by Hu Zhengrong, Ph.D Bing Zhang, MA
In the past few years, radio and television industry grew rapidly in China. The State Council of China issued No.82 Document in November 1999 by the Ministry of Information Industry (MII) and State Administration of Radio, Film and Television (SARFT) titled the Suggestions about Strengthening the Management and Construction of Radio, Television and Cable TV network. Since then, the radio and television in China has so far experienced the adjustment of industrial structure, and reorganized into media groups. The industry is going to step into the trans-media and trans-regional integration. This article will give a brief analysis about the current situation and problems of radio and television industry’s development, from the perspective of media environment it lies in.
The Context of Chinese Broadcasting Industry Development
The changes brought by globalization
Nov. 10, 2001 is a date with a sense of milestone. With the decisive gavel announcing China’s entry into WTO, China took a step forward into the economic globalization. Transparency, equality and market access, the three basic principles of WTO, became the fundamental “game rules” for all the member states of WTO. Therefore after China became one part of WTO, its radio and television industry must carry out extensive reform, ranging from macro-administrative model to micro-operating mechanism. There are two major aspects for the reform as follows:
1. The transparency of the managing rules of radio and television industry will be improved considerably.
WTO requires all the member states’ relevant authorities improve the transparency of the concerning sectors. All the laws, rules and administrative orders in the fields that the member states have promised to open must be ensured to make public. Moreover, the government must take appropriate measures to prevent the conducts that restrict competition and guarantee reasonable, objective and impartial administration, thus insuring the fair competition.
The existing policies of radio and television industry in China are largely made or formed during the transformation from planned economy to market economy. These policies do not fit the “game rules” of WTO principles quite well, so they must lead to the disconnection between domestic policies and international rules. Therefore, without enough transparency, not only the values and functions of those policies, but also the openness, fairness and impartiality in the process of the allocation of social and cultural resources by the government are undermined. Although China keeps promoting the reforms of the administrative system of radio and television industry in recent years, these measures did not solve some fundamental problems about the system, such as separating governmental functions from enterprise management, separating the institutions from the administrations, and transforming the government’s functions. Therefore, the top priority at present is to improve the rules of domestic radio and television system, thus make it match up with the WTO rules.
2. The opportunities for the access to media market of radio and television in China will increase a lot.
Given the nature of radio and television industry, which will influence the stability of a regime and social and political framework of a nation while providing information and entertainment, media market can not be as a free market as that of the physical products. China compromised and agreed with the two following clauses during the negotiation for entry into WTO: first, “foreigners, including those content providers who have been restricted by Chinese government, can invest in domestic Internet companies and set up joint ventures”; second, “China will allow the import of 20 overseas movies every year, as well as allowing foreign movie and music companies to share the profits.” Besides, the documents concerned keep iterating that, foreign political news media are not allowed to enter China’s market. Foreign capital is not allowed to invest in state-owned news press, radio and television, even state-owned websites.
However, it does not mean that the entrance into WTO has little impact on the radio and television industry. In a way, the chances of market access for the foreign media have increased correspondingly. Firstly, it reflected in the import of programs, for the time being foreign programs can only enter into the circulation field, that is to say television stations can buy foreign programs based on their needs. Secondly, it reflected in the opening-up of the film service field. This kind of opening-up, which allows the cooperation of the state-owned film studios with foreign partners, can solve two big problems, which restrict the healthy growth of the Chinese film and television industry. They are insufficient capital and backwardness of technology. At present, one of the most active players in Chinese film and television industry is the Columbia Film Studio of America. Lots of films such as Heroes directed by Yimo Zhang, Heroes between Sky and Earth directed by Ping He, and The Big Shot’s Funeral directed by Xiaogang Feng were all produced by this company in collaboration with China’s state-owned film studios.
Changes brought in by market economy
Under the traditional planned economy, the radio and television media in China has long been under the protection of the state policies. The allocation of the media resources has heavily relied on the administrative measures; therefore, they have little awareness of competition and lack the experience in business management. With the transition of national economy, great changes have taken place in Chinese radio and television industry.
