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China Gets Tougher on Foreign Media

Times Staff Writer

After presiding over the opening of Hong Kong Disneyland last week, Walt Disney Co. President Robert Iger headed straight to Beijing to meet Liu Yunshan, chief of the Communist Party’s powerful Propaganda Department.

Disney declined to say what the two men discussed, but it’s a good bet that Iger, who will become chief executive Oct. 1, renewed his case for the Disney Channel in China, and that once again he was told to wait. Disney has been waiting since 2003 for a broadcasting license from Beijing so it can air its programs to some of the 340 million homes with cable TV.

Last year, prospects looked good when China moved toward loosening rules on foreign media investments. But in recent months, Liu and other leaders of the Chinese government have clamped down on foreigners’ participation in China’s burgeoning media industry, declaring last month that they wouldn’t allow more foreign television channels and would tighten their grip on the 31 satellite broadcasters in China.

Chinese officials say they want to “safeguard national cultural security.” But some analysts believe that the restrictions are aimed at keeping advertising revenue in the hands of state-controlled and domestic media enterprises. Even as Beijing has moved to limit foreign companies, it has encouraged the development of private Chinese media firms.

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Disney isn’t the only company hindered by the new rules. Viacom Inc.'s Nickelodeon children’s channel has been waiting for two years for a broadcasting license. One of Rupert Murdoch’s News Corp. ventures in China has been shut down. Time Warner Inc., Sony Corp. and others involved in co-production of movies in China now face greater censorship.

These media giants haven’t said much about how the rules will affect their investment plans. For the most part, they’re “sitting tight, not upsetting regulators and being more patient,” said Vivek Couto, an executive director of Media Partners Asia in Hong Kong.

But frustrations are beginning to spill out.

Murdoch, who with his Chinese-born wife, Wendi Deng, has cultivated Beijing over the last decade to become the top Western television company in China, said at a conference Friday in New York that his company had “hit a brick wall” in the Middle Kingdom. In the last year, he said, China has backed away from opening up to foreign news organizations. He called Chinese authorities “quite paranoid about what gets through.”

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Richard Parsons, Time Warner’s chairman, who also spoke at the session organized by former President Clinton, said the Chinese wanted to monitor the traffic and e-mails sent on the Internet. Parsons said that was why he bailed out of a deal to distribute America Online there.

Some industry executives and analysts view the curbs against Western media as part of Chinese President Hu Jintao’s broader campaign to head off perceived threats to his rule. Communist leaders have long seen the media as more of a propaganda tool than a commercial enterprise. In recent months, the central government has reined in journalists and cut off Internet forums at some major universities as the Internet has helped to foster criticism of party officials and policies.

The restrictions on foreign media coincide with a changing of the guard at the State Administration of Radio, Film and Television, where longtime provincial official Wang Taihua replaced media veteran Xu Guangchun as head of the regulatory body.

Some American media executives also believe that Beijing’s tightening reflects the deterioration of U.S.-China relations in the last year.

China’s attitude toward Western firms’ access to the domestic market has always been one of extreme caution, said Song Jianwu, professor of journalism at Renmin University in Beijing. He noted that when China joined the World Trade Organization four years ago, it made few commitments on opening up the media market to foreigners.

David Wolf, a Beijing-based industry consultant, said the Chinese government might have unintentionally “opened the doors too wide” last year when it allowed new foreign ventures in television production. Wolf expects China to maintain its tougher stance on international media firms for the next 18 months, but after that he thinks China will allow wider foreign participation in its television market for financial reasons and to enhance its image globally.

Others believe that the chill could last until the Olympics in Beijing in 2008. But Chinese leaders also have another incentive to open up the market to foreign investment: They want to convert the entire nation to digital television by 2015, a task that could add hundreds of new channels.

Chinese homes with cable TV currently have access to about 50 channels, for which they pay about $3 a month. Much of the programming is dull -- and propaganda. Many viewers would rather watch pirated DVDs of Hollywood hits and censored TV shows such as “Sex and the City.”

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Some Chinese officials are eager for foreign investments and expertise to develop popular programming. News Corp.'s Star TV is making 800 to 1,000 hours of content a year. But Star TV has legal distribution rights only in Guangdong province in southeast China, which has a total TV ad market of about $300 million, according to Media Partners Asia.

Media Partners estimates that in China, foreign-owned TV channels and programs generated as much as $220 million last year, with more than half of that going to Phoenix Satellite TV, which is 35% owned by Star. That’s a fraction of China’s $6-billion TV market, dominated by state-owned broadcaster CCTV, Media Partners says.

News Corp. has been the most aggressive of foreign media companies in China, where it operates six channels. But it has had a rocky history in China, and the recent regulations appear to have squelched a plan by News Corp. to expand its audience by partnering with a regional broadcaster, Qinghai TV in western China.

“We don’t have any intention to launch a new channel, so it won’t affect our operations,” said Star TV spokeswoman Jannie Poon in Hong Kong. Of the tougher climate for foreign media in China, she said, “We knew from the beginning it’s a long-term play.... We didn’t really expect smooth sailing anyway.”

It’s not clear how the new rules might affect Viacom’s plans. Its MTV network reaches some 10 million homes in Guangdong province, and Viacom was seeking to win rights to broadcast Nickelodeon 24 hours a day. The channel has a joint venture with Shanghai Media Group, a major government-owned competitor to CCTV, to produce 25 hours of children’s programs a week.

Viacom didn’t respond to inquiries. But Sun Wei, a spokesman for Shanghai Media Group, said the new regulations wouldn’t affect the company’s joint ventures, although he noted that foreign partners had complained. Among other things, the rules prohibit jointly produced programs from showing foreign brands on local broadcasts.

The restrictions also could stifle foreign films’ distribution.

Sony and Time Warner executives in China declined to comment. Sony has co-produced several films for the Chinese market, including the big hit “Kung Fu Hustle.” Last year, Sony took advantage of the relaxed controls to work on some projects with the state-run China Film Group.

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Time Warner, too, has made significant investments, including the building of eight multiplexes in China. Although Beijing hasn’t blocked foreign investment in theaters, some industry executives expressed concern about the government’s wanting control over movie houses so that it could show propaganda films. Chinese cultural officials’ recent statements suggest that they’re unlikely to increase the import quotas on foreign films, currently at 50 a year, of which about 20 are considered popular movies, including those from Hollywood.

“The Chinese government is already limiting to a great degree the movies their citizens can see in theaters,” said Mike Ellis, regional director of the Motion Picture Assn. of America for Asia Pacific. “We view any action that further restricts the Chinese marketplace as problematic.”

So would Disney, which, with the opening of Hong Kong Disneyland, has a lot more riding on access to China’s media market. Disney cartoons have been shown on Chinese TV since 1986, including a 30-minute daily show called “Dragon Club.” A 24-hour Disney Channel would give it branding, far more airtime and the ability to attract children and keep their attention for hours on end. That would help drive Disney’s video and merchandise sales and theme park visits and make its commercial slots valuable to advertisers.

Recently, Disney’s Iger has suggested that he might take a more aggressive tack. Besides paying a visit to the propaganda chief, Iger indicated that Disney wouldn’t build a second park in China until it won greater TV broadcasting rights.

Chinese analysts are skeptical. “China does not have a commitment to open its media industry,” said Chen Shaofeng, vice director of the Research Institute of Cultural Industry, which is connected to Peking University.

Of Disney’s chances of winning a channel in the near future, Chen said, “It won’t happen.”


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