CSM's Matt Brosenne

Digital TV expanding despite content crunch

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HONG KONG--China’s media environment may not be the world’s freest, but it is quickly becoming one of the most advanced and complex markets. China has gone from just 1.07 million digital TV households in 2004 to 16 million this year, according to CSM Media Research.

Even viewers in small towns have access to about 35 channels, with many more in the first tier cities. According to CSM, the average for some second-tier cities has jumped from 46 to 63 channels on the conversion to digital cable, with CCTV and provincial satellite channel operators providing the main source of new channels. That number does not include hundreds of additional channels launching on other platforms like IPTV and mobile phones.

The number of pay TV digital channels has skyrocketed already and the conversion of market after market to digital cable TV ensures that these channels will be available for viewers across the country, said Matt Brosenne, Beijing-based international business director of CSM Media Research, a joint venture between TNS and CTR Market Research.

Making sense of the mix has fallen to media experts like Mr. Brosenne, a key speaker at the four-day CASBAA Convention 2007, organized by the Cable & Satellite Broadcasting Association of Asia late last month. One of the biggest challenges plaguing the industry, he said, “is whether the industry can keep up with the demand for content on the new channels and platforms,” given strict controls on foreign programmers like News Corp. and Viacom.

148 digital TV channels

Chinese companies are experimenting with four types of digital media--terrestrial digital, digital cable, direct-to-home digital satellite and Internet Protocol Television (IPTV). For the first three types, the State Administration of Radio, Film, and Television (SARFT) has issued 148 digital TV channel licenses, of which about 120 are currently on-air.

These niche channels dedicated to activities like fishing, golf, tennis, cooking, travel, and shopping. “They’re new and they’re cool--but they’re not necessarily good,” said Mr. Brosenne, an American who relocated to Greater China in 1994, to work for a publishing company in Taiwan. He moved to the mainland with TNS in 1997.

They compete against traditional analogue TV channels with national reach, such as cable feeds of provincial channels like the popular Hunan Satellite TV, as well as local terrestrial stations and channels broadcast nationally by state-owned China Central Television (CCTV).

“Just because there are different platforms doesn’t mean the channels are necessarily different,” said Mr. Brosenne. “Material can be repackaged for different formats like digital TV, buses and mobile phones. But it’s hard for content producers to be paid. It’s a question of getting the money back out.”

Who pays for content?

There’s no easy answer, and the content issue is slowing down development. Even in more open markets, it’s hard for content producers to recoup their investment costs. In China, always a hot topic at CASBAA’s annual event, international broadcasters have struggled just to get a foot in the door for years.

While the rollout of IPTV--multimedia services such as TV, video, audio, text, graphics and data delivered over IP-based networks-- has been a sizzling topic, the industry is still in its infancy.

So far, SARFT has granted four licenses, to the internet division of CCTV; Shanghai Media Group (SMG), the country’s second-largest broadcaster after CCTV; and Guangdong-based Southern Media Corp.--essentially covering China’s three first-tier cities, Beijing, Shanghai and Guangzhou. The last license was issued to China Radio International. But only one of those companies, SMG, is currently operating an IPTV service, through a joint venture with China Telecom subsidiary Shanghai Telecom.

IPTV viewers download content, as well as interactive services like video-on-demand and shopping, through boxes attached to internet connections like Hong Kong’s popular Now Broadband TV service. But they are still viewing the content on television sets.

Another small but growing platform in China is internet TV, streamed onto a computer. The country has dozens of web sites like OpenV offering different channel s.

Because channels overlap, “the lines between these platforms get blurred and no one can really tell you what the rules are, except at the end of the day, it’s all about the viewer,” said Mr. Brosenne.

The rise of digital media, and the demand for content it creates, provides a glimmer of hope. While the government wants to maintain the status quo in China, in terms of how much freedom it gives foreign broadcasters to distribute their programming in the mainland, it also wants to encourage cooperation between foreign programmers and Chinese production companies and channel operators.

Digital channels steal eyeballs from CCTV

In part, progress has been made because the government has stated publicly it hopes to convert eastern China into a fully digital broadcast market by 2010, followed by central and western China by 2015. Those goals require some foreign involvement.

It’s a narrow distinction at times, but “Chinese regulations dictate content will be homegrown and local,” said Mr. Brosenne.

Since Chinese consumers are unwilling to pay high premiums for digital content, one obvious source of income is advertising. However, the government has banned ads from digital channels--at least in traditional 30-second formats--for the forseeable future.

"So why should advertisers care about the growth of China’s digital market? Digital channels’ proliferation make an exceedingly competitive TV environment even more so, possibly stealing eyeballs from today’s powerful commercially funded analogue channels,” he warned, and those viewers are “upscale, with high incomes.”

At the same time, branded content deals offer a promising solution to the shortage of programming. Earlier this year, for instance, Coca-Cola Co. created 13 ten-minute animated films for its Qoo brand, featuring the Qoo character as well as animated versions of Coke's stable of celebrity endorsers.

In one episode, for example, Qoo is lost in the woods and learns how to jump over tree trunks from the track-and-field star Liu Xiang. After, Qoo shows the athlete how to perform his trademark dance and make friends with the village natives. The series, created by the independent agency Nitro in Shanghai, was distributed free to channels across China.

“Besides promoting the Qoo brand, because the character is so recognizable to young Chinese children, the free films were welcomed by Chinese broadcasters,” said Nitro’s group managing director and head of planning in Shanghai, Stephen Drummond. "A law passed last year requires that all animation aired in peak children’s viewing periods needs to be produced locally, and there isn’t an enormous amount of good local animation. The series also has a positive message for kids, which gives the channels another reason to run the programming.”

Consolidation likely

Key foreign media players also expect some degree of consolidation to help alleviate China’s content shortage. The current fragmented system has led to thousands of channels at the local, provincial and national levels operating on different platforms, with relatively little cooperation.

“With 2,500 analog channels, not counting the new digital channels, China is comparable to the U.S., except that each market operates independently, there are no affiliates or networks like NBC and CBS in the U.S. Since every market does their own thing, advertisers have to deal with them independently,” said Mr. Brosenne.

With a laugh, he added, “I feel sorry for media planners in China. But I’m quite bullish about the development of China’s media industry. Progress has been seen. It’s just a question of executing slowly, carefully and within the limits.”
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