Hunan Satellite: A Media Consolidator
A new report on big investment plans in digital media by Hunan Satellite Television is shining a spotlight on this aggressive company in interior China, and its potential to become an important consolidator as Beijing looks to revamp the stodgy traditional media sector. According to that report, Hunan Satellite is planning to invest 1 billion yuan ($160 million) in its Mango TV service, which delivers video over the Internet and other digital platforms and competes directly with private sector firms like Youku Tudou (NYSE: YOKU) and Baidu’s (Nasdaq: BIDU) iQiyi.
As someone who closely watches the Chinese media, I can say with a high degree of certainty that traditional state-owned newspapers, magazines and TV stations are currently in a state of crisis as they rapidly lose business to new media rivals, many of those privately owned. That state of crisis prompted Chinese President Xi Jinping last week to declare that the country’s traditional media were in dire need of reform, marking the first time a top leader had clearly stated the sector was due for an overhaul. (English article)
Such an overhaul is overdue, and reflects similar trends that have been happening in the west over the last decade. The broader trend has seen audiences and advertisers defecting in droves from traditional newspapers, magazines and even TV stations to more flexible and targeted online platforms. In China’s case, the shift has come quite rapidly over the last 2 years, and I now hear regularly from my industry contacts about the state of crisis at most local media here in Shanghai.
Against that backdrop, consolidation certainly looks like a critical first step to salvaging some of the nation’s more promising traditional media. If that’s the case, the next question becomes: who is best positioned to play the role of major consolidator? My answer would be that Hunan Satellite is probably one of the best positioned to do that, and its current plans for Mango TV reflect its forward-thinking posture.
According to the latest reports, Hunan Satellite, the national broadcasting arm of the Hunan provincial government, is preparing to pump the 1 billion yuan into its interactive broadcasting company, with a primary aim of building up Mango TV. (Chinese article) The initiative is focused on both Internet TV and mobile video, 2 highly competitive areas where Youku Tudou, iQiyi and other names like LeTV (Shenzhen: 300104) and e-commerce leader Alibaba are also investing heavily.
Hunan Satellite was traditionally known for its creative programming, dating back to its roll-out of the wildly popular “Supergirl” talent show series about a decade ago. It now operates one of China’s most successful province-based TV channels with national distribution, and is frequently a ratings leader. Its more recently formed Mango TV continues its tradition of forward thinking.
The digital service was in the headlines recently when Hunan Satellite decided to stop selling some of its popular programs to independent video operators like Youku Tudou and offer them exclusively on Mango TV. (Chinese article) Mango has already started ts own acquisition spree, with media reporting earlier this month that the unit was in talks to buy a video asset from privately owned struggling social networking service Renren (NYSE: RENN). (English article)
If Xi Jinping is really serious about salvaging traditional media, I do expect we could see Hunan Satellite start to acquire some state-owned assets in other provinces over the next year. Other acquirers could include Shanghai giant Shanghai Media Group (SMG), and the recently formed Shanghai United Media Group. Such consolidation could provide some profit-making opportunities for investors in many of the smaller media companies that are now publicly listed. But the consolidation drive could also face strong headwinds from local interests that don’t want to cede control of media that they use to promote their own agendas.
Bottom line: Hunan Satellite could emerge as a consolidator as Beijing revamps China’s traditional media, providing a profit-making opportunity for shareholders of smaller state-owned media firms.
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