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Home :: Online Services :: AOL Time Warner/ Not Just about PR Business in China's Media Market

AOL Time Warner/ Not Just about PR Business in China's Media Market

CHINA, August 07, SinoCast -- It has been two years since AOL Time Warner took over China Entertainment Television Broadcast Ltd. from Robert Chua, the founder of CETV.

SinoCast China IT Watch

SinoCast China IT Watch via NewsEdge Corporation : CHINA, August 07, SinoCast -- It has been two years since AOL Time Warner (AOLTW) took over China Entertainment Television Broadcast Ltd. (CETV) from Robert Chua, the founder of CETV.

When Steve Marcopoto, president of Turner Broadcasting System, Inc., an AOL Time Warner company, announced at a press conference in July 2001 that revenue in CETV would embrace two- digit growth in revenue, some insiders said that AOLTW was doomed to fail in CETV project.

During the past two years, Time Warner has sold 64% of the stakes in CETV. Insiders pointed that AOLTM has poured about US$ 45m to 50m in CETV, calculating at annual expenses of US$ 17m plus and a monthly payment of US$ 500,000 to CETV for maintaining the operation in the company in the previous year.

Advertisement income in CETV during 2002 was just US$ 450,000, far from what Time Warner had expected.

The Wall Street Journal described it a milestone landing when Time Warner forestalled News Corp. to land in Guangdong Province in 2001. Unfortunately, ever since AOLTW entered Chinese market, the business plan planned everything for the best but prepared none for the worst because the business plan was made by a US media consultancy company based neither on market research nor market orientation.

Marcopoto, the only member of acquisition team left, assured annual revenue of US$ 4m in CETV during an interview in 2001 and he expected CETV to achieve a balance within three years. His illusion was just based on PhoenixTV's annual revenue of US$ 40m from advertising, ignoring the fact that Phoenix injects at lease US$ 60m a year in its operation.

Pursuant to the mutual agreement between Time Warner and CCTV (China Central Television), Time Warner got the landing rights on the condition that it will not enter news programs. As a pure entertainment channel, Time Warner needed to inject enough money into CETV, which appeared too risky and costly to Time Warner.

Time Warner is said to have acquired 80% of the stakes in CETV for US$ 2m in 2000, but it obtained legal operation license to land in Guangdong one year after the acquisition of CETV. The big boss in the US was too reluctant to make further investments in making any changes for CETV, even not willing to change name for CETV.

In addition to insufficient capital injection, insiders believe that Time Warner had chosen a wrong way in running CETV.

It trusted the operation of CETV to the hands of Marcopoto and Chen Yongguang, an American and a Taiwanese who know little about the media market in mainland China.

CETV stuffed Chinese market with second hand programs from Hong Kong, Taiwan and South Korea, which insiders criticized wrong decision as no TV station has ever made big money via imported programs.

In spite of abundant resources the company has, such as movies and cartoon series, Time Warner failed in operating CETV in China because it has never formulated practical strategies for Chinese market in details.

AOLTW was faced with a total liability of US$ 26b after the investigation by the securities regulator in this year and its business in China proved to be a failure. AOLTW is to sell second-tier assets - the newly appointed CEO set reducing liabilities to US$ 20b as the target for the year.

AOLTW is said to sell CETV to sooner or later. It (selling CETV) is a financial decision, described an executive from Time Warner (China) Ltd.

Time Warner gets almost nothing from transferring CETV stakes to Time Warner chose to quit as quickly as it had decided to approach Chinese market although the losses of US$ 17m a year contribute little to its total liability of US$ 98.7b.

So far, AOLTW has failed in three business lines it had expanded to China, including CETV, (a proposed joint venture project with China's Legend Group) and media information service project (a proposed joint venture project with Shanghai Industrial Investment (Holdings) Co. Ltd.).

For other multinational companies that wish to succeed in China, Time Warner rings the alarm on them that China is a market that demands whole-hearted devotion.

Publication: SinoCast China IT Watch

Distributed by Financial Times Information Limited - Asia Africa Intelligence Wire

<<SinoCast China IT Watch -- 08/05/03>>




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