Cultural exchange
Cultural exchange
Oct 25, 2005
NEW YORK -- Viacom Inc. chairman and CEO Sumner Redstone has traveled to China often and mingled with its power brokers over the years.
The relationships he has built have allowed the entertainment conglomerate he controls to expand its reach in China's fast-growing media market and to start turning a profit.
Even the company's beloved animated character SpongeBob SquarePants is getting ready to debut in the country on state-run broadcaster China Central Television's CCTV Children's Channel (HR 10/18). "SpongeBob SquarePants" is expected to launch in China on or around Dec. 28, the one-year anniversary of CCTV Children's Channel.
Redstone, during a recent wide-ranging interview, talked about the company's China strategy, recent regulatory changes and possible future ventures.
He is eyeing another visit to the country next year. By that time, the company is expected to have split into two entities -- Viacom Inc. and CBS Corp., both of which will remain focused on expanding in China, he says.
Redstone, whose most recent trip to China was in September 2004, is expected on his next touchdown in the country to meet more representatives of the current government leadership and looks to reassure China's political and business elite that Viacom sees itself as a partner to enable cultural exchanges.
For example, he has not met China President Hu Jintao, but he was friendly with former President Jiang Zemin. "When I was there last, I didn't get to meet (Hu)," Redstone says. "But I did have lunch with his son. We'll make it our business to meet everybody in a nonintrusive way."
His absence from China during the past year-plus doesn't mean Redstone has neglected his Chinese partners and contacts.
"In the last year, there were at least three or four delegations of Chinese government officials and businessmen who have come to my home in California," he says. "That's where you build strong relationships with economic implications."
Asked about recent signs that the Chinese government has started restricting access for foreign media companies, Redstone expresses a more diplomatic take on the situation than, say, fellow media mogul Rupert Murdoch, chairman and CEO of News Corp., who has recently more openly expressed some frustration about the Chinese leadership.
"We lived in an era where regulatory restrictions were being relaxed," Redstone says. "I got to know everybody in radio, television and so on in China and to know them well. So it's been very open. Now ... we see that the tendency seems to be the opposite direction -- more restricted."
Besides press reports, Redstone says Viacom gets guidance on regulatory trends from its employees in China and particularly from Li Yifei, managing director of MTV China, senior vp of MTV Asia, chief representative Viacom China. She is widely respected as one of China's most powerful media mavens.
Says Redstone: "(Li) leads the throng, and she knows everybody. My job is to know everybody she knows."
However, he says Viacom hasn't had to give up on any business plans or give up existing ventures in the new regulatory environment. "So far, Viacom has not suffered any bad consequences, but we'll work together, cooperate with the Chinese government to see if they have any concerns, to see how we can satisfy them," Redstone says.
Part of the reason Viacom has eluded a regulatory crackdown may be its focus on providing pure entertainment content.
Market awareness
"We make it a practice of not broadcasting material that we know would be offensive," Redstone says. "So we haven't had really any bad experiences there. Naturally, if we want to be guests and if we want to work cooperatively in China, we would tend to avoid subjects that would be controversial in China. We're not a news broadcaster. Our programming is not political; it's entertaining. So we don't really have a problem in that area. Let the news broadcasters, like one of my unnamed friends, worry about that subject matter."
With President Bush set to visit China next month, entertainment industry executives will watch closely if he presses China on piracy or other issues that have brought them headaches.
But when asked which issues he would like the president to raise, Redstone says he won't make any political calls: "I don't think President Bush needs me. Of course, he could use me, because I know a lot about China. I'll bet I've been there a lot more times than he has and know the people more intimately. But I think he's smart enough to know the subjects he wants to discuss."
In a gesture signaling that there are no hurdles to an open dialogue between Viacom and the Chinese government, Viacom sponsored a keynote speech in Washington this month by China Minister of Culture Sun Jiazheng as part of the Kennedy Center Festival of China, a monthlong celebration of Chinese culture and the arts in the nation's capital.
It was Redstone, who had met the minister on previous trips, who introduced him at the event.
He expresses optimism that newer Chinese ministers also will grow more comfortable with U.S. media companies, particularly Viacom.
"The government has changed. Different ministers have different points of view," Redstone says. "Some of them haven't gotten to meet the American media and the foreign media to the extent that the old government did. It was easy for (former President) Jiang Zemin to be friendly. He knew us very, very well. We were with him so often. So I feel that in the long run that (relationship with the new government) will evolve in a productive way."