1.Fiercer competition in a diversified market
Firstly, with the weakening of administrative power, the allocation of media resources gradually obeys the will of market. Let’s take television for example, at present, there are altogether 43 television satellite channels, the original phenomenon of “CCTV (China Central Television, which is the only nation-wide TV provider)-dominant” has been broken down by the emergence of Satellite Age. Secondly, as far as the audiences are concerned, with the development of market, they will surely demand media’s higher professional skills, ability and speed to produce new products. The forming of a diversified market will definitely lead to the enhancement of competition and the specification of media.
2. More market-oriented
In China the media have been state-owned for quite a long time. Therefore, the relationship between the owner and the management is not quite clear. The needs and changes of market were neglected. The industry lacks the awareness of cost, that is to say high input, high waste, low quality and low output. In market economy, media are becoming more market-oriented; let market be the main factor in the allocation of media resources.
Four Options for Chinese Broadcasting Media under Development
Then what can we do about the industry under the impact of globalization and commercialization? There could be four options, i.e. institutionalization of administration, consolidation of broadcasting media, segmentation of media market and the commercialization of media management and operation.
Alternative 1: Institutionalization of administration
1. Changes in government regulation
In the past, almost all broadcasting stations in Europe are state-owned or public-owned. After the enaction of new radio and television regulations in 1980s, this field gradually opened up, some state-owned stations even privatized. Then came the enaction of re-regulation, the radio and television industry boomed. Things in America are the same. After mid-1990s, American government has lessened its control and regulation over radio and television, then came what is called de-regulation period. After China’s entry into WTO, what matters the media industry most is the amendment and adjustment of policies and the vitalities it created. At present, the control over the media’s regulation lessened in China. But what differed from the west is that media still have to be owned by the government and the privatization is totally impossible.
(1). Change of administrative structure of industry and departments
Undoubtedly, globalisation and commercialisation can be called a revolution to Chinese radio and television industry, which has been developed in a very scattered way and is lack of the consciousness of market. Therefore, it carries the same importance to establish and improve the external government administrative structure while constructing the internal structure of radio and television organizations.
In China, a basic model of traditional government administrative structure towards radio and television industry is characterised with strict control from the central government, which plays a multi-functional role as the owner, operator, and administrator of the radio and television industry. This administrative structure which is lack of a clear differentiation between government and business activities is the main reason why Chinese radio and television industry is working with low efficiency and being lack of the motivation, vigour and pressure to develop and discipline itself. To change the current status, it is necessary to separate governmental administration from enterprise management with adjusting, reducing and changing the scope of function of the central governance towards radio and television industry. Currently, there are The Central Department of Propaganda of Chinese Communist Party, SARFT (mainly in charge of radio, film and television), The General Bureau of Press and Publication (mainly in charge of publishing houses of books, audio & video, electronic publishing, newspaper and periodicals), in addition, there is another organization as Ministry of Information Industry (in charge of the three main services—telecommunication, cable television network and the Internet) as government sectors in charge of media industry on the national level. Vertically, different medium has to report to different government sectors, they all independent from each other, therefore, they don’t listen to each other. It is thus very difficult to establish a cross-region and cross-media group. Taking all the factors mentioned above into consideration, this essay argues that it is high time to break this vertical administrative structure, adjust government function, and transfer from government control to market-driven.
At present, there is another topical problem involved in this transformation of the administrative structure of radio and television industry, which is the so-called “merging the three nets”, that is telecommunication, cable television network and computer net. By saying, “merging the three nets”, it indicates a merge in practical application at higher level to enable all the three nets to provide comprehensive multi-media services including voice, data, and graph through a series of technological regeneration. Technically speaking, this merging will achieve a combination of advantages of all these three different nets and make them compensate to each other, therefore to eliminate the differences among them on the basic level. There suppose to be a great amount of new services and applications emerge with the new combination of the three nets. However, “merging of the three nets” will consequently bring the problem of “reallocation of benefit”. Therefore, only if the administrative structure is successfully readjusted, could the “merging of the three nets” be realized.
