S&P Equity Research: The China Conundrum For U.S. Media Companies

NEW YORK, Jan. 29 /PRNewswire/ -- China continues to pose a myriad of atypical challenges for U.S. media and entertainment conglomerates, according to Standard & Poor's Equity Research. Over the years, companies such as News Corp. [NWS 15 ***] [NWSA 13 ***], Viacom [VIA.B 29 ***], Time Warner [TWX 30 ***] and Disney [DIS 29 ****] have tried to capitalize on what remains an elusive opportunity to plant a meaningful toehold in the world's most populous nation, and one of its fastest-growing emerging markets, observes Tuna Amobi, Media & Entertainment Analyst at S&P Equity Research.    

"Perhaps more than any other development in recent memory, Google's [GOOG 542 ****] potential pullback of its search operations in China shines further light on the potential quandaries confronting foreign media companies that have largely come up short in the Chinese market," says Mr. Amobi.  

"Well before the glitzy spotlight of the 2008 Beijing Olympics, we believe China has held a special allure for U.S. media companies, increasingly looking to tap higher international growth opportunities for filmed entertainment, cable and broadcast channels and publishing businesses, continues Mr. Amobi. "In theory, China's sustained economic growth, combined with the attractive demographics of its over 1.3 billion populace, offers some key ingredients for the world's leading media brands to thrive in what is now the world's third-largest economy."

Amobi says the inability of U.S. media companies to effectively establish a lasting presence in the Chinese market has certainly not been for lack of credible or sustained efforts. He notes that Rupert Murdoch and Sumner Redstone, Chairman of Viacom and CBS [CBS 13 **], are among several executives of leading U.S. media conglomerates to have embarked on a mostly futile decade-long odyssey in China – involving emissaries to government officials and business leaders. Even so, he observes that these companies largely have little to show for their fervent lobbying efforts.

"The list of frustrations most frequently cited in our conversations, meetings and calls with U.S. media companies that have gotten some cold shoulders in China rings a familiar bell," says Mr. Amobi. "Among some of the most pervasive challenges are unbridled censorship of content, nationalism, protectionism, stringent media ownership caps and regulations for foreign-controlled entities, lack of legal and political transparency, free market restrictions and other artificial barriers, cultural differences, bureaucracy and lax protection of intellectual property rights."

Amobi concludes: "Ironically, in exhorting the audience of the Beijing Media Summit to adapt to the challenges of a new era, Rupert Murdoch cited Confucius's notion that those who seek constant happiness must often change. And, interestingly, at the same Summit venue, China's President Hu Jintao made what we saw as some thought-provoking comments on the need to boost the healthy and orderly development of the global media industry. While those might initially seem like media-friendly mellifluous remarks, whether they ultimately amount to an actionable clarion call or a carrot-and-stick campaign remains to be seen."

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