Li Ruigang

April 2008

Shanghai Media Group (SMG) has become a go-to partner for many international organizations looking to expand into the lucrative Chinese media market. Formed in 2001 after the merger of various Shanghai-based radio and television stations, the company is the second-largest media organization in China after the state-run behemoth CCTV. Its assets include more than a dozen analogue channels across terrestrial, cable and satellite platforms in Shanghai as well as 16 national digital pay-TV channels. It is also active in the print business, runs five sports clubs and was the first to receive a license for an IPTV platform in the country. A prolific producer of domestic content across news, entertainment, sports, drama, documentaries, animation and other genres, SMG has also opened itself up to international collaborations. Leading SMG’s growth is its president, Li Ruigang, a former reporter and producer who also spent time as a visiting scholar at Columbia University in New York. He speaks to TV Asia Pacific about how he is positioning the company for the future.

TV ASIA PACIFIC: What are your plans for expanding your bouquet of channels?

LI: Most of the existing analogue channels of SMG are free-to-air channels, which have been operating since the emergence of TV in the 1950s. In recent years, we have launched a number of digital channels to target the pay-TV market. In the near future, it’s quite unlikely we will further increase the number of the free-to-air channels, even though the advertising business is still growing. I believe the pay model, both digital pay TV and IPTV, is promising.

TV ASIA PACIFIC: Do you have plans for digital terrestrial television?

LI: SARFT (the State Administration of Radio, Film and TV) is working on designing the framework of terrestrial digital TV content. As soon as the overall digitization of the terrestrial and cable-TV networks is completed, all the existing analogue TV channels will be carried on the digital network simultaneously. In China, the audience takes it for granted that all TV content is free. There is not a clear line between public TV and commercial TV, which is a longstanding issue in China. Consequently, the pay-TV market is growing very slowly.

TV ASIA PACIFIC: How important is high-definition content for the company?

LI: Undoubtedly, high-definition content is the direction for the future and also a top priority of SMG. We are actually now applying to get licenses from SARFT to run terrestrial high-definition TV channels.

TV ASIA PACIFIC: How much content are you producing locally and how are you exploiting that programming on the global market?

LI: About 60 percent to 70 percent of content is produced by SMG itself. WingsMedia is a distribution company under SMG responsible for selling SMG content worldwide. It works closely with a lot of broadcasters at home and abroad. It also syndicates programs produced by other content suppliers in China.

TV ASIA PACIFIC: Are you seeing more demand for Chinese-language content in markets like the U.S. and the U.K., where Asian communities are growing? What are some of your other key markets worldwide?

LI: We are seeing growing demand for Chinese-language TV content. The major markets for this content are in Southeast Asian countries and North America. We have been reaching those overseas markets through the distribution of our channels via satellite. Now we are having a remarkable increase in the number of overseas Chinese-language TV stations directly approaching us to acquire content from SMG. [Celebrities] created by several reality shows of SMG saw huge crowds of fans recently when they went to Canada, Malaysia and [other markets].

TV ASIA PACIFIC: In addition to your Mandarin-language shows, you’ve also begun producing in English.

LI: We just launched an English-language channel, which is the second one in China after CCTV9. Among all the provincial media groups, only SMG operates and invests a big amount in an English channel with a specialized programming team. It is still in its infancy. It takes time to grow. However, I believe our English channel is privileged by its location in Shanghai, where a mature market for English-language programming is entirely likely.

TV ASIA PACIFIC: The Olympics will be the big media event for China this year. What will SMG be doing to cover the games?

LI: SMG will be responsible for producing and transmitting some of the Olympic matches in Shanghai—for example, the soccer games. At the same time, we are talking with CCTV [about other rights to] the Olympics and we hope we can make some breakthroughs. We will join hands with CCTV by cooperating on transmission and production for new-media platforms. [And] we are going to launch some sitcoms, reality shows and entertainment programs [revolving around] the theme of the Olympics.

TV ASIA PACIFIC: You were the first company in China to receive an IPTV license. How is the deployment of that service progressing?

LI: So far, SMG is the only company to have started the commercial operation of IPTV services in China. The partnerships with China Telecom and China Netcom have proven to be successful. With a more mature business model and technology, we are providing more differentiated content and value-added service to the users. Our IPTV service provides SMG content as well as content from third-party [distributors].

The challenge facing us today is still the suspicion and rejection of local cable operators. Harbin in the north and Shanghai in the south have become the two most important IPTV markets for us. Trials have been launched in another ten cities in China. By the end of last year, the number of our IPTV subscribers had exceeded 700,000 nationwide.

TV ASIA PACIFIC: What are you doing in mobile TV?

LI: We provide mobile-phone streaming on 2.5G and 2.75G networks by working together with China Mobile and China Unicom. The business is growing steadily and SMG’s mobile-TV company, Dragon New Media, has already turned profitable. This year we hope to achieve better development with the arrival of the Olympics. As there is still a lot of debate on the national standard for mobile terrestrial-TV broadcasting, we’ve just had a few tests in this area. There is no plan for a commercial launch at the moment.

TV ASIA PACIFIC: How important are international collaborations? Are you co-producing with entities outside of China?

LI: SMG has always valued international collaborations. We are probably among those domestic media companies with the most international cooperation. Under the guidance of SARFT, we will explore more ways, including co-production, to collaborate with our international partners. Last year, we took the lead in China to acquire formats from a number of international companies. The formats acquired proved to be very successful after being localized properly. We are looking forward to more involvement in the international media industry.

TV ASIA PACIFIC: What are your broad goals for SMG this year?

LI: Thanks to the Olympics and to the efforts invested in the past few years, SMG will be able to maintain rapid growth this year. Three areas in particular will top my agenda. First, I hope to see more programs of nationwide influence from SMG. Second, I hope to achieve some benchmark growth in the new-media business. Third, [that] some business subsidiaries of SMG can achieve breakthroughs in financing and a public listing.

TV ASIA PACIFIC: What are some of the long-term strategies you are putting in place?

LI: The revenue of SMG has tripled in the past five years, with the profit margin growing rapidly at the same time. I am confident that SMG will keep growing at this rate in the next few years. The following four areas are my priorities for future development. One, SMG aims to become a group providing the best Chinese content in the world rather than a local TV station serving the audience in one city. Two, with the favor of current regulation, SMG aims to be a national operator for new-media businesses rather than just a content provider or distributor. Three, SMG aims to be a media conglomerate with diversified businesses. We have extended our businesses into network operations, print media, film and TV drama production, artist management, sports and [more], and I hope we can be established in all these areas. Four, SMG will work to create a number of platforms to tap into the international [content] market.