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Tuesday, November 20, 2007


MEDIA; AOL Gains Cable Rights in China by Omitting News, Sex and Violence

Published: October 29, 2001

How did the world's biggest media company gain a foothold in the world's most populous country? For AOL Time Warner Inc., the answer, it seems, is, ''no sex, no violence, no news.''

Last Monday, AOL signed a deal with the Chinese government, allowing it to broadcast one of its cable channels in southern China. The agreement, under which AOL will expand its Mandarin-language channel, China Entertainment Television, into the mainland, is the first time a foreign broadcaster has won the right to distribute programming on cable television systems in China.

China Entertainment Television, or CETV, is already available in some Chinese homes from cable operators who distribute it illegally. It has survived this nebulous status by steering a cautious course through China's political shoals -- avoiding sex, violence, and, most of all, news coverage.

That makes it an odd duck at AOL Time Warner, a company known for ''Sex and the City,'' the ''Lethal Weapon'' movies and CNN. But it may be the right vehicle for AOL to tiptoe into the Chinese market.

Stephen J. Marcopoto, the Hong Kong-based executive who has led AOL's expansion into China, said the company wanted to offer Chinese viewers a channel that did not offend their cultural or political sensibilities.

''We want it to be a Chinese channel, with international characteristics,'' said Mr. Marcopoto, who as the president of Turner International Asia Pacific oversees CNN, Cartoon Network and AOL's other channels.

Unlike CNN or Cartoon Network, CETV is not home-grown. AOL acquired the channel last year from a Singaporean entrepreneur, Robert Chua, who started it in 1995 as a Mandarin-language entertainment channel for Chinese viewers throughout Asia. Its reputation was for family-friendly, if somewhat dowdy, fare.

''My formula was 'no sex, no violence, no news,' '' Mr. Chua said. ''I actually watch CNN all the time. But I understand the political situation in China, and that's why I left news completely out of it.''

Mr. Marcopoto said CETV would continue to steer clear of news. But he said AOL had livened up the channel in other ways. It has acquired a slate of new, more edgy programs -- dramas, game shows and situation comedies -- from Taiwan and Hong Kong. And it has replaced CETV's on-air personalities, whom Mr. Marcopoto described as ''cats from the 70's,'' with younger, fresher faces.

''It was pretty hard-to-watch television in its prior state,'' he said. ''I won't say unwatchable, on the record.''

Even the retooled CETV barely registers in surveys of television viewership in Guangdong, the economically vibrant province of 100 million just north of Hong Kong where it is now legal. Given the popularity of other channels -- including Hong Kong's two broadcast networks, which are also distributed illegally -- it is possible that CETV may never be more than a blip.

Whether the channel becomes a hit with Chinese viewers is less important to AOL than the fact that it is legal.

''It gives them a chance to prove they are responsible and trustworthy,'' said James Mitchell, a media analyst at Goldman Sachs here. ''That puts them ahead of Viacom and Disney when the market opens further.''

Just when the rest of China will open is unknown. AOL's negotiations with the Chinese government extended over two years and 18 rounds of talks. Rupert Murdoch's News Corporation has been in similarly protracted talks to distribute a cable channel, and it has not yet signed a deal.

Analysts noted that Beijing conceded little to AOL. Even if it had tried to keep CETV out of the market, they said, the province's independent-minded cable operators would likely have ignored them (CNN and other popular cable channels are available in hotels and diplomatic compounds).

Moreover, Time Warner Cable has agreed to distribute the English-language channel of China's state broadcaster, CCTV, on three of its cable systems in the United States, in New York City, Houston and Los Angeles.

''It's a wonderful bit of diplomatic judo,'' said a broadcasting executive here, who spoke on condition of anonymity. ''The Chinese get some distribution in the U.S. and they give away nothing at all. They look terrific because they can say, 'We're letting foreign television into China.' ''

There are also signs that, even as Beijing opens up its market, it is seeking to tighten its control in other ways. The government has asked all foreign cable channels to transmit their signals through a single, Chinese-owned satellite, rather than through private satellites.

Beijing initially demanded $400,000 from each channel for use of the satellite. The channels resisted, and industry executives said the government had backed down on the fee. But it had not given up on the concept, because it would also enable them to censor objectionable programming.

Mr. Marcopoto, a 20-year veteran of Time Warner in Asia, is willing to roll with China's punches. He said AOL regarded the country as an investment that would pay off over decades, not years. He said he did not expect to turn a profit on CETV for five years. He declined to disclose its losses, or how much AOL paid for it. Analysts estimate its sales at less than $10 million.

Still, Mr. Marcopoto sees CETV as a vessel to deliver other AOL brands into China. He is planning programs adapted from health and lifestyle features in People magazine and on CNN. And he has scheduled several hours of western programs each week, which come from the library at Warner Brothers studio.

For Mr. Marcopoto, 46, this deal is the first tangible evidence that the China market is more than a mirage.

''This is the dawn of the market,'' he said, as the morning sun glinted off Hong Kong's harbor outside his window. ''And it's not a false dawn. This isn't just a sky turning a different shade of gray.''

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