Tuning In To The WTO Means
Double Happiness For CCTV
China's national broadcaster stands to make big money
from a more competitive business environment - and without
the risk of foreign rivals being allowed to sneak into
the picture By CRYSTYL
MO
ALSO The
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WTO winners First
Mover: When the automakers market finally
opens, Volkswagen may be the big winner
CCTV will continue
to be the only choice for many advertisers seeking
nationwide exposure for their products
Chinese may soon be eating more foreign foods, driving more
foreign cars and buying more foreign insurance. But WTO or no
WTO, they will continue to watch Chinese television. In particular,
they will watch state-owned Chinese Central Television, or CCTV,
the government's favorite mouthpiece and the only network capable
of reaching the entire 900-million-plus mainland audience. Nothing
in the WTO agreement requires China to open its media to outside
competition. And despite allowing limited foreign investment
in regional TV markets, Beijing is jealously protecting its
monopoly on national broadcasting. Says Lisa Wei, Beijing buying
director for advertising agency Mindshare: "The government will
never loosen its control of the media, especially CCTV, because
it is essentially a propaganda tool."
But China's rulers see CCTV as much more than just an instrument
of political survival. They also value it as a cash cow. And
ironically, although CCTV's own business will be immune from
WTO-inspired competition, it should benefit hugely from China's
entry into the world trade grouping as a result of increased
advertising from domestic and foreign companies fighting for
brand recognition. That makes CCTV a twofold WTO winner.
CCTV is already earning serious advertising revenue. It brought
in $640 million last year, a hefty 16% increase on 1999. Indeed,
advertising slots are in such demand that CCTV has the luxury
of auctioning off some of its best spots at what some claim
are inflated prices. A growing middle class, predicted to double
to 200 million by 2005, and the nation's still-robust economic
growth also bode well for the sector. The tax authorities' decision
this year to allow state-owned companies to spend 8% of revenue
on advertising, up from the previous cap of 2%, also will boost
revenue. Next comes the WTO bonanza.
Little wonder foreign media groups, battered by the rest of
the world's economic crisis, look with exasperation and envy
at CCTV's hugely profitable market. Critics accuse the network
of arrogance, complacency and even producing inaccurate ratings
data. Snarls one foreign advertising executive: "There could
be famine and plague in the rest of the world and CCTV would
carry on its regular business." Sour grapes? Perhaps. But no
one disputes CCTV's dominance of the market. Says Huang Shengmin
of the Beijing Broadcasting Institute: "CCTV's unique position
in China means that almost nobody can really challenge it."
CCTV's main competitors are the hundreds of regional stations
largely restricted to broadcasting to their home provinces.
Some local stations have huge audiences - Anhui TV, which
can also be received by cable outside its provincial borders,
claims 52 million viewers. But even that is a fraction of CCTV's
reach. And while conventional wisdom states that China is too
large to be a single market, there are still plenty of companies
seeking nationwide exposure for products ranging from toothpaste
to TV sets. CCTV will continue to be the best viable choice
for those advertisers. The alternative is buying time from local
stations, which can be even more frustrating than dealing with
CCTV. Says Gilad Coppersmith of agency Universal McCann: "You're
dealing with 26 different provinces. It's like 26 countries."
CCTV proved its strength last month when, despite the global
downturn and a slowing domestic economy, the company pulled
in $317 million from its 2002 auction, a 20% increase over this
year. The highest bidders were drug companies, led by Harbin
Pharmaceutical, which spent $6.5 million. Other big spenders
were liquor firms and bottled water giant Wahaha. Agencies representing
foreign brands such as Colgate, Hitachi, Siemens, and Philips
avoided the auction, but are expected to continue to advertise
by negotiating their own rates with with CCTV or agencies. And
the lure is not merely audience reach. Explains Mindshare CEO
Chris Walton: "There is still a lot of status in getting a national
spot on CCTV."
But competitors are nipping at CCTV's heels. Feisty state-owned
local stations have consolidated to win more business from companies
targeting regional markets. A few foreign channels have been
granted broadcast rights, notably CETV, a subsidiary of U.S.
media giant AOL Time Warner (parent company of ASIAWEEK), and
Phoenix, 38% owned by Rupert Murdoch's STAR TV, which compete
in Guangdong.
Some see such deals as nascent challenges to CCTV's supremacy.
Officially, CCTV is unfazed. "I do not think there is anything
that could really endanger our position," insists He Haibing,
customer director for CCTV's advertising department. But industry
insiders detect China's broadcasting giant is becoming less
complacent. Says Mindshare's Wei: "They are learning how to
deal professionally with clients; their attitude and marketing
has changed. This is obviously because they feel threatened."
Still, it is unlikely China will open its TV market further
until after the 2008 Olympics, which promises to be an advertising
gold mine for both CCTV and regional broadcasters. And if CCTV
really is developing some business savvy, it should by then
be an even more formidable competitor.
Commentary
2003-12-06
Coming soon to the commentary column--behind the scenes stories of the how the articles are really put together--the difficulty in getting anyone to accept an interview in China, the political sensitivities, the great stuff that got cut because of space, and much more about the joys and frustrations of writing in China
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