(2). Establishment of regulation system
The Telecommunication Act of 1996 in the U. S. absolved the prohibition of merging of the three communication nets. This Act first brought telecommunication and broadcasting industries under the same administrative sector, and also stipulated that apart from telecommunication to get into the broadcasting platform, all the other areas could get into and compete with each other freely. The Telecommunication Act of 1996 has been the basic regulation for the development of American broadcasting and telecommunication industry. In addition, the contemporary U.S. broadcasting industry should also obey the American constitution. All these are the underlying regulations to protect the basic rights and benefits of the American radio and television industry. In China, there are about 90 different laws and regulations are related to broadcasting industry. Industry administrations are mainly carried according to The Administrative Regulation of Broadcasting, The Administrative Regulation of Receiving Appliances of Satellite Broadcasting, The Administrative Regulation of Audio and Video Products, etc. enacted by the State Council. The Administrative Regulation of Broadcasting enacted in 1992 is the top regulation in this industry. However, all these regulations are formulated from the perspective and benefit of the government administration sector at that time; they are no longer suitable to the present development of the radio and television industry, therefore not compatible to the related regulations from WTO. The lack of a comprehensive and complete regulation system will lead to unregulated competition in the radio and television market. And the lack of legal protection will also deter prospective overseas investors of media market in China. Therefore, a Broadcasting Law and a set of comprehensive legal system with the Broadcasting Law as centre are urgently required.
2. Building and improving media managing and operating mechanisms
Under the traditional planned economy, the allocation of the media resources is always subjected to the government administrative measures instead of the market forces. This has led to the results that radio and television industry in China only put emphasis on the media’s political control function rather than its business objectives; on the production of programs rather than returns and gains on capital; on the short-term profitability instead of long term cost effectiveness. Such malformed operation model brought serious difficulties to the business management of radio and television industry. The key task for the reform of the industry in China is to set up an effective market-oriented media managing and operating mechanism. Under the same economic system, different management will produce entirely different outcomes. Take the broadcasting industry for example, the China National Radio (CNR) earned the advertising incomes as much as 120 million RMB Yuan in 2001, while the Beijing Radio Station (BRS, a local radio station) got 180 million RMB Yuan during the same period. The advertising income of CNR should be higher than that of the BRS for its programs have much wider coverage, but the result is just on the contrary. The media internal managing and operating mechanism is the root cause that brings about the income disparity.
Alternative 2: Consolidation of broadcasting media
The Document No. 82 on the Suggestions about Strengthening the Management and Construction of Radio, Television and Cable TV network, released by Chinese government in 1999, stepped up the consolidating drive of the media industrial structure. Its core contents include the separation of network (network provider) and station (content provider); the merge of television and radio, and the cable and the territorial TV; no more approval for setting up radio and television stations at the county level; setup of the media group company consisting of radio and television stations at provincial level, etc.
1. The Restructuring of current industrial structure
Highly dependence on government is one of the major characteristics of radio and television industry in China. Generally speaking, radio and television stations set up at the central-provincial-municipal-county level have played supporting role to the political regime at all levels. Media, a key propaganda tool for the government, have become a significant component of the state political framework. Therefore, each level of Party committee and local government set up their own radio and television stations, in which their propaganda ideas are strictly followed. Such system, in which politics and business affairs are not clearly divided, confines the development of media industry and brings about low work efficiency and inadequate competition environment. On one hand, local stations spend more money than foreign media in producing programs because of their smaller scales; on the other hand, there is little cooperation amount these fragmented local radio and television stations.
The on-going structural reform aims to change the unreasonable framework, reduce redundant resource allocation within media and encourage specification and segmentation of channels and demassification to lay the foundation for a cooperative relationship within the industry.
2. Problems in the consolidating process
Since June1999, when Wuxi Broadcasting Group was founded, more and more media groups have emerged in Hunan, Shanghai, Beijing, Shandong and other regions in China. During the process, several problems also come up.
