 |
| Public Transport TV Market Expanding in China |
|
|
|
|
LCD TVs (Liquid Crystal Display Television) installed on buses in large and medium cities of China have become a money printing machine, feeding an advertising market worth billions of dollars. The three largest rivals, Towona, Vision China Media and Bus Online, are now competing head-to-head for a bigger slice of this lucrative market.
Cash is king
Public transport mobile TV, or so-called transit TV, is becoming one of the most promising new media channels in China, due to its captive, public and enclosed nature. Similar to other out-of-home TV formats, the advertising value of transit TVs is primarily based on the number of installed TV screens (LCD terminals), which require huge upfront and ongoing investments. Therefore, investment capital would be the decisive factor for companies to develop in this industry, and the big three transit TV players in China have firmly followed this principle.
In February 2008, Towona announced that it had received US$50 million funding from Baring Asset Management. But Towona's major competitor, Vision China Media, had been one step ahead of the game, by listing on the NASDAQ with a US$108 million IPO in December 2007.
So floating the company and raising more capital have now become an urgent task for Towona, in order to cope with the competition. Industry experts estimated that the market value of Towona could potentially be worth US$850 million, higher than Vision China. On the other hand, the smaller rival Bus Online had also received US$30 million investments in December 2007 from CCB International, the investment banking division of China Construction Bank. Bus Online had also partnered with CCTV, China's state-owned television station, to produce a new-generation entertainment platform.
Fighting for terminal resources
Vice CEO of Towona, Mr Cui Bin, and CEO of Vision China, Mr Li Limin, had both expressed the view that the first thing they would do on receiving investment funding, was to entrench and expand their transit TV networks. "Terminals are monopoly-nature resources. Once they are locked-in by one company, it will be difficult for other companies to get in," said Cui from Towona. Normally Towona would sign an 8-year long term agreements with local broadcasting and TV companies with mobile TV licenses. Currently there are about 30 Chinese cities each with more than 1,000 buses equipped with TV screens. Towona claimed that it has presence in 25 out of these 30 cities, and it has dominant positions in 14 cities such as Hangzhou, Taiyuan and Qingdao. |
|
|
|
|
|
Mr Cui claimed that by the end of March 2008, Towona's network will cover more than 30 large and medium cities in China, with about 55,000 buses, 95,000 screen terminals and 200 million viewers. While in October 2007, Vision China claimed that it had coverage in 26 Chinese cities, with about 90,000 screen terminals and 270 million viewers. Vision China's CFO, Ms Liu Dan, also revealed that the company plans to expand its portfolio of self-operated (non partnership-based) cities to 20 in 2008.
Interestingly, a Towona report admitted that Vision China's advertisement pricing was 1.74 times of Towona's on average, implying that the higher ad prices and the bigger funding coffer of Vision China could present it with more bargaining power to secure terminal resources from local broadcasting companies.
Multi-channel expansion
Ms Liu revealed that Vision China has expanded its reach into subways in Beijing and Shenzhen, as well as Taxis in Wuhan City. And Mr Cui also commented that Towona is planning to expand its transit TV network into subways, light rails, tourist buses and airport buses. "We will look at any mediums, such as internal panels of a vehicle, LED screens on board, text display screens, GPRS stop announcement systems and digital media in bus stops," Cui said that Towona's goal is to build a comprehensive digital transit media platform.
Towona also established its own advertisement producing division, in addition to its existing TV programming division. In contrast to Towona's goal of a comprehensive digital transit media platform, Mr Cui once declared that Vision China's role as a pure "advertising agency" is not sustainable.
To counter the attack, Vision China pointed out that Towona's practice of broadcasting content programs with inserted CF cards (compact flash cards) in certain cities has violated the regulation of "prohibiting broadcasting news and other audio-visual programs using CF cards or DVDs on out-of-home advertising mediums". And Vision China can safely avoid this risk by not making content programs. Unsurprisingly, Mr Cui downplayed the regulatory risk, saying that participation in content production can help producing viewer-friendly programs and increase transit TV attractiveness. As long as program contents have been examined and approved by local broadcasting authorities, there should be minimal regulatory risks.
Of course, both companies wouldn't deny that they are looking for more cooperative partners through mergers, acquisitions and partnerships, such as traditional advertising agencies and other new media platforms.
While Towona and Vision China are fighting with each other, Bus Online has been quietly building its own differentiations. Bus Online CEO, Mr Wang Xianshu, suggested that the development trend for new media will definitely be "cross-platform and interactive". He has envisioned that if a consumer becomes interested in a particular video shown on a bus, he can directly download that video from his mobile phone by typing in the URL address displayed on the TV screen, hence a revenue split between Bus Online and video providers. As a result, Bus Online established a partnership with CCTV's mobile media division in 2007, in order to secure more video clip production resources for Bus Online.
The rise of transit TVs in China
Many industry insiders have summed up three major reasons for the rise of digital transit media companies in the last 3 to 4 years. First is that public transport TV belongs to the new media category, which attracts less regulatory restrictions from the Chinese government compared to traditional media such as newspaper, home TV and radio. Therefore those domestic and international investors, which have long been eyeing the lucrative Chinese media market, have rushed to the new media sector.
The second reason is that the transit TV industry in China is still at an early stage, characterised by unclear business models, unestablished rules and unsaturated competition, therefore it will be easy for some stronger players to win out. Third is that as many local broadcasting companies in Chinese cities are still isolated from each other and have little cooperation, the big three transit TV companies have seized this opportunity to quickly expand their network coverage, by means of singing profit-sharing or incentive agreements with municipal broadcasting companies.
Produced by China Business Intelligence; Source: China Information Weekly
|
|
| < Prev | Next > |
|---|
