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Masterarbeit, 2010, 57 Seiten
1 Motivation, Structure and Methodology
2 Brief Historic Perspective on Political Influence and Media in China
2.1 Ancient China, Inventions and Early Uses of Media
2.2 Media and Political Influence in Imperial China
2.3 The Rise of ‘Mass Culture’
2.4 Communism, the Use of Propaganda and the Reform Era
2.5 Tiananmen Square Massacre
2.6 Post-Reform China
3 Government Control Today
3.1 Broadcasting System and Regulators
3.2 Rules and Regulations
3.3 Discussion on Cultural Imperialism
3.4 Special Case: News
4 The Chinese Media Market
4.1 Size, Growth and Structure
4.2 Import and Export of Cultural Products
4.3 The Role of IP and Piracy Issues
4.4 Analyzing Audience Preferences
5 Chinese Media Companies
5.3 Second and Third-Tier Players
6 Foreign Media Companies and their Strategies in China
6.1 NEWS CORPORATION AND STAR TV
6.3 THE WALT DISNEY COMPANY
6.4 DISCOVERY CHANNEL AND NATIONAL GEOGRAPHIC
7 10-Year outlook for the Chinese Television Market
7.1 Government Control and Sponsorship
7.2 The Role of Technological Developments
7.3 Domestic Players within China
7.4 Foreign Players in China
8 Implications for Global Markets
8.1 Territories, Genres, and Discussion on Creativity
8.2 Spreading the Chinese Perspective
“The presence of television is influencing the future of China in ways that no other technology or human agency can”. Given its’ importance, both culturally and politically, the television industry is one of the most interesting industries in China. Candidate 114608’s career background is in distributing linear TV channels. However, a quick review of regulations and market realities showed that there are virtually no foreign channels in the country and probably won’t be for a while; therefore the focus of this report is foreign television content entering China – and, to a slightly lesser degree, Chinese content in global markets. All video genres are discussed here, with news and current affairs programming being a special case.
The first part of this report is a short introduction that includes the history of political influence and a review of existing regulations. After this overview, the industry and major players are introduced and analyzed - supplemented with various facts and statistics. Here, the issue of cultural imperialism, or Western media influence is elaborated on. Then, the paper discusses the opportunities for international firms in the Chinese media market and the tension between Government control and market liberalisation. A compelling answer to the question of who will dominate the domestic market in 10 years is developed. Finally, the impact of Chinese content on international markets will be assessed within the same timeframe. This is particularly interesting as media is not a traditional manufacturing industry and poses different challenges i.e. creative skills.
This report relies on data and insights from around 45 academic books and journal articles, 5 dissertations, 60 news and popular press sources, 10 analyst reports, and 15 online resources. English-language materials are widely available, even about Chinese companies and regulatory bodies; the majority of industry data is less than 5 years old. Class materials from the Global Strategy course and theoretical frameworks such as AAA, ADDING, Five Forces and the National Diamond are applied. Additionally, 12 personal interviews with high-level media executives were conducted, mostly at Europe’s largest industry event in Cannes, France in April 2010. These insights were particularly useful for the 10-year outlook.
Paper was first invented and used in China between 50 B.C. and the second century A.D. Ink was independently invented by several civilizations but the Chinese were the first to use it from the 12th century BC. However, writing and reading was limited to a relatively small elite group of 1-2 percent of the total population. A Government newsletter written on silk for state officials was used in the Tang dynasty (eight century), court news periodicals printed by competing publishers were distributed in the Ming Dynasty (1368-1644) and popular illustrated newspapers with a ‘gossip’ character appeared before 1800. All these publications can be considered early forms of media. Slowly the level of literacy rose to 5 percent in 1800, which equalled to 15 million people.
In the late imperial Chinese society, cultural integration was orchestrated by the literate elite. Through the sophisticated use of ‘media’, in a wider sense, messages were spread. Two examples were described by James Watson: “The standardization of culture – namely the promotion of ‘approved’ deities by state authorities,” in this case the God ‘T’ien Hou’ over a period of 1,000 years in Southern China. An even better case of disseminating ideology is the sacred edict, the most concise and authoritative text of Confucian teachings, that highlights messages of social harmony and was spread nationwide in the late 17th century. Both highlight that the elite had learned how to control communication in order to maintain a harmonious society, which also secured their power.