The Document No. 82 required the construction and implementation of a so-called “three-three system”, which put film, radio and television into one group; cable, wireless and education stations into coalition; unite provincial, regional and municipal level. The new structure is a big step forward in the process of media consolidating since it promoted reasonable allocation and flows of resources, and reduced the malicious competition in media market. But it just touches the superficial problems and does not lead media industry into an efficient market system.
First of all, the “three-three system” does not eliminate the regional administrative barriers that hold back the development of media industry. Though the “three-three system” changed the “four-level” framework of operating stations and pushed forward the “two-level” mode, which only allows state and provinces build radio and television stations, but on the whole, media market is still quite fragmented. Regional monopoly among provinces became more serious. The existence of such regional barriers cannot completely solve the problems of malicious competition and waste of resources.
Secondly, “three-three system” can easily lead to the monopoly of the resources and does not help reduce risks. The competition became coordination within an organization, which makes the market lack competition. For instance, the advertising company under the Hunan radio and television Station has the exclusive rights for advertising sales for seven channels. The company has seven departments, each in charge of one channel. So the seven departments become rivals, thus the malicious competition comes into being within the company.
3.Process of media consolidation
At a national conference for propaganda ministers in 2002, some ideas about cross-media integration, cross-regional consolidation were put forward. From then on, regulating media resources was put on agenda.
At present, cross-regional and cross-media consolidation is still an imagination, because the domestic media system is not mature. For example, powerful media institutions are not able to buy weak ones, which are in the other province, due to the regional administrative barriers. As a result, capital links among different regions could not be realized and the cross-media coalition is the same.
It is an inevitable trend to integrate media resources among different regions and various media forms. The example of The Telecommunication Act of 1996 of the USA that has been mentioned before greatly released the limits of media industrial integration, which has brought about the unprecedented coalition drive in US’s media industry. Therefore, lots of media giants have been emerged, such as AOL Time Warner, News Crop, Viacom. The acceleration of the reorganizing process of the media resources will rely on the formation of the government administrative system. A cross-regional and cross-media coalition could not be fulfilled without regulatory support.
Alternative 3: Developing radio and television segmented market on the basis of an improved industry chain
1. Status quo of the radio and television industry chain in China
A complete industry chain should consist of research/development and production (production sector), sales and consumption (distribution sector), and the reproductive expansion of the industry (production sector). For radio and television, the development and investment in the programs, the production of the program contents, the transmission and broadcasting are all critical links of the industry chain. Applying this criterion to check the industry chain of radio and television, we can identify problems in the industry.
Firstly, there are problems related to the insufficient investment and cash shortage in the preparation stage of program production. The root cause of the problem is the small workshop operation in radio and television industry. Firstly, the producers do not invest in the preparation stage and perform any market studies in order to save cost. Therefore, the program production lacks feasibility study. Secondly, the programs lack segmented audience positioning and there is no understanding of the audience psychology and demand. Thirdly, market positioning is inappropriate; the industry is still at the stage of the production determining the market. The industry still determines sales according to the production. The number of programs sold on market and advertising effectiveness is just considered after production.
Secondly, the out-of-date program production operating system. The television stations in China still have an operating system of the “combination both production and distribution”, i.e. the production and distribution are controlled by the centralized administrative measures. The production and distribution by the same station made radio and television industry lack cost consciousness, the competition mechanism of the human resources, the division of labor, innovation and leads to the poor management. In contrast to the combination both production and distribution is the separated production and distribution, i.e. the television station will be deprived of the most production function and mainly focus on the planning, evaluation, censorship, purchase and broadcasting. The relationship between the television station and producer is the pure buy-and-sell relation. This is a high quality and high efficiency program production model. The concept of the separated production and distribution was introduced in China about four to five years ago, but not much well operated in media due to the interest reallocation and the mass reassignment of human resources.
