Chapter II
Review of Related Literature
The earliest model of television program choice was introduced by Steiner in 1952. It was assumed by Steiner that viewers are most likely to watch their preferred program type. Additionally, every viewer has his or her preference when it comes to program type. As an illustration, for example, there are 70 percent of viewers who prefer to watch reality television programs while lesser number of viewers prefer to watch documentaries, game shows and sitcoms. It is expected that competing firms will broadcast reality television programs. This, in a nutshell, is the “Principle of Duplication”. This principle is based on the assumption that the market system will cater to the majority.
There are different program formats and contents that television offers to viewers. Included in these contents are sports coverage, news and current affairs, movies, comedies, documentaries and so on. The preferences of the viewers are different. Preferences are different from individual to individual and a single viewer can enjoy different genres. When there are a diverse number of program formats and genres, there is a tendency for viewer surplus to increase. Diversity is also important in a democratic society and in the political sphere, since it allows different opinions to be heard and be broadcasted. The decision to provide diverse programs and genres depend on what the television channel will earn from doing so. As it is there are television channels which focus on limited number of genres while others aim to cater to varied tastes (Seabright & Von Hagen, 2007).
In today’s broadcasting industry where funding for television programs are mostly acquired through advertising, the aim is to attract the largest audience share. Among the very first to study program format duplication is Steiner (1952). Steiner (1952) gave an explanation for program format duplication. According to him, no program format duplication will occur in a broadcasting market where a broadcaster has a distinct program type and caters to a distinct set of viewers. No program duplication will exist if the number of channels equals the number of genres and if each channel presents its distinct genre. However, if two or more channels target the same genre, then the viewers will be divided. According to Steiner, program duplication will arise if a broadcaster duplicates an existing program type rather than producing a unique program type for an unreserved group of viewers. Instead of creating a new program type, the broadcaster takes part of the viewers that are already being served by the competitor. If there are limited numbers of television networks, those genres or program types that are less watched will be ignored, resulting in the duplication of popular genres or program types. Steiner also argues that if there is an increased in the number of television network, the chances of serving smaller, unserved groups of viewers will increase. This analysis suggests that with a small, fixed number of channels, competition performs worse than multi-channel monopoly since business stealing between broadcasters results in duplication (Armstrong & Weeds, 2006).
The Nature of China’s Television Industry
Before digging deeper into the programme format duplication issue, it is important to study the Chinese television industry first. It should be noted that over the past decades, the Chinese television programming industry has experienced many changes which had long-term effects on the industry. Competition between television networks is China is more intense now compared to previous decades. International companies are now participating more actively in the Chinese television industry, making competition for viewership stronger. Currently, ninety-four percent of the Chinese population have access to television. However, there are only few major players who are able to gather the biggest percentage of audience share. Another development in the Chinese television industry is the penetration and threat of new media formats for viewership. Among these new media formats are the internet, mobile devices such as cellular phone TV and IPTV. Over the recent years, a boom in the television industry was experienced, with more and more television channels exploring different opportunities, introducing new program formats, employing different technological and management innovations just to win more audience share. Television stations are introducing innovative and original programmes just to attract customers.
The television industry in China has undergone major changes over the decades. From becoming heavily reliant on the government, television programmers have become more and more dependent on advertising revenue. As a result, television operators aim to attract wider viewership in the hopes of attracting more advertisers. Advertising revenue and ratings has become a stimulus for television operators to improve their broadcast and cater to the desires of the general public. The television industry in China is different from most other countries’ in that there are only two national television networks in China which are CCTV and China Educational Television. The number of provincial and local television networks in China is also unique – reaching up to 368 all in all. . Considered as one of the biggest changes in China’s television industry is the change of the major source of program funding from government subsidies to advertising revenues. As government funding for television is less abundant, TV channels are forced to raise income on their own, and, consequently, they rely mainly on advertising revenue and sponsorship. IN recent years, advertising grew as the main source for television funding. Aside from competing for advertising revenues, television networks also compete with other media formats. . There is competition among TV,radio, and printed media. There is also competition between TV stations, channels and programs. Journalists compete for exclusive news sources and prime time slots for their own programs.
Local TV stations are now also able to compete with national televisions networks through satellite or cable network broadcasting. Because of this, the Chinese viewers are offered with many choices for their viewing pleasure. In order to gain an edge over competitors, TV stations must constantly review programming strategy to strike a balance between professional standards and high quality programs.