Viacom officials have made sure in their interactions with Chinese government officials and business partners to emphasize more than just near-term dollar gains for the entertainment conglomerate.
"We take a long-term view of China," Redstone says. "I have been going there over the past 10 years, and my main motivation has to be to build relationships of trust and friendship with Chinese officials and Chinese companies."
While bringing its global media brands to the vast Asian nation, the company has worked hard to not be seen by Chinese consumers and officials as a force of U.S. cultural imperialism.
"It's all based on mutual respect," Redstone says. "We have great respect for their music. We have great respect for their culture. ... We create music with local people for local audiences respecting local culture. I think that's one of the reasons that we have been so successful in China. ... The Chinese always respect people who respect their heritage and their culture."
While many entertainment CEOs have traveled to China, Redstone feels he has earned a particularly strong standing in the country thanks to consistent exchanges with the Chinese.
"I have often been referred to by Chinese officials as China's ambassador to the rest of the world," he says. "That's something I've worked for, and it's genuine, because we truly want to be in that position. We want Viacom to become a vehicle for cultural exchange between China and the rest of the world."
Speaking of exchanges, industry executives often wonder how difficult it is to make oneself understood as an American doing business in China.
"A lot of Chinese speak English, and a lot is translated," Redstone says.
Viacom's presence in the country has always been very focused on TV product, but the film, outdoor advertising, Internet and mobile phone businesses could well play a larger role down the line, he says.
"The overarching strategy is simple," Redstone says. "We recognized very early in the game that 98% of the world's television audience is outside the United States."
More than 1.3 billion people reside in China. Of that, there are 340 million TV households, according to recent estimates from Austin-based IMS Research.
"China is the world's largest television market," Redstone continues. "When you see that, you recognize that means huge growth potential, particularly for youth-oriented brands like Viacom's."
Brand awareness
With 22.9% of China's population being younger than 15, according to the 2000 China census (which is conducted every 10 years), the market has particularly strong appeal for Viacom's young cable network brands, such as MTV and Nickelodeon.
"From a Viacom standpoint, China is fundamental to any global strategy," Redstone says.
Guided by this belief, Viacom a few years ago launched the 24-hour MTV China channel that is mainly available in the southern province of Guangdong and has continually expanded its reach. It was available in about 10 million homes after another such expansion announced in September 2004, and Redstone believes there is an even broader audience to be tapped. "We expect to triple distribution over the next year," he says.
Redstone says he is proud of the original programming on MTV
China, particularly "Tian Lai Cun," which is one of the network's trademark shows, mixing videos, artist profiles and music news segments.
Making connections
Beyond the fully branded MTV China network, Viacom's MTV Networks unit has, over time, managed to get MTV and Nickelodeon into Chinese households via a cornerstone of the company's China strategy -- namely partnerships with local firms.
Viacom's key partners in China read like a who's who of the country's media elite. Among them are CCTV and Shanghai Media Group, one of the country's largest media conglomerates. (SMG and VNU, parent company of The Hollywood Reporter, have recently signed a strategic cooperation agreement to develop projects together in China.)
Just like in the U.S., such deals tend to come about after various informal and formal conversations with company officials, according to Redstone. Asked, for example, how Viacom ended up picking SMG as a partner, he says, "We had met them first socially -- at dinners and so on -- and then we sat down and we worked out a deal."
The cooperation agreement with SMG early on included the syndication of MTV and Nickelodeon programming on SMG channels and the co-production of the MTV Style Awards.
That partnership worked well enough to be expanded last year.
In March 2004, Viacom and SMG unveiled a newly formed joint venture that saw Viacom take an equity stake in SMG. This was hailed by Viacom as the first deal in which a major U.S. entertainment outfit took a stake in a major Chinese content firm.
"We're very pleased with that deal," Redstone says, "because it was a particular honor for Viacom since no other (major) foreign (media) company yet had been permitted to have an equity interest." (Sony Corp. has an equity television joint venture with Hua Long, a unit of the state-run China Film Group, that also was approved. While Viacom was the first to announce its deal, which company's formal approval came first is a matter of some debate in industry circles.)
The venture led to the launch in May of children's programming in Shanghai on SMG's Oriental Children's Channel, with the co-produced, co-branded programming block HAHA Nick. The block has done well in the ratings with Nickelodeon content such as puppet shows "Little Hand Oobi" and "Magic Castle" and the live-action hosted studio show "HAHA Nick Weekend Play."
