TV advertising continuing to flourish
By Bai Jia (China Daily)
Updated: 2004-06-02 09:24

TV broadcasters will continue to enjoy steady growth in advertising revenues in the next 10 years, as the momentum of the nation's economy is strong and the media industry becomes more open, according to a leading domestic private investment banker.

"After a slow-down from 1997 to 2000, the TV market has picked up again," said Wang Ran, chairman and president of China eCapital Corp, a Beijing-based investment bank focused on technology, media and telecommunications.

According to a report on China's TV industry by China eCapital, the TV advertising market grew by 20 per cent in 2003 over the previous year to US$3.3 billion, while TV subscription revenues reached US$2.2 billion, increasing by 25 per cent year-on-year.

Wang explained that although the growth of China's economy in the 1997 to 2000 period was quite high, the burst of the Internet bubble in 2000 and the following depression of the information technology and telecommunications market traditional big spenders on TV advertising dragged down the growth of TV advertising.

However, with the recovery of the Internet and telecommunications industries last year, their spending on TV advertising resumed.

In the meantime, growing automobile and real estate sectors increased their TV promotions.

A 9.1 per cent growth of the gross domestic product in 2003 has also led to the growth of TV advertising.

Wang said the dramatic increase of car sales and houses was another major reason for a robust recovery in 2003.

The change of consumption habits of Chinese people from daily necessities such as food and clothes to entertainment was another driving force in the TV advertising market, Wang said.

He estimated the TV industry will grow at a similar speed this year.

The TV advertising market is forecast to maintain a growth rate of 22 to 24 per cent this year, while that of TV subscription may achieve higher growth, the highest among the major TV markets in the world.

Wang believed a steadily-growing national economy will create a favourable macro-economic environment. He added that TV advertising spending, suppressed last year by the deadly SARS (severe acute respiratory syndrome) outbreak, will be resumed this year and add more momentum to the growth of the market.

On-going opening-up and reform drives in the media sector, including the separation of production and broadcasting of TV programmes in TV stations and the green light given to State-owned, private and foreign capital in programme production, will bring more opportunities to TV broadcasters and lead to more investment in the TV business, which will bring in more advertising.

Wang pointed out that the overheating of automobile and real estate sectors won't hurt their spending on TV advertising to a large degree, as most of the investment in those projects is not directly funded by central or local governments and the sectors would spend more on advertising to promote their sales in difficult times.

He predicted that with the reform of China's TV industry, three forces, namely nationwide broadcasters such as China Central TV and China Education TV, provincial broadcasters, and private companies such as Beijing-based Enlight Media, will become dominant in the industry in coming years.

With their understanding of Chinese culture and support from government policies, local companies will remain leading forces.

Evolving trends in world media, the challenges of international giants, and competition between local players have forced the Chinese TV sector to reform and be run according to market-economy rules.

With the loosening of regulations on private investment into the media sector, private companies can also gain a large share in the market with market-oriented operations.

Wang believed foreign media companies such as News Corp and Viacom would be troubled by slow progress in China because of regulations as well as the growth of domestic competitors.

"Foreign capital is destined to play a secondary role in China's media industry," Wang said.

However, he said foreign capital could also be very helpful to Chinese TV broadcasters in both for operational expertise and programme resources.

In the near term, foreign media giants still need to rely on syndicating content to local TV channels while trying to obtain approval to set up their own broadcast channels in China.

Currently, 31 overseas TV channels are allowed to broadcast in three-star or above hotels in China. Six channels also got the nod from the Chinese Government to broadcast to audiences in South China's Guangdong Province.

Wang said he believed that, in the long term, foreign broadcasters would also benefit from the expansion of China's TV market and generate more revenue.

Their business could also expand through co-operation with or even investment in local production companies or related areas.

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