Another big change that happened in the Chinese television broadcasting industry is the importance that is now given to audience ratings. Historically, since television programming in China were funded by the government, no importance was given to audience ratings. This changed however, when the funding for television programming shifted from the government to advertisers. Because of intense competition, even the national network, CCTV, is aiming for the largest audience share. CCTV constantly reviews its programs and their ratings. If a program shown in prime time is not able to attract the required viewership, it will be removed from primetime to the late evening programming (Xiaoping, 2001). Now that the number of the middle class citizens in China has grown, most businesses, including television networks, aim for this demographic group. This demographic group is more able to access the international community. They are the same with the residents of Singapore, Taiwan and San Francisco in their lifestyle choices。They have high-disposable incomes and stable jobs, live in a coastal city, work for a commercial firm or private company, and are between the ages of 25 to 45. The new Chinese audience is hip, fun, young and wants to be entertained. They are motivated by money and aspire to better living standards, spending money, winning job promotions, and enhancing their knowledge. They want to entertain themselves in style, in high quality, and are no longer just content with belting out karaoke songs every night. In viewing habits and tastes, there exists a North-South divide. China is not a single, homogenous country. Southern Chinese like Qing Dynasty dramas whereas Northerners go for news, sports and more factual programs. There is greater income and diversity in southern China, and general disdain for CCTV programming. More than 50 percent of viewers in Guangdong province and Shenzhen tune in to TVB Jade or ATV, the two Hong Kong free-to-air channels broadcasting in Cantonese (Graham, 2002).
In investigating the issue of programme format duplication in Chinese television industry, it is best to consider the characteristics of the industry which are likely to contribute to this phenomenon. The uptake of the format as a template for content development is directly related to the relative adolescence of the Chinese television industry and producers’ attempts to come to terms with supply-demand economics. The cloning of formats is also related to the vast scale of the Chinese television landscape, a fact that makes effective administration difficult. There are more television stations in China than any other country in the world, approximately 980 terrestrial stations and over 1300 cable stations. There are also over 30 provincial satellite channels. These are organized on four administrative levels – national (CCTV), provincial, city, and county (mainly relay stations). The sheer number of broadcasters concentrated in a crowded and chaotic market leads to an extremely supply driven and imperfect market scenario with the bulk of broadcasters recycling poor quality, low-production-value television dramas and cheap game shows that deliver moderate audiences. This is in effect a legacy of decades of state control over media industries by which cultural bureaucrats exercised surveillance over form and content. It is also a legacy of a system that has tied production units to their perspective parent broadcaster, obliging the unit to produce for that station’s viewers. The effect has been a stagnant and carnivorous production environment, devoid of any real innovation. Like the Chinese reform economy in general the television industry provides evidence of ‘duplicate construction’. In other words, everyone rushes in and produces the same kinds of products and targets the same markets within a particular locality. This structural isomorphism along with the fact of ‘miniaturisation’ (the small scale of many stations) means that there are many under-capitalized television stations that have no real option than to barter similar programs (Keane, 2002).
The emergence of a competitive culture within television management and the more recent consolidation of larger players have led to a shift from supply towards demand. This has been augmented by the increased interactivity of television viewing in China. Whereas smaller stations maintain a steady supply of content through bartering, many of the larger provincial and metropolitan broadcasters are learning that the fundamentals of supply and demand are intricately related to pricing mechanisms that in turn depend on the regulation of scarcity. That is, when a program is widely circulated or plagiarized, the market value of the original generally diminishes (Keane, 2002).
Entrance of Foreign Media
The accession of China to the World Trade Organization in 2001 opened a new chapter not only for the nation’s international relations, politics and economy, but also in different industries in the country. China’s entrance to the WTO gradually made the government to open its doors to foreign market. The media market, is among the Chinese markets that was opened to the world. With the increasing degree of openness, a large number of foreign media organizations and companies attempt to enter the Chinese media market. Towards the end of 2001, three foreign media television channels were allowed by the Chinese government to broadcast in China – CETV (owned by AOL Time Warner), Phoenix Satellite Television (owned by both Today’s Asia and News Corp) and Star TV (owned by News Corp). This was remarkable because it was the first time that the government allowed foreign networks to broadcast locally. Despite of their limited entry only to Guangdong Province and the Pearl River Delta Economic Zone locating at southern China, this event has caused large ripples throughout the whole Chinese media industry. There were more foreign television channels that were allowed to broadcast in China. Furthermore, in 2004, the State Administration of Radio Film and Television enacted another two regulation policies to allow foreign media in China through more diverse formats. Because of these changes, The Chinese television industry continues to undergo transformations. Joining WTO is a significant turning point in China’s television history. The allowances mentioned above not only indicate a gradually-open media market in China, but also suggest a significant change of governmental attitude toward foreign investment. The enacted regulations in 2004 made two breakthroughs: it is the first time for Chinese government to allow foreign media entering local broadcasting system which can be viewed by a large number of domestic local audience, rather than limited to 3-star above hotels and foreign affair offices as previously regulated; It is also the first time to allow foreign capital entering into the broadcasting production area in China which is tightly controlled before and sensitive for overseas investment (Xinhua, 2004 cited in Minhua, 2008).
