Eastern promise

January 1, 2010 by Kelly Anderson

Ten years ago, Michael Stedman, MD for New Zealand-based prodco NHNZ, approached a network to pitch a documentary about China, and received a curt response: the net already had one documentary on China, thank you very much.

How times have changed. Media companies were flocking to China before the onslaught that happened around the Beijing Olympics. And now, India has increasingly become a key player in the global entertainment industry. Western companies of different stripes are now investing in both countries with the promise of reaching newly expanded middle class populations, despite the possible snags coming from layers of red tape.

Greg Moyer, president of Scripps Networks Interactive, knows about investing in India, after Scripps recently signed a deal to own 70% of India’s NDTV Lifestyle, with a goal of having a bouquet of Indian lifestyle channels operated by the NDTV Group subsidiary. It’s part and parcel of the mandate that brought Moyer to Scripps in the first place – to expand its lifestyle properties into emerging international markets.

‘While most of the Western world has dipped and felt the pangs of recession, it hasn’t been nearly as intensely felt as India and China,’ he says. ‘Any executive worth his or her salt is going to know those are good markets from a macro point of view.’ The deal, worth U.S.$55 million, is expected to close by the end of Q1, 2010.

The potential for vast audiences and an advertiser-friendly demo are prime motivators for companies such as Metan Development Group. Entertainment veterans Larry Namer, president and CEO, and Martin Pompadur, chairman of the board, teamed up with co-founder Jean Zhang, EVP, managing director of China operations, to use their Hollywood access and create content specifically for Chinese audiences. Metan would also represent Chinese productions and bring them to Western audiences.

The company’s first offering, Hello! Hollywood, is anchored in a Beijing studio by Chinese hosts, who throw to field reporters in the U.S. ‘We could’ve acquired programming out of Hollywood, dubbed and subtitled it, but we didn’t see that that really made sense to this audience,’ says Namer. And this audience can be a large one. The show could potentially reach 200 million people in 60 million homes. Still, the eyeballs won’t come without a lot of work.

‘There are a lot of production issues, [like] how do you move files across oceans, have the editing stations in both Beijing and L.A. and be able to do collaborative work?’ details Namer. They’ve also found a huge difference in pacing its shows, with the Chinese audience preferring a slower pace. Namer says the Metan team has learned to put its assumptions aside and let the Chinese production team guide the whole process.

Both Hello Hollywood and Metan’s second offering, Icons, are aimed at the 18 to 34 demographic, an affluent and well educated group that also takes a shining to luxury goods. They’re early adopters, and often the first to embrace pay TV and digital, says Christine Fellowes, managing director for Comcast International Media Group (CIMG), Asia Pacific. CIMG has recently announced it is increasing investments in localized entertainment, specials and interstitials.

Because of the red tape that can be present in China, which doesn’t allow for national distribution of branded foreign channels, CIMG takes a different approach there, says Fellowes. ‘We license programming in branded blocks and work with distributors and national channels like CCTV.’ As for the content, racy titles like Keeping Up With the Kardashians can make it past The Great Wall, but Fellowes says, ‘We do screen our programs with a view to make sure we’re not being offensive.’

From a production standpoint, NHNZ doesn’t make things specifically for a Chinese audience, but has had a Beijing office for about seven years. Michael Stedman was integral to NHNZ’s relationship with China, the opening of the Beijing office (helmed by Lauren Wang) and the company’s long-term approach to working in the country.

NHNZ has made in excess of 25 documentaries in China for international audiences, which were made possible by investing heavily in building relationships. ‘I spent a lot of time visiting China, learning about China, understanding how the television systems worked, building relationships with SARFT (the State Authority of Radio, Film and Television) and with the State Council and Information Office for CCTV,’ says Stedman. ‘I think that was the foundation that has allowed us to grow in China because we have shown the Chinese that we’re committed to the long haul, we’re not just in and out.’

In India, CIMG is embracing a long-term outlook after developing an avid audience for its programming on digital channels including AXN, Zoom, Zee Café, Zee Trends, and Zee Studios. Fellowes says that pay TV subscriptions are forecast to increase at a compound annual growth rate (CAGR) of 12% over the next decade with advertising revenues to grow to double digit levels, which would mark India’s as among the highest in the world. The next phase of CIMG’s India strategy is to develop partnerships to launch local versions of E! Entertainment, The Style Network and The Golf Channel.

‘India offers an attractive investment environment for foreign corporations and Indian media companies have recognized the appeal of global brands and collaboration with major media companies from America and elsewhere,’ says Fellowes. ‘That said, there are challenges including legacy structural issues, an inhibiting regulatory framework and unrealistic business models.’ With those concerns in mind, ‘A long-term outlook is imperative for foreign companies seeking meaningful returns in India.’

Moyer believes handling the challenges of these emerging markets is best accomplished with good local partners. ‘That expertise is probably the best insurance policy you can have [with] a sizable investment in a country you don’t fully understand,’ he says.

Moyer also says that the time commitment on the part of the Western company is a costly one. ‘In one due diligence trip I took 12 people from various corporate departments because there are so many different aspects of the business to examine,’ he says. ‘Maybe if you have a cast of thousands, 12 people doesn’t sound like a lot, but it’s not one or two people going off and pulling on a T-shirt that says ‘I’m Marco Polo’ and discovering a new world. You’ve got to take a team of people with different disciplines and skill sets and ways of looking at our business to help advise you. Consultants can be a huge help in that regard. I wouldn’t overstate the difficulty here, but it’s not a casual decision to go international from a U.S. base in any country.’

In relation to China, Stedman concurs. ‘You can’t walk up with a camera and start filming. But once the door is open, they’re immensely positive and helpful.’