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Time Warners CETV Deal Takes Steps Toward China

Time Warner Inc. invested in a Hong Kong-based network last week that could give it rare access to one of the world's most coveted markets: China.

The company has acquired a stake in China Entertainment TV (CETV), which was founded and is owned by Robert and Peggy Chua.

The couple is well known within the Hong Kong media industry for more than just building an over-the-air channel that's actually managed to get full-schedule carriage in China, largely due to a no-sex, no-violence, no-news style of programming.

During the Asian financial crises, they were likened to TV evangelists Jimmy and Tammy Faye Baker due to their impassioned on-air pleas for money to keep their channel alive.

"CETV has been running on the smell of any oily rag and hype for years," said Grantly Brown, a vice president at Communications Equity Associates LLC who keeps an eye on the Pacific Rim.

"And there have been a succession of investors over the years that CETV has announced with great fanfare-some of which actually ponied up cash, and some of which didn't," Brown added. One of CETV's one-time investors was International Family Entertainment Inc.

Despite some extremely lean years, CETV has now secured the backing of one of the world's largest media companies.

The agreement-largely negotiated through the corporation's Turner International Asia Pacific Ltd. unit-is unusual in that Time Warner is acquiring an established international channel, rather than creating one from scratch.

The deal also involves a commitment by Time Warner to help CETV create Chinese-language entertainment programming aimed at a language group that now comprises roughly one-fifth of all people on Earth.

The importance of the deal for Time Warner was indicated by chairman Gerald Levin, who made the announcement.

"We see this alliance with CETV as an ideal way for Time Warner to assist in the creation of a high-quality Chinese-language channel that will meaningfully contribute to the development of original Chinese programming and be a great service to the television industry," Levin said in a press release.

The executive key to securing the deal-Stephen Marcopoto, president and managing director of the Asia-Pacific Turner unit-would not reveal financial details of the agreement. He also downplayed the China aspect. "It may [give Time Warner unique entree], but it's not something we're counting on right now," he said.

But Brown said, "I'm sure much of the appeal of CETV was a desire to gain greater-if indeterminable-presence in the China market. But I'm equally sure Turner wouldn't be putting all their China eggs in this one basket."

The indeterminable aspect of CETV is its inexact science of calculating viewers due to a lack of ratings in China and other markets. In the past, the Chuas have gauged interest and audience size through letters from viewers and those who phone in during call-in shows.

CETV's satellite footprint gives it access to 33 million households across Asia. Perhaps most important, it is carried on a cable system with some 500,000 subscribers in the southern province of Guangdong.

The only other nonmainland channel to achieve full-time carriage in China is News Corp.'s Phoenix TV service-a channel that has aspirations to create a whole stable of networks for China and neighboring markets.

News Corp.'s strategic advantage through Phoenix has been the envy of other Western programmers. Channels from American heavyweights like MTV Networks and ESPN Inc. have been relegated to program blocks on Chinese owned-and-operated channels.

Under terms of the deal, Robert Chua continues as CETV's chairman, and will oversee the channel's content. Turner's Asian unit and Time Warner's TV-distribution arm, Warner Bros. International Television, will help him to revamp the channel's programming. That will involve a combination of product from Turner's and Warner's libraries and new original Mandarin-language productions.

Time Warner brings CETV plenty of resources-not only cash and programming, but expertise in the areas of distribution, sales and marketing and channel operations, Marcopoto said.

He sees that renovation period as phase one, but "that's not our vision for what it will become. We see it as a world-class, high-quality channel.predominantly stocked with original Chinese productions and co-productions."

Marcopoto added: "Initially, it will be in Asia, but we'd like to explore as time passes opportunities in Europe and the United States. There are Mandarin-speaking audiences all over the world."