MEDIA: SMG Boss Quits TV, Focuses on New Media
Bottom line: SMG’s Whaley Tech division has become the focus of its drive into the new media realm, following Li Ruigang’s departure from his post as group chairman to focus on the unit’s development.
I don’t generally hold out much hope for traditional Chinese broadcasters for making the transition to new media, since most are bureaucratic, state-run outfits staffed by an older generation that doesn’t really understand the emerging industry landscape. But 2 companies that have the potential make the transition are Shanghai Media Group (SMG) and Hunan Satellite TV, which are both making big drives into digital products delivered in on-demand formats over the Internet.
Of the pair, my favorite is Hunan Satellite, since the company has a strong track record of innovation that has helped it to build a national audience despite its location in the relatively backward interior Hunan province. But SMG’s longtime chief Li Ruigang is also trying to show he can take his company into the new media era, with word that he’s formally quit as chairman of his group to focus on development of its new media businesses.
Li’s surprise resignation is actually his second time stepping down from the helm of SMG, China’s second largest traditional media company after only state-run behemoth CCTV in Beijing. (English article; Chinese article) He was quite young when he served as SMG’s president from 2002 to 2011, and was later reportedly forced out to give others a chance at the job as one of China’s top media bosses.
But SMG, along with most of China’s other traditional state-owned broadcasters, have been struggling these last 3 years as they’re forced to compete with a newer generation of private new media companies like online video firm LeTV (Shenzhen: 300104) and news portals like Sina (Nasdaq: SINA). As SMG struggled, Li made a surprise return to the company as chairman in late 2013 to try to reverse its fading fortunes.
But now he’s leaving his position as the group’s boss again to focus on China Media Capital (CMC), SMG’s venture capital arm that is moving aggressively into an array of new media businesses. The reports say Li is especially interested in CMC’s new smart TV unit, Whaley Tech, which counts Internet giants Tencent (HKEx: 700) and Alibaba (NYSE: BABA) among its strategic investors. It’s not clear what relationship, if any, Whaley has to SMG’s homegrown flagship digital TV unit, which was formed last year through the merger of its Oriental Pearl and BesTV units.
Strong Partner List
Li is currently chairman of Whaley Tech, and the company’s president is the former general manager of BesTV. CMC has partnerships with a wide range of major western media companies, including Hollywood giants DreamWorks Animation (NYSE: DWA) and Time Warner (NYSE: TWX), as well as British advertising major WPP (London: WPP) and Japan’s Softbank. The fund also has ties to Rupert Murdoch through its 2010 purchase of a controlling stake in New Corp’s (Nasdaq: NWSA) China-based TV station.
My biggest past gripe with Li, and the reason I’ve been less bullish on SMG that Hunan Satellite, is that his success was built on a state-granted broadcasting monopoly for the massive Shanghai TV market. It’s one thing to thrive in such a big market when there’s competition. But it’s quite another matter when you have a monopoly, and anyone with such a monopoly would almost have to be a complete idiot to fail. By comparison, Hunan Satellite has done quite well by building an audience in the much more competitive national Chinese TV market.
Of course SMG’s monopoly in Shanghai is rapidly disappearing, as thousands of the city’s viewers abandon traditional TV for newer video services offered by private companies like LeTV over the Internet. Whaley Tech is still a largely an unknown name in China’s online video space, but presumably will try to build up a service comparable to Hunan Satellite’s fast-growing Mango TV. I would put Whaley’s chances of success under Li’s leadership at about 50-50, but am still slightly skeptical that he has the savvy to compete with Hunan Satellite and private names like LeTV and Baidu’s (Nasdaq: BIDU) iQiyi.
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