In the 20th century, various factors lead to the fermentation of a ‘mass culture’. First, the rapid growth of the population and second, the parallel adoption of education transformed the country of peasants with a small highly educated elite into masses of literate media consumers. Over a forty year period the number of students in primary and secondary schools rose at a staggering 50 percent p.a.
Exhibit 1. Enrolled Students in China
Abbildung in dieser Leseprobe nicht enthalten
At the same time, with a new potential readership the mass media (then: print) started to develop. While in 1890 only a dozen newspapers existed in the country, by 1921 550 Chinese-language newspapers were published. After the Kuomintang takeover in 1927 independent media was dismantled. Two decades of instability in domestic (and world) politics followed.
After the war and revolution, the Communists ‘inherited’ 400 newspapers and 49 radio stations in 1949. For the Party radio and television was instrumental for the “implementation of socialism … especially because the literacy rate in rural China, although greatly increasing since 1949, remained low”. Still, by 1955 the number of newspaper subscriptions increased six-fold.
The propaganda system was largely imported from the Soviet Union. Mao stressed that his revolution must be fought both with barrels of guns and a pen to ’mould public opinion’. In 1966, one of Mao’s first actions during the Cultural Revolution was a complete power grab over the propaganda apparatus turning media into “instruments for class struggle supporting the Revolution” with its’ three pillars anti-imperialism, anti-capitalism and anti-revisionism. At this time, almost no exchange of information or TV content with the outside world took place. In fact, the main evening news bulletin played 18 minutes (of the total of 26) of captions of Mao’s thoughts accompanied by Communist hymns and poems.
Import and export to and from other socialist countries was relatively limited mostly due to cultural differences. Also, the self-reliance policy which was centred around the principles of national sovereignty and cultural identity (ibid) stifled foreign imports. During the 1970s the industry was slowly developing. The first colour TV channels were launched in 1973 and the first commercial (for a Beijing-based Taxi company) was aired in 1979. According to some researchers the first big television “event” was the funeral of Chairman Mao Tsetung in 1976 while others maintain that the first watershed event was the public trial of the Gang of Four in 1980 which attracted 300 million viewers.
After Deng Xiaoping seized control a drastic change occurred and for the first time world news was shown to Chinese citizens. Also, imports of audiovisual products from communist and capitalist countries were allowed and included shows like Falcon Crest, Hunter, Alf, and The Thundercats. At this time, barter deals were common-place e.g. a deal from 1982 between CCTV and U.S.-based CBS for 60 hours of TV series including NBA Basketball and 60 minutes in exchange for 320 minutes of advertising time. The agreement allowed CBS to sell these ad slots to domestic or international advertisers who could reach many times more potential consumers in China for each ad dollar spent than in the USA or Japan.  20th Century Fox and Paramount Studios also had similar deals for their Hollywood movies. Walt Disney bartered 30 minutes of Donald Duck and Mickey Mouse clips for 2 minutes of ads.
While the Cultural Revolution represented the extreme form of cultural protectionism, the subsequent reforms brought a radical change for the industry, but surprisingly not a linear progress in the case of importing foreign programs. There were three setbacks which are highlighted in Exhibit 2: In 1983 during the anti-spiritual pollution campaign, in 1987 during the anti- bourgeoisie liberalization campaign, and after the Tiananmen massacre in 1989 which was dubbed the anti-peaceful evolution campaign by the Government.
By 1986 mass media was flourishing with 2,200 newspapers at a circulation of 200 million. The 1980s also marked a time where almost all families bought their first television set (similar to America in the 1950s). As they were very expensive for the average peasant or worker family, many relied on overseas relatives to “bring them a Japanese TV”. By 1990, 150 million sets were in use throughout the country. While less than 1 million sets were produced domestically between 1958 and 1976, output increased substantially from annually 8 million (1984) to 25 million (1989) and China became the largest producer of TVs worldwide. 
