MEDIA: Era Ends with Closure of Time Warner’s Former China TV Play

Bottom line: The closure of former Time Warner Chinese TV station CETV reflects the broader decline of traditional broadcasting worldwide, and also heavy restrictions on foreigners for operating video delivery channels in China.

As Time Warner (NYSE: TWX) pursues a blockbuster merger deal with AT&T (NYSE: T) in the US, a much quieter story in China reflects the end of a frustrating chapter for the entertainment giant and many of its western peers that hoped to make a fortune in the world’s most populous market. That story has the relatively obscure Tom Group (HKEx: 2383) announcing the shuttering of its China Entertainment Television station, also known as CETV.

Longtime China watchers will remember that CETV and several other similar TV stations once represented the hopes of Time Warner, Viacom (NYSE: VIAB) and News Corp (Nasdaq: NWSA) for tapping the huge Chinese TV market at the start of the 21st century. But those hopes were ultimately thwarted by Chinese regulators wary of foreign influence, and later by a newer generation of online video sites that are now threatening even China’s own domestic TV stations.

Against that kind of backdrop, it does seem like the end was almost inevitable for these early foreign-backed TV stations in China. Now it appears that CETV is the first of those to officially call it quits, though the station appears to have already severed its few remaining ties to Time Warner at some point in the last few years.

Tom Group, itself a former high-flying media company backed by Hong Kong billionaire Li Ka-shing, announced its formal closure of CETV in a brief filing to the Hong Kong stock exchange. (HKEx announcement; Chinese article) Tom cited an advertising market downturn and tough regulatory market for its decision, and added it now controls nearly 100 percent of CETV’s shares.

This quiet end to the broadcaster was hardly noticed by most media, largely because CETV was never a noteworthy player in China’s TV and video space. But that wasn’t the case back in the late 1990s and early 2000s, when Time Warner, News Corp and Viacom’s MTV made major headlines by becoming the first foreign media companies to win licenses to operate TV stations in China.

Lost Opportunity

I began covering the industry back then, and recall all the hype and excitement these new TV stations generated, with plans to bring slick western-style programming to a stodgy Chinese TV market dominated by regional state-run broadcasters. But regulators, wary of western influence, put up numerous obstacles to the big media companies, preventing them from expanding beyond south China’s more market-oriented Guangdong province.

Time Warner was actually the first to pull the plug on that part of its China operations with its sale of a majority stake in CETV to Tom more than a decade ago. Now it appears it later quietly sold the rest of its interests in the station. News Corp also sold a controlling stake of its China TV station to a local partner in 2010. MTV China appears to be still operating from a base in Beijing, but it’s also a non-player in the market.

While they’ve mostly given up hopes of operating their own channels, the foreign media companies have found more recent success in content production tie-ups with Chinese partners to tape growing demand for movies and video delivered online. Time Warner signed a major production deal a year ago with a company tied to Shanghai Media Group (SMG), China’s second largest traditional broadcaster. Others with similar tie-ups include Disney (NYSE: DIS), DreamWorks Animation, and Sony Pictures.

At the end of the day, the end was really inevitable for all of these Chinese TV stations, which are rapidly becoming dinosaurs in a world where most people prefer to watch video delivered on demand over the Internet. But in China, even those newer online platforms are still squarely controlled by private domestic companies like Youku Tudou and iQiyi, and it seems unlikely that China will open that market to foreigners anytime soon.

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