Beware the Back Alley Channel Salesman

BEIJING --- Many articles have appeared in the press lately discussing the opportunity presented by the opening up of China's broadcasting industry (specifically channels) and noting that China's broadcasters have begun to view investment as well as stock market listings as a potential source of additional revenue. This is despite that fact that non-public, and certainly foreign investment in Chinese television stations is strictly prohibited.

So what gives?

As part of the Chinese media industry's ongoing mergers and restructuring, media production assets were from the beginning supposed to be hived off from broadcasters. This plan, dubbed 'Zhi Bo Fen Li', has until recently proceeded at a rather slow pace. This was due mainly to the fact that the broadcasters were not interested in letting go of production assets that could be forced to sell programming back to its parent at a greatly reduced rate.

However, this all changed as broadcasters realized that they could still retain partial, and indeed majority, ownership in the spun-off entities, while receiving non-state investment, as production or advertising units do not fall under the same prohibitions regarding investment in the television stations themselves.

According to remarks made in February by Cheng Hong, the director of CCTV's editor's office, the State-owned station will spin off its production and non-broadcasting businesses, part of which may later be listed overseas. The same goes for, CCTV Market Research Co Ltd, which is preparing to list in Hong Kong.

Chongqing TV is also considering a GEM listing for its majority owned advertising company Chongqing TV Media (see 8.1 below for more details).

Indeed, the Chinese government at its highest levels has been supportive of media reform. Li Changchun, a standing member of the Political Bureau of the Communist Party of China, its top decision-making body, said on February 6 in Beijing that cultural industries - which commonly include broadcasters- should liberalize their productivity through the restructuring their management systems.

What the broadcasters are doing is simply taking non-core production assets, spinning them off as private companies (which of course, the broadcaster has a stake in) and allowing them to accept investment, or list if they can get the permission. What is new is that foreign companies now have as much right to invest in the broadcasters non-core assets as a domestic company does. However, this does not mean any rights to the channel itself are being sold.

There does seem to be some confusion over this. In fact, at a number of informal industry gatherings that CMM-I has attended recently, new companies (at least new to us) have begun furtive whisperings about bringing foreign investment into new channels about to be launched. When pressed for details they tend to clam up and start looking wildly around the room for someone else to talk to.

China's TV industry is opening up to the widest degree it ever has in terms of foreign and non-state investment. There exists palpable, real opportunities in the production and TV advertising sectors for foreign companies to develop synergy, and indeed, even make money.

Just beware of the guy in long trench coat who's offering to sell you a channel.