The pan-Asian market has recently been the focus of new initiatives from film agencies and market organizers alike. This article is the third in a series providing an overview of the burgeoning market.

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hong kong: At the beginning of star tv’s operations in 1991, the Hong Kong-based satellite broadcaster projected that it may reach as many as 10 million viewers in China by the end of 1995. Recently released research now indicates that star reaches over 40 million households on the mainland alone.

The staggering success of satellite tv in China demonstrates a huge appetite for tv in the world’s largest and fastest growing economy. China now has an estimated 230 million television sets and 900 million viewers.

These immense numbers underline the importance of the China market to foreign broadcasters and program suppliers. In addition to China, suppliers are now looking to ‘the other China’ – Taiwan – as offering enormous potential opportunities owing to high levels of disposable income and a developed – although chaotic and until recently, unregulated – cable tv industry.

In this article we will examine both of these markets as well as the Hong Kong industry. For foreign program suppliers intent on gaining a foothold in the region, Hong Kong presents the most well-developed tv market in Asia and has become the hub of broadcasting in the region. However, the familiarity of the Hong Kong market stands in sharp contrast to the less developed and more complex markets of the two Chinas.

Hong Kong

In the race to capitalize on the opportunities in Taiwan and China, Hong Kong-based tvb is perhaps the best positioned. The broadcaster has over 72,000 hours of Cantonese and Mandarin programming in its library in addition to significant production capabilities and distribution arrangements throughout the region.

The broadcaster is majority-owned by Sir Run Run Shaw, and was the target of a takeover attempt by Rupert Murdoch only weeks before NewsCorp acquired star. Time Warner is now rumored to be on the verge of acquiring a minority interest in the company.

tvb also has significant international holdings, including a stake in both Vancouver’s Chinese-language Cathay International Television and Toronto’s Chinavision Canada.

In Hong Kong, both tvb and its only competition in terrestrial broadcasting, atv, operate two commercial stations each – one in English and one in Cantonese.

The English stations have failed to achieve significant viewership levels and are heavy cash drains on their owners. In fact, both atv and tvb have recently requested that the Broadcasting Authority in Hong Kong reduce the requirement that no less than 80% of the programming on the stations be in English. The Broadcasting Authority is considering this request along with a proposal that atv and tvb be allowed jointly to operate an English-language service.

The two terrestrial broadcasters argue that the requirement to offer an English-language service is particularly onerous since the launch of Wharf Cable in Hong Kong last October. Wharf, which has the exclusive right to supply the territory with subscription tv for three years, offers eight channels including sports, news and entertainment. Another three channels are expected to come on line in May. Wharf anticipates that up to 500,000 households will be able to connect to its us$640 million system by late May.

Taiwan

While Hong Kong residents are only now being introduced to cable tv, approximately 1.8 million households in Taiwan are already connected to cable systems. However, these systems are a far cry from the highly regulated and legitimate systems that Canadians are used to. Most of Taiwan’s cable systems have been fly-by-night operations and flagrant abusers of intellectual property rights, sending virtually any programming they can get their hands on down their cables to their customers, with no regard to ownership.

These ‘illegal’ cable systems have been termed ‘fourth channels’ owing to the fact that there are only three licensed terrestrial channels in Taiwan, each of which is controlled by the governing party: cts is under the control of the ministries of defense and education, while ttv is run by the provincial government and ctv is led directly by the ruling Kuomintang party. The government is also hoping to launch a public tv channel in July of this year.

After a 23-year freeze on new terrestrial licences, Taiwan’s media regulatory body, the Government Information Office, recently announced plans to license a fourth terrestrial network sometime this year. This is part of an overall trend in Taiwan to liberalize all facets of the media, and comes on the heels of the passage of the territory’s first-ever cable tv law.

In July, under duress from the u.s. government which was threatening Taiwan with trade sanctions if the government did not clean up its cable tv industry, Taiwan passed its first cable tv law. The new law promises to clean up the industry significantly and eliminate the rampant piracy that has drained much revenue from intellectual property rights owners worldwide.

Six hundred and eighteen temporary licences have now been granted to cable operators, and it is expected that the government will award up to 250 licences by early 1995. This will mean that as many as four or five systems will compete head to head in each of Taiwan’s 57 cable ‘districts.’

Foreign program suppliers are hopeful that the passage of the cable law will allow Taiwanese cable to become a much more effective vehicle to reach affluent Taiwanese consumers, thereby generating increasing revenues. Foreign services such as hbo, espn and cnn have all hired local sales agents to market their services to Taiwan’s cable operators.

However, distribution contracts are currently being signed at deep discounts, with operators being charged by suppliers for only about 20% of the total number of subscribers. As licences are awarded and the cable industry adjusts to a new, ‘legal’ way of life, these contracts are bound to become much more lucrative, and Taiwan will become an important source of revenue for program suppliers worldwide.