The HAHA Nick block, which airs seven days a week, reaches about 3.5 million households in China's second-biggest city after Chongqing.
Redstone is happy with the performance of the block to date. "It's going very well," he says.
When Nickelodeon's animated program "CatDog" went on air in May on the newly launched CCTV Children's Channel, it earned a Nielsen Media Research rating of 10 in Beijing.
One Nielsen ratings point represents 65,470 viewers in Beijing, which means that when "CatDog" achieved a 10 rating, it was seen by 654,700 people living in China's capital, where the total TV universe, as measured by Nielsen, is 6,547,000 potential viewers. (Nielsen is owned by VNU, parent company of THR.)
CCTV Children's Channel reaches 120 million homes and Nickelodeon programming is on for two hours every day, Li says, adding that "The Wild Thornberrys" got a Nielsen rating of 8 in Beijing when it launched in August. ("CatDog" and "Thornberrys" are not currently airing.)
"The concepts of our shows that we've created here (in the U.S.) travel in China and around the world -- even though the language is different," Redstone says. "The kids love 'CatDog.' The kids love 'Thornberrys.' The Chinese kids will go crazy for 'SpongeBob.' "
Viacom's CCTV connection runs much deeper though.
On Sept. 10, the two partners co-produced the first-ever CCTV-Nickelodeon Kids' Choice Honors, in Beijing's Tian Qiao Theatre. The awards aired later in the month on several CCTV channels that reach into more than 300 million Chinese homes. The show is expected to become an annual fixture.
In a long-standing deal with CCTV, Viacom also has co-produced the popular CCTV-MTV Music Honors show, which hands out awards to musical talent from mainland China, Hong Kong, Taiwan and other parts of Asia.
That annual event, whose seventh edition took place in late July, has aired on various CCTV channels in China, is broadcast to all of MTV's more than 180 million TV households across Asia and also is made available to all MTV channels worldwide, which reach more than 400 million TV households globally.
Viacom's MTV China runs music programming in Guangdong as well as in Hong Kong and in hotel and luxury housing compounds on the mainland reaching a total of about 10 million households. (Its reach is broader, to 138 million households, when it syndicates locally produced programming to cable channels across China.)
Beyond the CCTV and SMG relationships, Viacom also has created other partnerships with Chinese companies that Redstone believes will have further upside over time.
For example, in September 2004 Viacom unveiled a strategic partnership with Beijing Television for Chinese content production in the music and entertainment areas.
While the two haven't made big splashes with major production news to date, the relationship gives Viacom another connection with an industry heavyweight in China.
In more technology-heavy deals, Viacom last year entered a strategic alliance with one of China's leading computer firms, Tsinghua Tongfang, to pursue opportunities for content and other partnerships in the digital, broadcast and other arenas.
And during the spring, the company started offering MTV-branded content to the more than 200 million subscribers of China Mobile, the country's largest cell phone service provider.
Customers are able to access MTV-produced music charts and entertainment news as well as download music ringtones and ringback tones, according to a company statement earlier in the year.
Redstone didn't detail how well this business has been doing so far but says it has the potential to be "enormous."
He declines to provide details of the financial performance of his conglomerate's operations in China.
"We are profitable," he says. "We have turned profitable relatively recently, but the profits are increasing now."
Expanding on the topic, he says: "It's taken a long time. And the reason it's taken a long time was our emphasis. We always take a long-term view, and I certainly have (done that) all my life. I concentrate not so much on the money part but on the relationship part. Now, we have those relationships, and those relationships will enhance, and are now enhancing, our ability to move ourselves forward economically in China."
The major media conglomerates traditionally don't break out their financials by country. Asked how much revenue China brings in for Viacom per year, Redstone will only say: "I know, and it is increasing. But I'm not allowed to give you the number."
Emerging areas
Even after the current Viacom splits into two, as is planned to happen by year's end, Redstone is expected to lead the China charge of the new Viacom and CBS Corp., which will be headed up, in CEO positions, by current Viacom co-presidents and co-chief operating officers Tom Freston and Leslie Moonves, respectively.
While the new Viacom is likely to continue to have the bigger exposure to China thanks to its ownership of the MTV Networks unit, Redstone says CBS could well surprise some.
"You never know because Les is very entrepreneurial, and he's indicated to me he's going to find ways to be a big businessman in China and everywhere else," he says.
For example, CBS will be in charge of a recent venture into the Chinese outdoor advertising market.