Thirdly, there is serious disconnection between the production sector and distribution sector. Repeated production of programs has been a serious problem for a long time. Take entertainment programs as sample, as soon as the Pleasant Camp and Rose Appointment became popular programs, more than a dozen of the television stations nationwide produced imitated programs with different names and same contents and low quality. The TV series market also wasted a great deal of money. In 1997 alone, the money was poured on TV series production reached hundred of million Yuan, but many of them could not be sold due to their poor quality. In 1999, more than a dozen of television channels in China broadcasted Tian long Ba Bu (a very popular TV series) at the same time.
The shortage and repeated contents of programs will result in the waste of resources. According to the recent statistics, the total number of television stations reached 3000, satellite channels reached 43. A DBS (direct broadcasting satellite) is expected to be launched in 2003. The first phase project will contain 80 channels, which will host 30 general channels and 40 to 50 specified or segmented channels. In the face of so many resources, what programs do we have to fill up these channels? The 43 satellite channels are all general stations, which will lead to repeated programs broadcasted on different channels. The basic trend of the modern media is fragmentation and demassifacation. But right now in China the segmented channels and programs are highly identical. There are several hundreds channels named as Life or so nationwide, but there are not any true meaning life channels. These channels carry a Life channel name, but only show about 20 minutes programs on daily life and then show TV series for all other times. It is not rare to see fashion shows on education channels and stock market updates on art channels.
On one hand, there is a fast expansion in market demand; on the other hand, there is serious waste of resources caused by a great number of repeated programs and channels. This imbalance between supply and demand is the most serious problem facing radio and television industry.
2. WTO’s impact on the industry chain of radio and television
After China’s entry into the WTO, the television stations in China will not have a high degree of openness in near future. The opened areas are down-stream products such as science programs, daily life programs, TV series and movie. But the openness of this area will lead to the most pressures on the China’s radio and television industry. As early as 1995, MTV, a subsidiary of Viacom got into the Chinese media market by an exchange program with China. Nowadays MTV has 4 programs broadcasted in China in cooperation with some local television stations. The weekly broadcasting time reached 16 hours. The programs were broadcasted on more than 38 television stations and reached 40 million audiences. Nickelodeon, a subsidiary of Viacom began to show 30 minutes a day on more than 100 channels in China. ESPN operated by ESPN-Star Sports, which purchased the broadcasting rights for British Super Cup, Spanish Class A Soccer Games, Italian Class A Soccer Games, NBA, Wimbledon, US Open, also got onto the Chinese channel by providing free programs with TV commercials
The competition for content market, especially for content material resources is the direct impact brought in by China’s entry into the WTO. The competition for content material resources means the production by utilizing domestic contents with foreign investment. A typical sample is the Crouching Tiger and Hidden Dragon, which won the Oscar best foreign movie award, directed by Taiwanese director An Li, photographed in China. For the buyers of the content materials, they can buy at a lower price and sell finished products at a high price and make good profits. For the seller of the content materials, they have to sell at low price and buy finished product at high price. The sellers of content material resources will be driven to earn a living on selling those resources in this vicious cycle.
Foreign media giants will usually carry out a localization strategy in competition for content market. Rupert Murdock is a typical sample of localizing operation. He yielded his position of CEO position of Star TV, which he had held for many years, to a Chinese and achieved the strategic objective of localization of Hong Kong-based satellite television. For those foreign media giants trying to get into Chinese market, localization strategies can help them avoid or eliminate the restrictive and discriminative market barriers to foreign investments by cooperating with local partners and localizing operation. The foreign media’s localization strategies will no doubt constitute challenges to those domestic media that want to compete with foreign media merely based on local advantages.
3. Shaping fragmented media market on the basis of the improved industry chain of radio and television.
The improvement of the industry chain of radio and television will result in the changes in the industry structure. Firstly, a diversified industry will take shape. For radio and television industry, a diversified industry will include program sales, VOD, entertainment, theme park, etc. Secondly, the profit making chances of the radio and television industry will increase as the sophistication of the audience demand increases. A fragmented media market of radio and television industry will take shape, i.e. radio and television station will accurately target audiences, give up general programs, segment the market and produce more special interest programs.