Since many foreign media giants have entered China, some commentators argue that mass Western media products transmitted by these media giants will bring along a heavy challenge or even a damage influence on local culture. Contrary to this belief, instead of becoming destructive to the local television industry, the entrance of foreign television channels have been constructive. Minhua (2008) argues that in recent years, imported television programs have been found losing their charm among the Chinese viewers. Locally produced television programs on the other hand, were found to be more favoured by the Chinese viewers (Lu, 2003). Audiences show an obvious preference for local content as they can easily understand the language and may feel more comfortable while watching those programs with similar cultural background. Translating English programs or any other programs with different language is not satisfying for Chinese audience. It has also been found that most of the popular programs in China tend to be the locally or regionally produced dramas and television series. Because of this, many foreign television channels are forced to localized their operations and contents. For example, STAR TV, which attempts to expand business in Asia has realized that it needs to cater to the local taste of the viewers. To do this, they hire local actors, launch domestic branches, open Mandarin-language television channels, and produce local-taste television programs for the viewers. Nowadays, more and more global television broadcasters adopt the strategy of localization through setting branches in local market, hiring local actors, collaborating with local producers as well as making contents more localized. Imported programs always have been modified to cater to local tastes. Even some of them have been re-produced to better fit in the domestic market.
Minhua (2008) argues that instead of having adverse impacts on the local television industry, the introduction of foreign television channels and programs has been more advantageous. He laid his reasons as:
1. Foreign programs offer opportunities for reflexive awareness – according to Minhua, the Chinese viewers are not just passively receiving meanings. They are very active and critical during the reception process. Being exposed in many Hollywood movies does not equate to being influenced by the American culture. Instead of embracing the American culture, Chinese viewers undergo reflexive awareness. Reflexive awareness is a new type of bonding and solidarity as well as a new way of shaping cultural identity. Exposure to a large number of unfamiliar images has resulted in increase in reflexive awareness. Studies in China, Korea, and Japan found that the opposition to US culture has been engendered by being exposed to American television shows and hence evoked a protective attitude toward local culture. The purity of cultural identity, until now, is still a contested issue. Nevertheless, it cannot be denied that recipients have also been urged to reflexively consider about their own identifications while facing increased importation of foreign cultural products. National or regional consciousness rather than a homogenous global identity has been enlarged as the exposure to other cultures speeds up. Despite some quite visible evidences of cultural homogenization as part of Chinese lives, like westernization and Americanization, people do not feel a reduced sense of membership in their groups, instead, feel much stronger.
2. Localization is a form of cultural adaptation – cultural adaptation according to Minhua is not just the simple addition of Chinese subtitles for foreign programs, but also the active devotion into the local cultures made by transnational broadcasters. Chinese subtitles is not enough for a foreign program to attract the Chinese viewers. In order to produce and shoot 100% locally in China, they actively delved themselves into local cultures and even hoped to thoroughly penetrate through the employment of totally domestic materials, including production groups like producers, performers, directors as well as original scripts and scenes. The contents are purposely produced to cater for local taste, full of native cultural factors and background. From economic perspective, the large amount of foreign capital brought by foreign media giants can contribute to the prosperity of local media market since local media companies could benefit from the competition through cooperation with foreign ones. In fact, this is also the consideration of the Chinese government when it opened its doors to foreign media companies. Local media industries can improve their capacities and enhance the quality of their programs through competition. On the other hand, as a result of the localization strategy adopted by foreign media companies, their media products have been embedded with a strong local cultural taste, which constitute little destructive influences on local culture but many constructive influences instead.
Economics of Television and its Impact on Program Format Duplication
The Beebe Model
Steiner’s model can be best applied in scenarios where the second choice of viewers is to not watch the program available. But what if there are different choices for viewers and they rank their preferences. The viewing and non-viewing criterion in Steiner’s model will not be applicable. In situations like this, it is more useful if the measure that will be used not only counts the number of viewers but their preferences as well. Because of this, Jack H. Beebe, designed a new model that will accommodate the viewers’ different preferences. Beebe’s model (1977) is considered as more general and has a number of measures that can be used to gauge viewer satisfaction. In this model, the number of viewers who receive their first choice, second choice, etc., are totalled. Then a comparison between monopoly and competition regarding the number of viewers who receive their first choice. Comparison are also made regarding which between monopoly and competition satisfies more first choices. Also comparison is made based on the number of viewers for each structure and which structure gives the higher-ranked programs (Owen & Wildman, 1992).
