Shanghai Media Group Blazes Trail in China’s Fledgling Market

When Sumner Redstone, the billionaire chairman of Viacom Inc., visits China this year, one of the first people he expects to meet is Li Ruigang.

Li, 38, is the president of Shanghai Media Group, a state-owned conglomerate that has emerged as a powerful force in China’s fledgling media market.

Though he wants to emulate media moguls such as Redstone and News Corp. Chairman Rupert Murdoch, Li is blazing a trail that Redstone and Murdoch might have to follow. He is pioneering efforts that could transform how people watch news and entertainment on the Internet and cellular phones.

From his cluttered 31st-floor office in a glass tower here, the Shanghai native oversees an empire that includes 13 TV channels, 11 radio stations, five newspapers and magazines, and ventures in Internet and mobile TV.

Li and Shanghai Media hold keys to the largest television audience in the world. Already, Viacom and Shanghai Media co-produce Nickelodeon-branded children’s programming and MTV-style awards seen by millions of Chinese.

Li and Redstone have talked recently about teaming up to make movies.

“He’s a friend of mine,” Redstone said, recalling that Li was a guest at his Beverly Hills home last year. “We consider him a visionary and pioneer, a key driver to bringing foreign content into China.”

Sony, Universal Music and CNBC also have cut deals with Shanghai Media, as have a number of Silicon Valley companies, from giant Intel Corp. to small tech companies.

“We have no doubt [that Shanghai Media] is going to grow their channels and programming services. We want to be part of all that,” said Alain Fernando-Santana, chief marketing officer for South San Francisco-based Envivio Inc., which is providing the company with technology to enhance its video images.

Li has an MBA from Shanghai’s Fudan University and is fluent in English. He studied briefly at Columbia University as a visiting scholar. He has made no secret about his desire to expand globally and to raise money by selling shares in Shanghai Media.

But Li faces obstacles in getting Beijing to open up the national media.

After Beijing decreed last year that foreigners couldn’t operate channels in the Middle Kingdom -- because it wanted to preserve “national cultural security” -- Li was like a TV addict with no remote control. He put on hold plans to partner with foreign media companies and to raise private capital.

“You know, I have a lot of ambitions, to be frank,” Li said in a recent interview. “I want to do a lot more.... But I feel there are still some limits.”

If Li is frustrated by the government’s restrictions, he tries not to show it. He insists that he is a “civil servant” and that Shanghai Media is not a company but “a media arm of the government.”

Shanghai Media was formed in 2002 when the city’s television and radio stations merged. It has a staff of 5,200 and its revenue reached $475 million in 2005, up 35% from the previous year.

Li puts in 14-hour days and work weekends to manage his dual roles as a government official and entrepreneur. But it’s clear that real power is still wielded in Beijing.

In March, Shanghai Media’s China Business Network pulled the plug on a talk show hosted by Larry Lang, a finance professor in Hong Kong who has railed against corrupt management buyouts of state-owned enterprises and other ills of the mainland’s economic changes.

At the time, Shanghai Media spokesmen would say only that the Taiwan-born Lang did not have the required government license to host a talk show. But some analysts said they believed Beijing had heard enough of Lang’s criticisms.

Although Lang has declined to comment, Li said, “It’s nonsense that he was taken off the air because of political reasons.”

Li insisted that Lang was still a candidate for shows at Shanghai Media, which has built a reputation for producing lively talk, children’s programming and trendy dramas. Li also created China’s first documentary channel, which is starting to make a profit, said Meng Jian, associate dean of the School of Journalism and Communications at Fudan University.

“Li has been a reformer,” Meng said.

With their innovations, Shanghai Media and other provincial networks have put pressure on CCTV, China’s national network that dominates the country’s $6-billion television market, to discard dreary Communist Party fare and offer a wider range of programming.

Last summer, the finale of “Super Girl,” a Chinese version of the “American Idol” series, was watched by about 400 million people who voted for the contestants. The program brought in more than $70 million in advertising revenue for its producer, Hunan Satellite TV.

“In the past, people sat on their couch and watched stars. There was no interaction,” Li said. “Now, a lot of young people want to reveal their opinions and ideas.”

The success of “Super Girl” has spawned copycat shows in other regions. It also has stirred concerns in Beijing about whether such programs are “healthy and disciplined,” and regulators have slowed approval of similar programs.

During the Chinese Labor Day holiday last week, Li walked around the set behind Shanghai Media’s building where his crews were shooting live performances of “My Hero,” a male version of Super Girl.

In his neatly pressed blue suit and perfectly coiffed hair, Li could have been mistaken for a host on the show. He mixed easily with contestants and praised his staff. Days earlier, Li spent hours working on the show, excising some parts.

He wouldn’t identify what he had removed, saying only that he “wasn’t going to create a beauty contest. This is about young Chinese people’s vision, self-confidence and courage.”

Li insisted that sanitizing the show was intended not to make the government happy but to adhere to Shanghai Media’s own standards. At the same time, it’s clear to observers here that Li doesn’t want to risk all that he has built over the years, including his reputation.

The eldest of two children, Li lived with his grandparents in Shanghai after his parents were relocated to the countryside, as many were, during the Cultural Revolution. After studying journalism at Fudan University, he worked as a news producer and as an editor of lifestyle shows for one of Shanghai Media’s predecessor TV stations.

When he took the helm at Shanghai Media in 2002, Li was viewed by his peers as too young and naive. His entrepreneurial drive stood out in the strictly governed Shanghai media, which have been dominated by technocrats. But he has won over critics and doubters.

One of his biggest accomplishments was beating out CCTV to win China’s first license to operate a national Internet-based television network. Li said he spent months visiting every exhibit in the world on the subject, and made weekly trips to Beijing to persuade regulators that Internet protocol television (or IPTV) would be the wave of the future.

About 70,000 people in Shanghai and Harbin pay $7.50 a month to watch Shanghai Media’s shows on their computers.

His goal: to use the IPTV model to become a national network.

“The traditional model is free TV and advertising,” Li said. “But IPTV is a paid model. It has the potential to change the world of television.”

Li also has the nation’s only license to market TV programs over mobile telephones. An additional 200,000 subscribers across China pay as much as $1.50 a month for this service.

With more than 400 million cellphone users and 110 million on the Internet, Li knows that others are likely to compete in this new arena. Just this week, CCTV also got approval to launch an IPTV network.

Li also is aware that Shanghai Media’s early lead won’t help if it cannot produce compelling content. That’s where foreign players such as Viacom and Walt Disney Co. could help. For now, neither they nor Li have any choice but to wait for the government restrictions to end.

Li is waiting.

“If all the regulations loosen up,” he said, “and these companies come to chase me for partnerships or cooperation, it would be hard for me to select.”

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Shanghai Media Group

Employees: 5,200

President: Li Ruigang

History: Formed in 2002 from a merger of People’s Radio Station of Shanghai, East Radio Shanghai, Shanghai Television, and Oriental Television.

Holdings: Thirteen TV channels, 11 radio stations, five newspapers and magazines, an Internet TV service and three sports clubs.

Revenue: $475 million (2005)

Los Angeles Times