Rupert Murdoch has dedicated years of lobbying to launching his television channels there and Warner Bros recently established a film production joint venture in the country. But media moguls with ambitions to expand in China should perhaps look at a less glamorous or politically sensitive medium: outdoor advertising.
The growth prospects for outdoor are as enticing as any other platform. Overall advertising spend has grown from 27,3-billion yuan ($3,2-billion) in 1995 to 108 -billion yuan in 2003. Within that, outdoor ad spending rose from 2,5-billion yuan to 11,4-billio yuan.
Clear Media, a company controlled by American media group Clear Channel, is the country’s largest outdoor advertiser and represents its parent company’s most successful foray outside the US. Last year, revenues from its sites in 30 Chinese cities rose 10% to HK$538-million ($69-million), while the pre-tax profit rose 16% to HK$95-million.
Roger Parry, deputy chairperson of Clear Media and head of Clear Channel’s international operations, admits outdoor’s more passive effect makes it less influential than TV or radio. It is therefore more palatable to Chinese authorities keen to bring in foreign investment.
Clear Channel, the largest commercial radio broadcaster in the US, has had talks about setting up a Chinese radio operation but the official reaction to such a proposal is markedly different, he adds.
”There are no editorial controls [in outdoor] and therefore there are no government inhibitions. I have had conversations with a lot of Chinese officials about the possibility of being in radio. While they are intrigued, the number of hurdles to jump are vast.”
Marcel Perez, head of PricewaterhouseCooper’s Asian media practice, agrees that outdoor is ”easier to take part in”.
It is becoming more alluring, thanks to delays in making headway in other areas. The new minister for radio, film and TV is taking his time before approving joint ventures with western media companies, adds Perez. ”He is perhaps being conservative, and that’s understandable.”
A parallel can be drawn in the Russia Federation, where Vladimir Putin’s crackdown on independent TV stations has underlined the dangers of investment in media. Murdoch’s News Corporation owns more than 21 000 billboards across eastern Europe, including Russia, where it owns the News Outdoor corporation in Moscow.
Parry also says hubris is a hurdle. Despite decades of authoritarian rule it is a self-confident and entrepreneurial country that is producing companies more than capable of taking on western entrants.
”Casualties? There already have been. Western companies investing in China have to recognise that there are formidable and talented local competitors,” he says.
”You have to make sure that you have an absolutely top-class local management team. It’s not like in other parts of the world where multinationals come in and compete against other multinationals. The Unilevers and Proctors & Gambles will not get their own way because the Chinese economy is big enough to develop its own Unilever and Proctor & Gamble.”
JCDecaux, the French outdoor group, is increasing its presence in China with the acquisition of a majority stake in MediaNation, owner of the ad contracts for the Beijing Metro and 1 000 newspaper kiosks in Shanghai. Minority shareholders have until Friday to accept the JCDecaux offer.
The deal will make the company the second largest outdoor ad player in China. Billboards do not feature in Clear Media or JCDecaux’s Chinese portfolios because of clutter. (Mr Parry says ”you cannot keep count” of the amount of billboards that you pass on the road from Shanghai airport).
Jean-François Decaux, co-chief executive of the Paris-based group, wants authorities to get more money out of their billboards, bus shelters and tube networks by offering longer contracts. That gives firms more incentive to upgrade sites which increases their yields, creating a better return for the authorities. A recent 15-year deal with Shanghai airport, tipped to equal Heathrow in terms of passenger numbers by 2010, is an example to follow, he adds. ”We need more long-term contracts in return for more capital expenditure. For now, equipment is cheap and low quality because the Chinese authorities have only gone for short-term contracts. The airport contract paves the way.”
Vincent Lam, who heads the Chinese office of Posterscope, the media buyer, says western firms can bring valuable expertise. For instance, groups like Clear Media have helped grow a market that is still too dependent on old-fashioned billboards by introducing technology such as plasma screens, he says.
He is critical of MediaNation, saying the perceived underperformance of a local champion underlines the risk for cocky western entrants. ”If you think any contractor can come into China and make a big difference, look at those with local expertise. If they cannot make a success of it then the others stand a slim chance.” – Guardian Unlimited Â