To illustrate consider the case of television news. Assume that there are three types of television news viewers: those who prefer soft news programs, those who like a mix of hard and soft news topics, and those who want programs with high levels of public affairs content. The returns for capturing these viewers will depend on how much advertisers are willing to pay, which is based on the demographics of those watching. A programmer deciding on the level of public affairs coverage to offer in a news program will consider the number of viewers attracted to that type of information, the value advertisers place on these viewers, and the number of channels contending for viewers’ attention. Profits for a given news program will also depend on the costs of assembling the information and producing the stories, which may vary by type of news product. There are a finite number of channels contending for viewer attention, a limit derived from the combination of technology and regulation involving spectrum signals and cable channel capacity. For example, a news producer would have to choose between low, medium or high levels of public affairs content. In most cases, if the news program is financed by advertisers, the news producer will choose the level of public affairs content that is expected to yield the highest profits. Therefore, each channel will be able to offer different news programs format with the goal of gaining profits. If a certain channel’s news programming format yields the least profits, that channel can choose to switch to a different genre, often that which yields the highest profits. This model offers different predictions about news programming(Hamilton, 2004).
Sources of Finance for Television
Basically, there are three main sources of funding for television. These are: through taxation, advertising, or direct payment from the viewers for viewing the programs offered. If the funding comes from taxation or through licence fee can be a challenging since the broadcaster is not compelled to offer the programs that the viewers want but their own preferences. In a taxation-financed television network, the television channel can be tempted to substitute their own preferences to the preferences of the viewers since offering the programs preferred by the viewers will not result in any financial gain to the television channel (Bishop et al, 1995). In this kind of set-up the viewers have no power or influence over the broadcast company. On the other hand, the advertising-financed television network has a big difference from the tax-financed one. Programs are offered to the audiences for free and then the viewers are sold to advertisers. The advertisers in order to attract consumers place their advertisements in television programs with pay. Because of this, the television channel profits from advertisements. The more viewers watch a given program, the more advertisers will be compelled to advertise on that program and the more the television channel will profit.
The problem arises in the fact that in this kind of set-up the advertisers act as intermediaries between the viewers and the broadcasters. Since the television channels get their funds from the advertisers which based their decisions on the audience size. Oftentimes what is watched by more viewers is valued by the advertisers but most of the times, what is more viewed is not what the viewers truly prefer. Because of this, the television channel will be forced to offer programs that are viewed by larger audiences but not necessarily preferred by them. This happens when the viewers have no substitutes or there are no varieties among television programs. The result is that the viewers are pushed to choose their second preference. This is called the “lowest common denominator” programming. Another problem attributed to the advertisement-funded television program is the threat that the most-viewed program will be duplicated by other television channels. This idea was put forward by Steiner is his assertion that a limited number of competing television channels will offer similar programs designed to attract the same mass audience, thereby neglecting what the minority of the audience population prefers. However, according to Steiner, when there are more number of television channels that offer programs for viewers, the number of program types that are ignored become lesser, although this does not ensure that duplication will not happen. In the advertising-financed television industry, the televisions channels are often after audience share. Because of this, television channels have more incentive offering programs that cater to the majority rather than offering programs for the minority.
The three conventional sources of financing for broadcasting according to Withers (2002) are advertiser payment, audience payment and government or community subvention. In the case of advertiser support, programs are supplied free of direct charge to the audience. The audience in turn is sold wholesale to advertisers who seek, by attachment of their messages to the programs, to inform or persuade consumers in regard to their products and services. The ultimate incidence of payment depends upon the extent to which advertising costs can be passed on in product prices to consumers of the advertised goods and services. On the other hand, in cases where direct payment from the audience is involved, the audience shoulder the payment for the programs and services they require from the television channel or a cable network. Oftentimes, the viewers are on subscription arrangements and pay for the programs that they prefer.
Regulation of Television Content, Production, and Distribution in China
Regulation of Broadcasting Programs
Though there are hundreds of television stations and dozens of satellite television channels in China, the domestic market remains rather monopolistic. Since 1995, program management has become more standardized. All imported cable television programs, approved by the Ministry’s Social Bureau, must be notified with an approval number at the beginning of the program. Although the production of domestic television drama has been partially taken over by the private sector, a single authorized state corporation – China International Television Corporation, a subsidiary of CCTV – has the exclusive right to import foreign films and television programs. The Corporation not only controls imports and exports, it also distributes domestic programs to provincial corporations for them to sell to local stations. In short, it operates both as a syndicated distribution system, and a monitor of the Chinese market in which most products are television dramas.
Franchise Culture
The idea of business franchising is predicted on an arrangement between the owner of a concept who enters into a contract with an independent actor to use a specific model to sell goods of services under the former’s trademark. This approach to franchising involves a set of procedures, designs, management approaches, and services that are to be delivered exactly as specified by the franchisor. Franchising is observed in the international transfer of TV program formats, which is nor formalized by international agreements on protocols, even if some of these protocols and processes are from time to time glossed over in the rush market. Process include a deliberate generation of value-adding elements, format marketing arrangements, licensing protocols, and a form of self-regulation within the industry administered by an industry association
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