Li Ruigang’s drive to unlock value in China’s highly regulated media markets continues apace, taking positions in Hong Kong broadcaster TVB and formats distributor IPCN via private equity firm China Media Capital (CMC) in recent weeks, as part of a bigger push to create and distribute content that resonates with different segments of Chinese consumers.

Importing successful program formats can accelerate development of China’s TV sector, helping prepare for greater competition with online platforms while concurrently moving on government goals to improve local content, explained Li – founding chairman of CMC, as well as chairman of Shanghai Media Group (SMG) – in an on-stage interview at this year’s APOS conference.

CMC, which experienced early success from format-based shows after taking a controlling stake in Star China in 2010, is also part of a recently announced formats JV between SMG and FremantleMedia, which has already licensed about 20 titles to the Chinese market.

While Li remains chairman of SMG, one of China’s biggest broadcasters, he stepped down as CEO at the beginning of the year after initiating a wide-ranging consolidation of the group’s distribution and content assets – including a merger of its two listed subsidiaries BesTV and Oriental Pearl – to help leverage scale and better compete against large, cash-rich internet rivals.

Options For TVB

Li also highlighted formats as a possible revenue driver for TVB, which has been running its mainland China business – including channel distribution, program sales, advertising, artist management and original production – through a JV with CMC since 2010.

TVB’s programs tend to be regarded as less relevant for younger audiences in China, although they remain in demand by local broadcasters and online video sites, Li noted.

“I have seen just a little TVB programming that has really learned from the outside market,” he said.

“It is very typically a closed in-house production,” he added. “The good thing is, you control all the IPs. The bad thing is, I think the creativity is not enough if you are just relying on yourself.”

CMC is also well placed to assist TVB in two other areas, Li told APOS attendees: the Hong Kong broadcaster’s push to tap China’s booming theatrical market, announcing a new movie slate in production under the Shaw Brothers brand earlier this year; as well as the TV company’s overhaul of its OTT services at home and abroad, an area Li knows through BesTV, which has established itself as China’s biggest IPTV company.

Li is also hopeful that CMC’s track-record can help secure a beachhead for the fund's own investments in two areas where entertainment choices are widening: in lower-tier cities, where cheaper smartphones are making OTT services more accessible; and via smart TVs, bringing more choice to the big screen.

“We are not from the technical side, but we do know content, and how to engage with the audience,” Li said.

Media and the market

At the same time, rising interest in co-productions between Chinese and overseas firms is opening up opportunities, but balancing commercial dynamics with government requirements can be tricky.

Oriental DreamWorks, a three-year-old JV between DreamWorks Animation and a local consortium led by CMC, has just received the nod for its first movie, Kung Fu Panda 3, to qualify as a domestic production.

“My experience is, trying out co-productions case-by-case could be okay,” Li remarked. “If you try to set up a sustainable model like a JV to continue to produce co-productions, it will be very hard, because you have to comply with both sides’ demands – the market and the government.”

Media regulation is largely shaped by a desire to strengthen local creativity and technical proficiency, Li said, although production values, especially for reality shows, are notably improving.

“We have invested in many small early-stage content production companies,” Li added. “Most of them brought formats from outside. The process of localization helped these companies grow their core competence.”