Caixin
Sep 20, 2012 06:26 PM

Hit TV Show Sings Song of Media Model Success

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(Beijing) – A reality-talent TV songfest popular in more than 40 countries around the world has become an instant hit in China, underpinning enthusiasm for an experimental business model linked to media sector reform.

The Voice of China's debut show in July immediately won high audience ratings in the 42 cities where it appeared. Viewer ratings nearly doubled for the show's second weekly broadcast, and rose another 30 percent soon after.

Especially noteworthy from a business perspective was that the program's joint producers, Zhejiang Satellite Television (ZJST) and Canxing Production, a company linked to global media magnate Rupert Murdoch's Star Media, succeeded while shaping an investment structure never before seen among domestic media players.

As joint-venture partners for The Voice of China, ZJST and Canxing became the first respective TV broadcaster and television production company to share all revenues and risks for a single television program.

The companies have so far declined to spell out the terms of their agreement, although a source said Canxing stands to pocket a healthy percentage of the take. "When viewer ratings exceed a certain level, Canxing can get as much as 70 percent of the profit," the source said.

Other sources said the partners have invested a combined 80 billion yuan top date, and that the show generated some 300 million yuan in revenue in less than three months, mainly from advertising.

ZJST's share of the total investment mainly involved equipment and production facilities for the competitive singing show, through which four celebrity judges pick favorites from among teams of amateur singers performing around the country. Most of Canxing's input has been in the form of capital and human resources, said Lu Wei, the company's public relations director.

The model fits a regulatory directive for the TV sector issued in 2009 by the government. Its goal is to promote financially separate yet cooperative broadcast and television production companies, blending public and private interests.

Until now, TV shows in China have been produced by broadcasters who then put them on air and pocket all profits. The model has deterred "real investment" in the television sector, said Xu Fan, a professor at China Communications University.

TV stations traditionally "produce programs themselves and broadcast them on their own platforms," Xu said. "If the program became popular, (the production team) will receive a bonus from the station."

Stations also buy complete shows from production companies like Canxing, with prices based on estimated ad revenues and potential viewer ratings. The business model leaves production companies in weak bargaining positions whenever negotiating prices.

Stronger Vantage

Industry insiders attribute Canxing's success to its strong capital capacity as a subsidiary of Star China Media, a venture whose chief players are the China Media Capital (CMC) private equity fund and Star TV, an Asian broadcaster run by Murdoch's News Corp.

Star China Media is 53 percent owned by CMC, which was set up in 2009 as the country's first culture-focused PE fund. The Shanghai city government's Shanghai Media Group controls 32.5 percent of the fund. Other major shareholders include state-run China Development Bank and China Merchants China Direct Investments Ltd., which is controlled by state-owned China Merchant Group.

SMG and Star China Media started exploring cooperative business options in August 2010. The former company's president, Li Ruigang, was particularly interested in participating in the central government's media industry reform project, and was exploring ways to set up separate production and broadcasting businesses for TV shows.

The next year, Li invited TV programming veteran Tian Ming to head Star China Media. Within a few months, Tian had built a full production team at Canxing.

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