Alternative 4:Commercialization of media management and operation
Radio and television industry in China could be summarized in one sentence: one system, two operations. The “one system” indicates the highly centralized state ownership of radio and television industry; and the “two operations” indicate the two characteristics of the industry of being a government organisation but managed as an enterprise. At the moment, the underlying problem of the operation of Chinese radio and television organizations is how to clear off the drawbacks of planned economy and to adopt commercial mechanism. In order to realize this transformation, there are two problems need to be solved:
1.Market access and the formation of competition
Market access is one of the three basic principles of WTO. It is also an interactive process. On the one hand, to a certain extend, overseas capital could enter into domestic media market, on the other hand, domestic capital could also look for the investment opportunities abroad. Not long ago, The Central Department of Propaganda of Chinese Communist Party and SARFT stipulated in the No.17 Document (the so-called 24 Items) that it is allowed for the distributional industry (like the New China Bookstore) to attract all kinds of external capital including overseas capital. Even tough the biggest possible quota could only take 49% of the whole capital; it has been the most generous promise the Chinese government made so far to the entry of overseas capital into media market. Under the trend of globalisation, purely depending on self-accumulation, it is very difficult to improve the scale and speed of the industry development. Market access is in favour of the formation of the competition; it will also bring benefit to the adoption of more advanced technology, management experience and marketing strategy. Only in this kind of media environment, could Chinese radio and television industry adopt the commercial mechanism in the real sense.
2.Adopting the modern enterprise system into broadcasting industry
Modern enterprise system includes: modern enterprise ownership system, modern enterprise organisation system and modern enterprise management system.
Firstly, let’s look at the ownership system. To Chinese radio and television industry, it is undoubtedly that the original ownership belongs to the State, and the radio and television is independent organization. The problem now is that if the ownership belongs to the state, who should be entitled to the rights? If there is no clear definition, very possibly, there will be a massy situation with everybody fighting for benefits but nobody claim for the responsibility when in trouble. To give more independence to radio and television industry but keep the leading position of the government in systematically, it is the high time to clarify the relationship between the broadcasting stations and the governors.
Secondly, radio and television industry could utilize the organization structure established by contemporary enterprise organizations, building the function units that separate internal decision- making, executing, and supervising according to the requirements of modern enterprises system.
Thirdly, establishing the modern enterprise management system. Currently, radio and television industry in China is most lack of the consciousness of market and audience. The operation ethos has been broadcasters-oriented and propaganda-driven for a long time. Audience and communication efficiency has not been emphasised. It will block the commercialisation development of radio and television industry. Therefore, radio and television industry should adopt modern enterprise management system, and transfer to be audience-driven. Further audience and market research need to be carried with strengthening of the senses of competition, strategy, marketing and cost. What is equally important is to apply all these abstract management concept and ideology into practice, to transfer all the theories into practical management system.
Chances and challenges co-exist right now, that is the best explanation for the status quo of Chinese broadcasting industry in the context of globalisation and commercialisation. Chances come from the China’s entry into the WTO, which bring Chinese broadcasting industry into the global market and more development space; Challenges means that Chinese broadcasting industry is still not capable to compete with those global media giants because it still needs more transforms. Among those transitions, the most important one is to have the regulation system, thus the management system changed in the context of globalisation and commercialization.
The Broadcasting Yearbook of China, 1999, 2000, 2001; The Broadcasting Publishing House of China; Beijing, China
China Radio and TV Academic Journal, 2001 & 2002, Association of China Radio and Television; Beijing, China
Modern Communication—Academic Journal of Beijing Broadcasting Institute, 1999, 2001, 2002. Beijing Broadcasting Institute; Beijing, China
Zhengrong HU, PhD
The National Center For Radio and Television Studies
(National) Beijing Broadcasting Institute
Bing Zhang, MA
(National) Beijing Broadcasting Institute