The 23rd China Content Broadcasting Network (CCBN) took place in Beijing from March 24 to 28. China’s State Administration of Press, Publication, Radio, Film, and Television (SAPPRFT) used the show communicate new strategic directions for the development of China’s TV broadcasting. The government is encouraging cable TV operators to upgrade their networks to support multiscreen TV services to connected devices, now that TV digitization is almost complete. There were 234 million of cable TV users and 184 million digital subscribers at the end of 2014.
Our AnalysisDespite the investment in digitization, China’s cable TV operators are encountering several challenges, such as declining viewers, lower income levels, and decentralized networks. China’s cable TV operators’ total revenue was approximately $12.2 billion in 2013, while telecom carrier’s total revenue was $187.3 billion. China’s cable TV operators lack enough capital to invest on new business. As a result, the developments of cable TV operators will be slower than that of telecom carriers in China in the future five years.
Chinese pay TV operators are facing similar problems to the rest of the world regarding millennial-TV-disengagement and connected devices fragmenting content viewing habits.
In response, the leading cable TV operators, such as Beijing Gehua Cable Television Network Co., Ltd. (Gehua) and Shenzhen Media Group (SZMG) are actively developing new services based on cloud platforms to deliver television content to connected devices in order to retain subscribers and attract younger users. Gehua established a cloud-based TV platform for multiscreen services in 2014. Its subscribers can download episodes to smartphones or tablets via Gehua’s Wi-Fi network and Content Delivery Network (CDN). They can also watch TV programs and stream video to computers, smartphones, and tablets via multimedia home gateway (MHG) set-top boxes (STBs) with Wi-Fi modules, Gehua is aiming to enable its subscribers to watch TV program on any devices at everywhere. Beijing Novel-SuperTV Digital TV Technology Co., Ltd. (Novel-SuperTV and trading as China Digital TV), which is the largest conditional access (CA) provider in China, is one major partner for Gehua’s cloud TV platform.
SZMG invested $27.5 million on its cloud TV platform and will start operation in April 2015. It established a union-lab with Huawei Technologies Co., Ltd. in order to develop both the hardware and software of its platform. The first service launched on this platform was an instant news app. SZMG wants to increase viewer participations via different devices, such as smartphones, instead of only linear broadcasting. Cable TV operators are upgrading to multi service operators from broadcasting providers. Importantly, they are trying new business models to increase revenue. For example, SZMG is providing more accurately targeted advertising based on applications (APPs) for smartphones using big data analytics.
The new development trend of cable TV operators provides CA and software providers, hardware manufacturers, STB makers, and APP developers, with new business opportunities. The participants within supply chain of cable TVs are actively penetrating in new segment of TV cloud markets.
The cloud TV platforms of cable operators mainly provide services in local cities. For example, Gehua provide cloud services in Beijing and SZMG’s users are all in Shenzhen. Now, only powerful provincial level or public operators have enough capital to establish cloud platforms. Compared with telecom carriers, TV operators control video resources, but have no CDNs for viewers in all country due to fragmented coaxial networks. China Broadcasting Network Co., Ltd. (CBN) CBN is trying to connecting different networks in overall country. It is establishing three TV cloud centers in Beijing, Nanjing, and Xian, and seven IP exchange and CDN centers in Beijing, Shanghai, Guangzhou, Nanjing, Xian, Wuhan, and Chengdu. It hopes to establish one powerful coaxial network in order to provide more services, to increase sales revenues, and to compete with telecom carriers.
China’s cable TV subscriber base is highly fragmented across thousands of cable TV operators. Most provinces have a single large operator and lots of small operators. These large provincial level operators are acquiring and integrating the smaller operators in their own provinces, which will see the market consolidating to approximately 30 provincial level operators dominating cable TV. However, even after this round of consolidation the cable market will still struggle to compete with the scale that the big three telecom carriers benefit from.