors.

"There were at least 1,000 people, all in one room, which is quite novel compared to other markets. Americans should adopt the same approach, having an open auction like CCTV is fantastic," added Mr. Beck, a New Zealand native. "They just need to improve the format to move through the inventory more quickly."

In 2004, CCTV took in about $655 million. Last November, the auction generated almost $725 million. Although Chinese brands dominate CCTV's airtime, for the past two years Procter & Gamble Co. has been the king of the auction. P&G spent $47 million of its total $400 million ad budget for China at the 2004 event for CCTV airtime last year. In 2005, P&G invested $43.5 million for 2006 airtime on CCTV.

"P&G buys a lot of spots, [up to] 30% to 40% of a TV station's prime-time airtime for our brands," said J. Alfonso ("Pon") De Dios, P&G's media director, Greater China, based in Guangzhou.

But CCTV is under pressure to provide more flexibility to meet marketers' needs to maintain its dominance in China's complex TV market. The broadcaster is expanding its drama, sports and variety/contest programming to broaden its appeal to consumers -- and advertisers -- in the face of growing competition.

Increasing competition
CCTV is right to be worried. China has more than 2,000 terrestrial and pay-TV channels at the city and provincial levels with more leeway than CCTV, still subservient to its propaganda roots, can offer. Provincial media operators in places like Hunan, Anhui and Shanghai are gaining in appeal, distribution and ad revenue.

"Provincial satellite channels are trying to compete with CCTV by working together, coming up with new formats like contest shows, and through foreign programming acquisitions like popular Korean dramas," said Ms. Chan.

Regional operators have even adopted their own themes. The provincial channel in Hainan, a popular vacation destination in southern China, for example, is now China's national travel channel. Shanghai's Dragon TV is a news-oriented channel and Beijing's provincial station shows mostly documentaries.

Another potential challenge to CCTV stems from the Chinese government's development of digital TV. The technology has already been tested in more than 49 cities and should be in place in the major cities by 2008, the all-important year when Beijing will host the Olympic Games.

But what really put CCTV on alert was the astounding success of the last season of the "Mongolian Cow Sour Yogurt Supergirl Contest," a talent competition known as "Supergirl" that was seen by up to 400 million Chinese.

The show's stunning popularity highlighted the significant changes taking place in China's TV market. The show was created by Hunan Satellite Television -- not CCTV -- demonstrating for the first time that advertisers do have choices beyond the state-run operator and that local viewers crave more engaging content.

Mission to go national
Hunan execs "realized their mission was becoming a national player back in 1999, and developed a team dedicated to establishing distribution on local and regional cable and satellite channels all over the country," said Matthew Brosenne, CSM's international business director in Beijing.

At its peak, "Supergirl" ratings topped CCTV's most popular shows, and the price of 15-second spots during the contest were priced as high as $15,000, making it more expensive than CCTV's prime-time shows.

The talent show "marks the first time a satellite show has really broken out of its own province, did very well around the whole country and was promoted nationally. That's a big challenge to CCTV's dominance," said Beijing-based Quinn Taw, chief strategy officer for GroupM.

P&G's ad strategy
The financial toll is already showing. Bidding at the last auction fell short of the revenue goal of $750 million the broadcaster had hoped for, largely because advertisers, including P&G, have started turning to more flexible and cheaper alternatives.

For example, P&G recently invested nearly $1 million with the Hunan channel that created "Supergirl" to make Gillette Vector the title sponsor of a folk-art show and a TV series featuring outdoor singing performances. The marketer also inked a deal with Chongqing TV to search for the best smile in that city, including TV coverage and a road show sponsored by Crest.

"It's all about creating your own rules, you need a lot of improvisation and agility, and you need to ask for things and push people," said P&G's Mr. De Dios. "This is poised to be the year of reality TV in China because of last year's 'Supergirl' success."
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