Exhibit 2: Percentage of Foreign-Imported Programming at CCTV and STV Shanghai
Abbildung in dieser Leseprobe nicht enthalten
Source: Own illustration based on Hong, 1998: p.73-74
Additionally the media eco-system developed. Between 1979 and 1989 advertising had been the fastest growing industry in China with a CAGR of 41 percent while the number of agencies exploded from 11 to 11,000 with 130,000 employees.
In 1988 CCTV broadcasted a highly controversial 6-part documentary called ‘He Shang’ (River Elegy) that criticized Chinese culture and the prevalent isolationist doctrine. The show was an instant hit and was repeated on several stations due to popular demand. Even though the Communist Party was not directly attacked, the series sparked social unrest and was later denounced as a ‘source’ of the Tiananmen uprising in the following year.
A lot has been written about the tragic events that unfolded on the Tiananmen Square in Beijing in April of 1989 which were broadcasted live on CNN to the outside world. Even CCTV broadcasted a lot of the events live – with an “unimaginable” impact on the Chinese public. In fact, domestic live coverage included students being carried off the square on the first days of protest, the world-famous ‘tank man’, a 3-hour debate between student leaders and Government officials (an unheard-of event in the 5,000 year history of China), as well as a heated discussion between enraged but ‘charismatic’ protesters with the ‘annoyed’ Prime Minister Li Peng. The protests intensified and even a group of courageous Xinhua reporters joined with ‘banners denouncing censorship and demanding press freedom’ at one point. At around that time, it became evident that the Government had lost control and therefore Martial Law was declared the following day; the immediate clamp down on the protesters and the media began.
According to Voice of America, the shortwave radio station that broadcasts Chinese-language news into the country, 60 – 100 million Chinese citizens tuned in each day during the crisis. The Western world experienced for the first time world politics unfolding live on TV with CNN not only reporting but, literally, also ‘shaping’ these events. The most fascinating, personal and action-filled account of the incidents was written by the former CNN Beijing bureau chief Mike Chinoy who points out that the relationship between the Communist leadership and Western media was already strained before 1989:
“The Chinese were … clearly suspicious. Officials repeatedly mentioned Deng Xiaoping’s 1985 interview with Mike Wallace of 60 Minutes, in which CBS spent over half an hour with Deng but aired just eight minutes. ‘Chairman Deng was furious’, one Information Department official told me. ‘Since then, our leaders have been deeply sceptical of cooperating with any American TV network.’”
China was clearly “devasted by the global coverage provided by CNN”, and the aftermath of the event included strained international relations and slowed reform processes.
Eventually, media policies continued to relax again and China became ‘the largest television market in the world’.  Today, the Government does not ‘muzzle’ media as heavily as before and sees media as a “nation building tool”. In fact, one stated purpose of media is to bring about a “socialist modernization” and to “raise awareness of the outside world”.
Today, the Chinese TV industry consists of three groups. First, a few highly profitable large media companies located in Beijing, Shanghai or Guangzhou. Second, a small number of entrepreneurial, provincial stations and networks. And third, a multitude of low profit provincial, city and cable stations. TV is the largest destination for advertisement in China, taking in around 40% of total ad revenues (which is in-line with other global markets) and the country will soon be the second largest ad market behind the USA. Obviously, a vibrant advertising environment helps TV channels to generate income that in turn gets re-invested in fresh content.
Formerly state-financed tools for propaganda, state-owned enterprises have developed into commercial entities that rely on their own revenue streams. “Media managers have received a clear signal from the state that they have to generate revenues and be self-supportive in the long-run”. It has been suggested that this development did not follow a political master plan, but was rather borne out of economic necessities as none of the channels received anywhere near sufficient state funding. However commercialized the media in China may be have become, Government control still exists. News Media are practically owned by the state and are expected to follow Communist party and Government policies. They are viewed as a tool for national development, education, information and entertainment. In short, they function as “a bridge between the party and the people”.