The Viacom Outdoor unit late last month unveiled an agreement to acquire a 70% controlling stake in Magic Media, which sells advertising rights on the Beijing bus system, with an option to buy the remaining 30% in five years. Financial details weren't disclosed at press time.
"We have a group of people working in China now to exploit opportunities because this is a great business," Redstone says. "The outdoor business is no longer just our outdoor business in the United States and in Mexico and in Canada. We've taken about 12% of the European market, we're looking at billboard companies in many parts of the world, and we have a whole crew working in China. That's a possible new (growth) business for us in China."
Also a possibility for CBS is a future theme park in China, which at least one region in China has suggested.
"When I was in Changsha (the capital city of Hunan province) last time, the governor of Hunan talked to me about all kinds of joint ventures. (Among other things), he also talked about the possibility -- only the possibility -- of a theme park."
The piracy issue
For the post-split Viacom, one of the things it may have to decide is whether to explore film business opportunities in China. The fight against piracy and for increased market access -- both tangled up in competing government bureaucracies -- are prime among the hurdles that have kept the company from pursuing an aggressive film and home video strategy to date.
"There are several issues," Redstone says. "Much of what we produce in the United States would not be acceptable in China. Secondly, and very important from our standpoint: piracy."
The Chinese government is doing more against piracy now than in the past, he says, hinting that still more needs to be accomplished.
"I gave a speech on this a year or two ago in China," Redstone says. "The basis of the speech was, if you want an entertainment industry, you're going to have to pay attention to piracy. Because if people will produce for you, the writers and so on, they're not going to produce material to see it get stolen. So there has to be a new emphasis on piracy in China."
That said, top SMG brass on a recent U.S. visit discussed with Redstone and people at Viacom unit Paramount Pictures possible ways to jointly produce Chinese movies or make movies in China, according to Redstone.
"But I have nothing that I can report on that yet," he says.
The future
Something that has been in the works for several months, meanwhile, is the planning for Viacom's tie-ins with the Summer Olympics coming up in China in 2008, according to Redstone.
"We plan to be a participant there," he says. "We will be running concerts."
Pressed for more details, he says the concerts taking place during the Olympics could be broadcast on MTV and the channels or stations of other potential TV partners. The concerts are scheduled to feature "largely Chinese music but also international stars," he says, without providing more insight.
The new Viacom also has suggestions for a possible new educational channel in China on the table.
SMG officials have said they are impressed with Noggin, which targets U.S. preschoolers and their parents.
"We would seriously consider (such a channel in China), if given the opportunity," Redstone says. But he declined to speculate if and when such a decision would be made.
Finally, Redstone indicates there could be a consumer products business in China for Viacom, even though no decisions have been made on that front. "We may even do some consumer products work with China Central Television," he says. "They suggested that last time, and that could be a major business for us in China."
Either way, Viacom's roughly 100 employees in China, working out of offices in Beijing, Shanghai and Guangzhou, have been busy.
Just as busy as their boss is when he visits the country.
"When I'm in China, almost every night a banquet is given for me and my wife, Paula, by Chinese officials," Redstone says. "When I go there, I truly go damn close to 24 hours a day."
So, what special insights and tips can the Viacom boss share with industry executives who haven't done business in China before?
Redstone suggests that while some aspects of business culture are different in China, certain behavior will lead to success in both China and the U.S.
For example, he emphasizes that Chinese businesspeople are "very concerned with status, with title" and with hierarchy. "But, generally speaking, behaving in a decent, considerate way is important (in the U.S.) and in China," he adds.
"As long as you follow your own rules of kindness and tolerance and decency and respect for their views, I don't think you'll have any (problems)."
He also feels that U.S. businesspeople who have never traveled to China tend to underestimate the lifestyle in the country's big cities and people's level of sophistication.
"I think China is very much misunderstood around the world," he says. "When you walk down the streets in China ... the people are happy, they thrive, they're going into shops. I know they don't have a democratic government like we do, but you have the sense of democracy and capitalism."
He adds: "I am well aware of the fact that there are human rights issues in China that have created controversy with other countries in the world. But, for us, we are treated so well in China. China is a destination point for Viacom. It's critical to our global strategy."
Jonathan Landreth in Beijing and Alex Woodson in New York
contributed to this report.
The relationships he has built have allowed the entertainment conglomerate he controls to expand its reach in China's fast-growing media market and to start turning a profit.
