Shanghai Media Merger: Consolidation Coming?
As a Shanghai resident with a personal interest in the media, I’ve become quite familiar with my local media scene that is largely dominated by 3 state-owned companies. That’s why I was intrigued and even a little excited to read that 2 of those companies might be preparing to merge, hinting at a broader coming consolidation that could produce a handful of new national media giants capable of challenging stodgy old names like CCTV and Xinhua. Of course there’s no guarantee that any of these newer names would be any more creative than the existing giants, since all come from backgrounds as state-run enterprises that are often far less innovative than their private sector peers.
According to the latest headlines, Shanghai’s Jiefang Daily Group and Wenhui-Xinmin United Press Group will soon combine to form a single company. (English article) The report I read cites a distribution official at Jiefang, though no formal announcement has been made yet. It says the new group will be headed by Qiu Xin, who is now CEO of Shanghai Media Group (SMG), Shanghai’s largest and most profitable media company that owns and operates most of the city’s TV stations.
Wenhui-Xinmin and Jiefang are a distant second and third, respectively, to SMG in Shanghai, one of China’s top media markets. Wenhui is one of China’s oldest newspapers, with a history that dates back to 1929 before the founding of China under the Communist Party. Its flagship publications are the original Weihui Bao, as well as its more popular and commercial Oriental Morning Post and Xinmin Evening News.
Jiefang is the least dynamic of the trio, and its core publication is the hardcore Jiefang Daily, one of the oldest traditional Party newspaper. But Jiefang has also responded to the government’s call to launch more commercial publications, and is now owner of the more popular Shanghai Morning Post.
A merger of these 2 companies would create a relatively serious new challenger to SMG, whose main power base comes from its control of most of Shanghai’s TV channels. Wenhui is definitely more commercial than Jiefang, and I wouldn’t be surprised if the merger of those 2 companies saw them merge their morning newspapers into a single publication.
What would be more interesting would be whether the newly merged company might try to launch some video products for sale over the nation’s growing field of broadband and Internet-based distribution channels, including a recent spate of smart TV initiatives. (previous post) A Wenhui-Jiefang combination would certainly face a steep learning curve in the video sector, but it should have the resources and savvy to make such a move, especially with a former top SMG executive as its head.
More broadly speaking, this kind of marriage could hint at a broader wave of mergers to come in China’s highly fragmented media market, which is filled with thousands of local broadcasters like SMG and locally based print publishers. Such mergers are often difficult since local government stakeholders are reluctant to give up control of powerful media assets.
But the central government must finally realize that these small local players will only be able to survive if they consolidate to create some major new media companies. This new Wenhui-Jiefang combination, along with other more aggressive regional firms like Hunan Satellite TV, could well emerge as consolidators of the future, providing much-needed competition for not only CCTV and Xinhua, but also a growing field of fast-growing private new media companies like Sina (Nasdaq: SINA) and Youku Tudou (NYSE: YOKU).
Bottom line: The rumored merger of Shanghai’s second and third largest media groups could hint at a coming consolidation for China’s fragmented, state-run media sector.
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