Since 1983, the Chinese TV industry is structured into four levels.
“The first of these four levels is the central national (or state) television station CCTV. The second level consists of the provincial broadcasters, including the TV stations of the provinces, municipalities and ethnic autonomous regions. The third level is made up of the cities, and the fourth is the counties (towns) and regions whose political administrative rank is lower than that of the cities. These four levels of broadcasting institutions are all answerable to the corresponding levels of administration. However, the non-central stations are not dependent branches of the central station and do not need to consult them on technical, management or financial matters. Their points of reference are local. Policy control is exercised through the party propaganda departments at the different administrative levels” 
This structure enables local Governments to establish TV stations without additional cost to the central Government and the numbers of stations multiplied in the subsequent ten years. The WTO entry in 2001 generated an intense restructuring including a merger of radio, television, and cable companies into larger groups. It is further planned to change the structure to a two-level system (central and provincial) in the future. State Administration of Radio, Film, and Television (SARFT), an executive branch directly reporting to the State Council, is the central control organ, which is developing and enforcing all rules and regulations for the television, radio and film industry since 1986. This body “uses two categories to describe the different television broadcasting institutions of China: ‘national stations’ (guo jia tai) and ‘local’ stations (di fang tai). Under the category of ‘national’ there is only China Central Television (CCTV), whereas all other stations are in the ‘local’ category.” This plays an important role in censorship and tighter control for CCTV and allows ‘local’ channels more freedom. SARFT does not only regulate content but also strategically invests in the roll-out of digital terrestrial broadcasting services to rural areas.
This central regulatory body form a barrier that foreign companies are facing and that make non-market strategies crucially important in this market. Institutional voids that oftentimes prevail in many emerging economies are less problematic in China, where the organisation of the whole industry lies at this top-level body which is managed rather transparently. The following report shall focus less on the complexities of central and regional Government institutions but more on the actual rules and regulations set in place by SARFT that may affect foreign players.
Various regulations represent formal and informal barriers to entry for foreign entrants. Formal Rules include:
- Foreign investors can only invest in production Joint Ventures with a registered capital of minimum 5 million RMB for a maximum 49% equity stake.
- Later this was restricted further to only one JV per foreign company. Also, no shareholding in broadcasting companies is allowed. The general message set by the Government is clear: “Foreign investment is permitted as long as the Chinese party remains in control of the venture and as long as any goodwill that flows from the venture accrues to the JV and not the foreign partner directly”.
- Import quotas were set in 1995 that allowed a maximum of 10 Hollywood Blockbuster hits per channel and year. These rules were later relaxed.
- A Rule from 1994 limits the allowed quota of foreign drama content to 25% (15% during prime time) on any channel. In 2009, SARFT issued a new rule that limits the number of dramas (domestic or foreign).
- All imported content must be screened and approved by SARFT before being allowed to be broadcasted.
- Current affairs and news remain 100% state-controlled, while non-controversial genres such as arts and leisure, sports, fashion are relatively unregulated. There is, however, a ban on foreign animation imports.
- In 2004, newly elected Hu Jintao started to reduce the influence of Western media that were seen as ‘harmful’ to Confucian traditions. Broadcasters had to dedicate more primetime slots to local productions that highlight family values and foster a harmonious society.
- Restrictions for foreign broadcasters and publishers to enter China. As such, the import of content is handled through a Government ‘licensed’ agencies that sells onto domestic channels.
- All satellite channels have to go through a central satellite hub and cable operators can only downlink from one satellite. This remains a tightly-controlled piece of the delivery chain.
- Since 1993 it is illegal for individuals to install satellite dishes and receivers into their private homes but at the time 11 million dishes were already in place – growing to 45 million in 2001. Clearly this law is not enforced thoroughly and in fact, the People’s Liberation Army manufactures and sells small dishes to private households.
Informal barriers for foreign firms are often vague and include:
- Guanxi forms the social framework of relationships in China and without the right connections, especially to the Government, business can be problematic. Foreigners lack ‘tong’, or commonality, a main prerequisite for positive Guanxi and, hence will not get the same level of access or privileges as local players.
