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AOL Time Warner Net Gains Access to China

Opening the door to what could potentially become the world's largest advertising market, AOL Time Warner Inc. last week signed a reciprocal carriage deal with the Chinese government.

The agreement gives the company distribution for its Mandarin-language China Entertainment Television (CETV), which it acquired last year, on Guangdong Cable TV Networks Co. cable systems in Southern China. In exchange, Time Warner Cable will carry CCTV-9 — an English language version of the state-run China Central Television — on its New York, Los Angeles and Houston systems.

"This is groundbreaking," said Steve Marcopoto, president of Hong Kong-based Turner Broadcasting System Asia Pacific, who negotiated the deal for 15 months. "There's never been an international media concern given authorized carriage of a channel in China."

No money will change hands between AOL Time Warner and the Chinese government, Marcopoto noted. Before last June — when the media conglomerate acquired CETV from founders Robert and Peggy Chiua — CETV was known as a "no sex, no violence, no news" channel.

Although CETV will have to adhere to strict Chinese content restrictions, Marcopoto said the company will freshen up the programming slate with Warner Bros. offerings, such as La Femme Nikita
and Miami Vice. It also runs a block from Cartoon Network, including the Power Puff Girls
and Cow and Chicken.

CETV now targets a younger, 18 to 44 demographic. Turner plans to cut co-production deals with companies in China, Marcopoto said.

CETV currently reaches about 80 million Pacific Rim households via satellite, but the channel is offered for free. Marcopoto said he eventually hopes to charge subscription fees for the channel on Chinese cable systems, but that notion hasn't been received favorably so far.

Presently, CETV charges advertisers $2,400 to $3,200 per unit for a primetime commercial. Marcopoto said he doesn't expect the rate card will change with the new distribution in China, but that he expects the number of ads will increase.

Media buyers spent an estimated $1.2 billion on advertising in China last year, a total that observers expect will increase significantly during this decade.

TBS Inc. isn't the first U.S.-based company to cut a reciprocal distribution deal with China. Starz Encore Media Group's International Channel signed an agreement with CCTV in 1996, allowing it to distribute 10 hours per week of programming on CCTV, and sell five minutes of advertising each day on the channel, said Encore International president Michelle Sie Whitten.

In exchange, International Channel distributes CCTV-4, an export channel from CCTV that offers Mandarin, Cantonese and English programming, in the United States. The diginet is currently available in about 1.2 million U.S. homes.

Encore hopes to eventually launch a 24-hour channel in China, and is currently conducting focus-group research in the country to help determine what content would be best to offer, Whitten added.