China

While the Taiwan market is a source of significant potential new revenue now that the cable law has passed, its potential is often eclipsed by the lure of the Chinese market with its 1.2 billion people, growing middle class and increasing purchasing power. The demand for programming in China is immense and ever-growing. Advertising revenues from tv are also increasing dramatically and are expected to grow by 40% this year.

Terrestrial tv on the mainland is composed of state and provincial or city broadcasters. The national ‘state’ broadcaster is China Central Television, the ‘official’ voice of the government. It is controlled by the Ministry of Radio and Television and operates four channels. cctv is primarily a special-interest broadcaster and its ratings remain low, with the exception of its news broadcasts which are immensely popular.

More popular shows

The city or provincial broadcasters air more popular programming and therefore achieve higher ratings. However, there are tremendous disparities between the television markets in the various cities and provinces.

Some stations are very sophisticated, while others remain in the dark ages. Some markets have a number of viewing choices, including cable tv, while others can receive only cctv signals.

In addition, the regulations imposed on some stations differ from those imposed on others. For instance, Shanghai, Beijing, and the provinces of Guangdong, Fujian and Sichuan have the right to import foreign programming without the consent of Beijing, while all other television markets must seek official approval.

Official limit

Officially, the limit on foreign programming in China is 10%. However, this quota is often overlooked. In Shanghai, for instance, foreign programming now accounts for about 30% of a station’s schedule.

While foreign programming is currently being sold into China, stations pay only minimal licence fees for the programs they do purchase. This is largely because most have yet to develop into fully commercial operations and are not equipped, in many instances, to sell advertising time. Therefore, barter is the preferred means of distributing programming into China for foreign program suppliers.

However, the Chinese market is not an easy one for foreign suppliers to crack, owing to the significant entry barriers resulting from the need to deal with each one of the stations separately – networks do not yet exist – and the requirement to have established relationships with stations before any programs can be sold.

Risky

In addition, it is very risky to deal directly with the Chinese stations. Rarely will they offer an ironclad guarantee that a program will air at its specified time. This often makes it virtually impossible to sign on advertisers.

Program brokers are therefore the most effective way of conquering the Chinese market. Brokers, who have established contacts throughout the mainland, are allocated time slots and then fill these with the programs they represent and sell advertising themselves. Typically, brokers split the revenues generated from the sale of advertising time with the program suppliers and with the Chinese stations.

Cable

In addition to having the rights to time slots on the terrestrial stations, program brokers often have similar relationships with cable systems. China has a significant cable industry that is growing rapidly. In the late ’80s, the first cable outlet opened in Shashi in the Hubie province.

Today, there are an estimated 661 cable stations in China serving approximately 20 million viewers. Two of the larger systems are Beijing Cable and Shanghai Cable, which expect to have 500,000 and 300,000 homes passed respectively by the middle of this year. Shanghai Cable offers 12 channels to its viewers and hopes to reach two million households in the next three years. Beijing Cable offers its service to viewers for just 70 cents a month and is currently delivering espn to hotels, with plans to offer it to local homes in the near future.

However, there is a growing trend in China towards cable systems that resemble Taiwan’s illegal fourth channels. Thousands of illegal cable operators are sprouting up throughout the country, largely in ‘company towns’ where a factory will install a dish and wire up its workers’ homes, pumping satellite tv signals or pirated films over the wires.

Ban on dishes

Nonetheless, the Chinese government prefers cable tv distribution of programming to satellite delivery and has recently revived a ban on the private ownership of satellite dishes in an effort to crack down on their proliferation. While this ban has been in place for three years now, the government has largely ignored it, preferring instead to allow the proliferation of China-made dishes and reap the significant financial rewards from their sale.

Suspicion

The impetus for the move to enforce the ban was twofold. First, it was a reaction against the purchase of star by Murdoch. Murdoch, a non-Asian entrepreneur, was viewed with suspicion by Beijing from the day he acquired star. Shortly after the deal was done, he confirmed Beijing’s worst fears by announcing in public that satellite tv would break down the walls of authoritarian regimes.

Second, the Chinese government curbed the ownership of satellite dishes in order to maximize potential revenue from television viewing in general. If too many Chinese had satellite dishes, not enough revenue would flow to cable systems and in turn to the government coffers. Satellite television programming per se is not banned. It simply must be aired via cable systems where the government can get a piece of the pie.

Of course, the Chinese government has another reason for preferring cable distribution to the satellite alternative: Beijing can always pull the plug on programming that it deems to be ‘undesirable’ when it is delivered via cable, but is virtually helpless when that programming rains down on the mainland from a satellite hovering some 22,000 miles overhead.

And now that 40 million Chinese homes are able to receive star, Beijing has cause for concern that Murdoch’s service may bring just a little too much western influence into homes throughout the mainland.