- A mandate that domestic show hosts use standard Mandarin as the only language (instead of Cantonese or Taiwanese dialects, slang words and accents that used to be ‘cool’). This makes entry for HK or Taiwanese based content providers extremely difficult. Also “mixing-in unnecessary foreign language” is forbidden.
- Government incentives to produce content that is beneficial to the youth.
- Censorship with ambiguous rules such as “no reports detrimental to the minds and health of youth”, “no false reports”, or “no reports on negative impact of WTO entry”.
- Strict censorship of pornographic content, with very strict interpretation including kissing as well as any bed or bathroom scenes.
- No violent content, which is hard to define, especially given the domestic Martial Arts industry.
- Strict censorship of politically sensitive topics such as Tibet, Taiwan, Falun Gong, etc.
- For media products that ‘pose a competitive threat’ to Chinese products, import is limited to 20 films per year.
Furthermore, there are some other requirements which are not entirely different from other markets:
- TV presenters are not allowed to appear in advertisements.
- Banning of advertisements for certain medical or nutritional products, superstitious services like fortunetelling or telephone-sex.
- Advertising breaks are limited to 12 minutes per hour (18 minutes in primetime) and infomercials during the breaks of TV series cannot exceed 90 seconds. Moreover, there cannot be any TV shopping content on satellite TV between 6 pm and 12 am.
Some of these measurements may sound strict but can readily be compared with similar regulations in Canada or European countries which also faced an influx of American media a few decades ago. In turn, EuroNews, as answer to CNN, and ARTE, a high-brow channel that intends to “support the integrity” of European culture, education and shared values were launched. Moreover, national laws like in Canada or France protect local creative industries from foreign imports.  And indeed, China’s media is not isolationistic as there are several signs of a new found openness:
- The WTO entry in 2001 enables content producers to access the market more freely than before.
- Subsequently, the opening up of certain audio-visual industries to foreign investment. 
- The ‘Special media Zone’ Guangdong Province is allowed to receive 30 new channels. Transmission will be encrypted and control will be centralized. The new channels are expected to show no sex, violence or news.
- Less tight control of provincial channels enables more editorial freedom (see Chapter 3.4.).
Cultural, Administrative, Geographic and Economic factors (CAGE) define the compatibility of products in a new market. This report shows that economic factors are less relevant and geographic factors non-existent in the (increasingly digital) media industry. The institutional (administrative) environment has been described at length and the impact of culture for the export and import of media shall be discussed here.
China is careful to protect and develop its creative industry. In fact, the Government prefers to use the term ‘cultural’ products over creative products to stress the point of a nation’s collective identity, which is much more vital for a society than physical goods. However, by 1998 China had “thousands of televisions stations (that) convey American style talk shows and western soaps to poor slums”. This resembles the situation in most developing countries, where after de-regulation the American media giants now dominate the markets.
