Tuesday, October 6, 2009

China looks to create own conglomerates

       China plans to spend billions of dollars over the next few years to develop media and entertainment companies that it hopes can compete with global giants like News Corp and Time Warner, and will in the process loosen some of its tight control of these industries.
       Guidelines issued last week by China's State Council envisioned the creation of entertainment, news and culture companies with a market orientation and less government backing - in short,companies resembling Bloomberg, Time Warner and Viacom, analysts said.
       Along the way, Beijing will allow private and foreign companies to invest in everything from music, film and television to theatre, dance and opera productions - though largely through state-owned companies.
       One exception is likely to be news programming, which falls under the control of the Communist Party. China has also been upgrading its state-run news media, with an eye on foreign language publications, wire services and television programs to reach readers and viewers overseas.
       News Corp, Viacom and other Western media giants have for years been frustrated by their inability to produce films and television programmes for Chinese consumers; often, they have operated with Chinese joint venture partners and run into delays or political barriers. Sev-eral American companies said they were studying the new Chinese rules and declined to comment further.
       Among the first companies to benefit from the new government policy will be Shanghai Media Group, one of the country's biggest state-run news and media conglomerates. In August, the government gave the company approval to reorganise its operations and to issue stock to the public.
       SMG, as it is known, has close to $1 billion in revenues and $100 million in profits last year. It also has partnerships with companies like News Corp, Viacom and CNBC, and profitable television units,including a home shopping network,an animation channel, fashion and lifestyle programming, as well as radio,newspaper, magazine and film production units.
       Foreign media companies looking for greater access to China's vast market may be disappointed, analysts say of the new guidelines.
       "This is not an invitation for stakes by international media companies," says Vivek Couto, director of Media Partners Asia, a Hong Kong-based research firm."But this may be an invitation for private equity and foreign capital to do more."
       But other experts warn of regulatory hurdles, because media and entertainment companies report to a variety of agencies, each with their own imperatives.

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