SMG on the Road to an IPO
In the latest in a series of bold moves made by SMG since the appointment of western educated President Li Ruigang in 2003, and another significant step towards taking parts of its assets public, Shanghai Media Group (SMG) has unveiled plans to re-launch its youth-oriented subsidiary into a wide-ranging, integrated multimedia brand called ENJOYOUNG on June 6.
Despite continued sensitivity in Beijing, SMG has long been seen as the most likely competitor to CCTV on a national scale and, within the next 3 to 5 years, SMG hopes to transform the existing Channel Young from a local station to a national fashion and lifestyle brand. Promoted as China's answer to Martha Stewart, ENJOYOUNG will target young professionals with a mix of Channel Young programming, print publications, plus expanded events, online and mobile TV offerings.
When the relaunch is complete, ENJOYOUNG's Managing Director Bao Xiaoqun said he aims for non-TV advertising revenues to generate 40% of the company's total sales events. Channel Young currently relies on TV advertising for more than 95% of its revenues. At the press conference held to mark the launch on May 26, SMG President Li Ruigang said "it is time to expand SMG's focus from local to national and from television to multimedia." Domestic capital markets will provide the bulk of the financing to help SMG buy newspapers and New Media assets in other parts of China, though Li emphasized that the TV and radio businesses will remain state-owned. He also said SMG would soon launch the first round of financing for its IPTV business, which Li expects to gain 2 million households before the end of the year.
SMG hopes to split some of its fashion, entertainment and animation subsidiaries in the future with the aim of taking them public in 1 to 2 years, Li said. If successful, the plan would spell a major step forward for China's broadcasters, which are tightly controlled by the central government. Controlled by the Shanghai Municipal Government, SMG is China's second largest broadcaster with annual revenues of RMB6 billion (US$880 million).
The move to approach its national ambitions by testing a single unified division in the young professional sector is a smart move given the political complexity of traditional broadcast markets, but it also reveals SMG’s need to grab a share of the fast growing online media and live events sectors where it is relatively weak and lags behind private market leaders, many with direct access to international finance.
Nevertheless, any public move by a regional state broadcaster that involves a "national strategy" and "future IPO" would not have been allowed without central clearance from SARFT in Beijing and so must be seen as a significant move towards a stimulation of domestic media competition. It is also a further demonstration of Li Ruigang’s ambitions to mould SMG into a truly commercial enterprise, albeit one with a state-enforced broadcast monopoly in its vibrant home market.
For more on Li Ruigang and SMG's plans for the future, please see this week's feature interview.