 Lull, 1991: p.220
 24/7 streaming ‘full’ TV channels
 Zhao, 2010 and Kops and Ollig, 2007: p.320
 Content here is defined as any audiovisual programming
 Some of which not publicly available
 Disclaimer: Some of the interviewees are the author’s clients; some asked not to be ‘quoted’
 deBeer and Merril, 2004, p.343
 Wikipedia, 2010
 Wikipedia, 2010, deBeer and Merril, 2004: p.343
 Watson, 1985, p.322
 ibid, p.293
 “Be filial to your parents”, “Be respectful to your elders”, “Live in harmony with your neighbours” (ibid)
 Watson, 1985, p.325
 Ou-fan and Nathan 1985
 Ou-fan and Nathan, 1985, p.362
 White, 2005: p.133
 At that time television was not introduced in China yet (Lull, 1991: p.18)
 Lull, 1991: p.18
 Wong, 1989: p.31
 Stalin saw the press as a ‘powerful weapon’ Wong, 1989: p.192 and also White, 2005: p.136
 Hong, 1998: p.44
 Junhao, 2007: p.28
 ibid p.27
 Ibid p.26
 Keane, 2007: p.191
 deBeer and Merril, 2004, p.361
 White, 1991: p.140
 “Not a single country in the world, no matter what its political system, has ever modernized with a closed-door policy” Deng Xiaoping 1982, quoted in Pye, 1985, p.4
 White, 1991: p.140
 Lull, 1991: p.149-151
 Many major international advertising agencies were entering China in the 1980s (ibid)
 Junhao, 2007: p.29-36 and also Chu, 2010
 Hong, 1998: p.3
 ibid, p.7
 ibid, p.102
 Today almost 9,0000 magazines in 84 languages, (deBeer and Merril, 2004: p.360)
 “By the end of the 1970s a [TV] set still cost more than a year’s wages” (White, 1991:p.140)
 Lull, 1991: p.22
 Hong, 1998: p.93
 Mostly to satisfy domestic demand
 White, 1991: p.142
 Hong, 1998: p.85
 White, 1991: p.137
 Wikipedia, 2010
 Lull, 1991: p.188
 However, the official Chinese interpretation of this footage was completely different: The Party used the image to show that the Army exercised restraint (ibid). It should not go unnoticed that some other Western sources maintain that the tank man was never shown inside China (White, 1991: p.145) but this report gives more emphasis to eye-witness accounts. There is no question that these images are now banned and that they serve as figurehead for current Internet censorship debates.
 White, 1991: p.149
 Wong, 1989: p.271
 Lull, 1991: p.191
 Lull, 1991: p.191
 White, 1991: 146
 Chinoy, 1999: p.304
 McPhail, 2006: p.147
 Xin, 2005: p.2
 Specifically: China has the largest viewership but has not caught up with more developed countries in terms of advertising or subscription revenues generated.
 Khanna et al, 2005: p.68
 Kramer, 2006: p.10
 Hong, 1998: p.62
 Keane, 2007: p.191
 Couto, 2010: p.408
 IDATE, 2010: p.9
 Cheng, 2008
 Curran and Park, 2000: p.22
 White, 19991: p.141
 deBeer and Merril, 2004: p.373
 Xin, 2005: p.31
 U.S. China Business Council, 2007
 Xin, 2005: p.35
 E.g. by a 366 million U$ plan until 2012 (Wang, 2009: p.1)
 Khanna et. al, 2005: p.66-67, p.73
 Khanna and Palepu, 1997: p.41-44
 Kops and Ollig, 2007: p.11
 Currently equivalent to 730,000 U$
 Kops and Ollig, 2007: p.246
 Kender, Redl, and Simons, 2007: p.60
 Chan et al, 2005
 Zhenzhi, 1997: p.46
 Reed Smith, 2009
 Chang, 2008: p.267
 Esarey, 2006: p.1 and Kops and Ollig, 2007: p.320 and Bohm, 2010
 Zhu, 2008: p. 123
 White, 1991: p.157/161 and The Economist, 2003
 Herman and McChesney, 1997, p.74
 I.e. personal relationships
 Heberer, 2008: p.275, 279
 Zhu, 2008: p.103
 Kender, Redl, and Simons, 2007: p.60
 Zhu, 2008: p. 123
 Sharping, 2007: p.259
 Faber and Xiomei, 2007: p.248
 Ye, 2010
 Nicholson, 2009: p.8
 Kender, Redl, and Simons, 2007: p.59
 ibid p.60
 Couto, 2010: p.407
 McMillin, 2009, p.98
 Bohm, 2010
 Hong, 1998: p.22
 French channels must broadcast at least 40 percent made-in-France and 20 percent European content.
 Chinoy, 1999: p.432
 Zhao, 2010
 Zhu, 2008: p. 123
 but excluded the broadcasting market
 Zhu, 2008: p. 123
 Ghemawat in Johnson et. al 2009: p.219
 Chang, 2008: 264-5
 Chang, 2008: 267
 McPhail, 2006: p.10; similarly Hong Kong: Curran and Park, 2000: p.31