China restricts online video sites

And other news in Greater China

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SHANGHAI--Government agencies have issued new regulations for user-generated online video sites in China, restricting operations to state-controlled enterprises and requiring the mainland’s homegrown YouTube-like sites to delete and report unapproved content.

The government’s main concerns are the censorship of pornography and politically sensitive content, not stifling an industry that is still unprofitable. In addition, the Communist country’s authorities are leery of allowing too much self-expression in mass media. Last year, for example, they banned TV contests from allowing viewers to vote online or via text messages in contests.

If enforced to the letter, the regulations could have a major impact. There are now dozens of privately-owned online video sites in China, the world’s second largest internet market with about 164 million surfers, but two players, and, dominate the market.

A key trend driving the popularity of online video sites in China, like in many parts of the world, is strong demand for user-generated, time-sensitive content that is relevant and interesting. Also, China's media industry is highly fragmented, and media companies, including provincial TV stations, increasingly cooperate on distribution to reach a broad national audience.

New rules are no surprise

Despite the ominous rhetoric coming from China’s media regulators, executives at market leaders Youku and Tudou as well as industry experts say they are not too worried at this point, but that it’s unclear exactly what lies down the road.

“This didn’t come as a surprise to us. These new regulations have been in the planning [stage] for a long time and the major companies have been consulted over the past year. We will follow whatever the regulation policies are and continue to operate in China under the law. We’re seeking more details now on implementation plans for the new policy,” said Gary Wang, Tudou’s founder and managing partner in Shanghai. Tudou has about ten million daily unique visitors, generating close to 100 million click views per day, according to company figures. That adds up to about one billion minutes of video.

“It is not currently clear how big the impact is to the online video space as this will depend on the interpretation and the implementation of such policy guidelines,” said Youku’s founder and CEO, Victor Koo, in Beijing. Last month, Youku exceeded 100 million daily video views for the first time, and its daily unique visitor base topped 12 million, according to Nielsen/NetRatings.

“In the meantime, Youku is actively working with the relevant authorities and have already submitted information about our company to facilitate this process. Our legal advisors are also communicating with the authorities to further understand the application process and implications to the legal structure for online video companies.”

Political struggle at work

Their confusion is understandable, since both traditional media companies and internet service providers operate in a murky environment, in which official policies seldom match up with reality.

"Two factors” are at work regarding the new regulations, said an executive at one online video company.

The first is an ongoing political struggle between two government organizations, the State Administration of Radio, Film, and Television, or SARFT, and the Ministry of Information Industry (MII). Since the dawn of the internet in China, they have battled to become the official body overseeing the web in the mainland. Last week’s statement, in a new twist, was a joint statement by both agencies, which has been greeted as a positive development by the companies under their jurisdiction.

“In this way, in theory, they have more power to execute the policy,” said the executive, “but it’s more clear to us who’s in charge and who we should be talking to.”

YouTube's future unclear

Second, the new rules, which go into effect Jan. 31, can be seen as a relaxation on regulations issued by SARFT two years ago, which mandated that only TV or radio stations could apply for an online video license. The new regulation states that web sites that provide video programming, or ones that allow users to upload their own video content, will be restricted to any state-owned business with a permit.

A Chinese-language site run by San Bruno, California-based YouTube probably won't be affected by the changes, since it officially operates from outside of the country, but will likely get shut down inside China periodically, which has happened in the past.

For companies at home, the status quo probably won't change very much.

"I think the notion that the government has suddenly and recently started 'cracking down' on the video sharing and P2P video streaming sites is misinformed," said Kaiser Kuo, Ogilvy & Mather's group director, digital strategy at Ogilvy & Mather, Beijing. "The relevant agencies--the MII, SARFT, and I believe the Ministry of Culture--have been in contact with the operators of these sites for some time now, pushing them to be more rigorous in keeping sexually or politically naughty video content off the air.

"The intent by regulators isn't to kill this industry, but rather to bring it under closer scrutiny. There's quite a bit that slips past the companies' teams of censors--not surprising, given that there are usually less than a dozen individuals who have to vet literally thousands of videos every day."

“The new rules only say you have to be majority-owned by the state to apply, and there are various forms of state capital and ownership available to us. In that sense, it’s a loosening up of requirements,” said the online video company executive. “In general, what they said last week is pretty much the same as what was issued two years ago. In reality, I don’t think there will be much change, in the short-term at least. It brings up a lot of new questions, but certainly for now, we will all continue to operate.”

Omnicom's BBDO invests in Shunya Communications Group
BEIJING--Omnicom Group’s BBDO Worldwide network will acquire a minority stake in Shunya Communications Group, an integrated communications company founded in 1999. Shunya provides professional business communications services in advertising, public relations, event management, marketing services and interactive business. Beijing-based Shunya has offices in Shanghai, Guangzhou, and Chengdu.

Under the agreement, Shunya's four principal operating agencies--Shunya International Ad Inc., Shunya Profuture Events Marketing Inc., Shunya International PR Inc. and Shunya PR Inc.--will, subject to regulatory approval, become a part of Omnicom's BBDO, Proximity, Porter Novelli and Pleon divisions, respectively.

“Since the establishment of Shunya in 1999, we have grown exponentially. The partnership with Omnicom will take us to yet another level through our investment in talent development, client experience and business innovation,” said Shunya's founder and Chairman, David Zhang.

AmEx launches Travel + Leisure Southeast Asia
HONG KONG--American Express Publishing has launched an edition of its Travel + Leisure magazine for Southeast Asia, a major market for the travel and tourism industries. The monthly will be sold in 12 countries and territories across the region, including Hong Kong, making it the most widely distributed edition of T+L outside the U.S. It has an initial print run of 50,000 and retails for $5. Advertisers in the 160-page debut issue dated December 2007 include Cartier, Louis Vuitton, Dior, Cathay Pacific Airways and the Mandarin Oriental Hotel Group.

Aimed at sophisticated Asian travelers, Travel + Leisure Southeast Asia is published by Bangkok-based Media Transasia, with offices in Hong Kong, Thailand and India. The company also produces OK! and Seventeen magazines, as well as Indian editions of T+L and Maxim.

"At present, inter-regional travel serves as the core inbound tourism market for any one country in Southeast Asia," said Lucas Krump, VP-associate publisher in Bangkok. "Countries such as Thailand, Indonesia and Singapore recognize the importance of inbound tourism from neighboring countries and are making substantial efforts to maintain and increase visitors from other Southeast Asian countries."
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