Even the company's beloved animated character SpongeBob SquarePants is getting ready to debut in the country on state-run broadcaster China Central Television's CCTV Children's Channel (HR 10/18). "SpongeBob SquarePants" is expected to launch in China on or around Dec. 28, the one-year anniversary of CCTV Children's Channel.
Redstone, during a recent wide-ranging interview, talked about the company's China strategy, recent regulatory changes and possible future ventures.
He is eyeing another visit to the country next year. By that time, the company is expected to have split into two entities -- Viacom Inc. and CBS Corp., both of which will remain focused on expanding in China, he says.
Redstone, whose most recent trip to China was in September 2004, is expected on his next touchdown in the country to meet more representatives of the current government leadership and looks to reassure China's political and business elite that Viacom sees itself as a partner to enable cultural exchanges.
For example, he has not met China President Hu Jintao, but he was friendly with former President Jiang Zemin. "When I was there last, I didn't get to meet (Hu)," Redstone says. "But I did have lunch with his son. We'll make it our business to meet everybody in a nonintrusive way."
His absence from China during the past year-plus doesn't mean Redstone has neglected his Chinese partners and contacts.
"In the last year, there were at least three or four delegations of Chinese government officials and businessmen who have come to my home in California," he says. "That's where you build strong relationships with economic implications."
Asked about recent signs that the Chinese government has started restricting access for foreign media companies, Redstone expresses a more diplomatic take on the situation than, say, fellow media mogul Rupert Murdoch, chairman and CEO of News Corp., who has recently more openly expressed some frustration about the Chinese leadership.
"We lived in an era where regulatory restrictions were being relaxed," Redstone says. "I got to know everybody in radio, television and so on in China and to know them well. So it's been very open. Now ... we see that the tendency seems to be the opposite direction -- more restricted."
Besides press reports, Redstone says Viacom gets guidance on regulatory trends from its employees in China and particularly from Li Yifei, managing director of MTV China, senior vp of MTV Asia, chief representative Viacom China. She is widely respected as one of China's most powerful media mavens.
Says Redstone: "(Li) leads the throng, and she knows everybody. My job is to know everybody she knows."
However, he says Viacom hasn't had to give up on any business plans or give up existing ventures in the new regulatory environment. "So far, Viacom has not suffered any bad consequences, but we'll work together, cooperate with the Chinese government to see if they have any concerns, to see how we can satisfy them," Redstone says.
Part of the reason Viacom has eluded a regulatory crackdown may be its focus on providing pure entertainment content.
Market awareness
"We make it a practice of not broadcasting material that we know would be offensive," Redstone says. "So we haven't had really any bad experiences there. Naturally, if we want to be guests and if we want to work cooperatively in China, we would tend to avoid subjects that would be controversial in China. We're not a news broadcaster. Our programming is not political; it's entertaining. So we don't really have a problem in that area. Let the news broadcasters, like one of my unnamed friends, worry about that subject matter."
With President Bush set to visit China next month, entertainment industry executives will watch closely if he presses China on piracy or other issues that have brought them headaches.
But when asked which issues he would like the president to raise, Redstone says he won't make any political calls: "I don't think President Bush needs me. Of course, he could use me, because I know a lot about China. I'll bet I've been there a lot more times than he has and know the people more intimately. But I think he's smart enough to know the subjects he wants to discuss."
In a gesture signaling that there are no hurdles to an open dialogue between Viacom and the Chinese government, Viacom sponsored a keynote speech in Washington this month by China Minister of Culture Sun Jiazheng as part of the Kennedy Center Festival of China, a monthlong celebration of Chinese culture and the arts in the nation's capital.
It was Redstone, who had met the minister on previous trips, who introduced him at the event.
He expresses optimism that newer Chinese ministers also will grow more comfortable with U.S. media companies, particularly Viacom.
"The government has changed. Different ministers have different points of view," Redstone says. "Some of them haven't gotten to meet the American media and the foreign media to the extent that the old government did. It was easy for (former President) Jiang Zemin to be friendly. He knew us very, very well. We were with him so often. So I feel that in the long run that (relationship with the new government) will evolve in a productive way."
Viacom officials have made sure in their interactions with Chinese government officials and business partners to emphasize more than just near-term dollar gains for the entertainment conglomerate.
"We take a long-term view of China," Redstone says. "I have been going there over the past 10 years, and my main motivation has to be to build relationships of trust and friendship with Chinese officials and Chinese companies."
While bringing its global media brands to the vast Asian nation, the company has worked hard to not be seen by Chinese consumers and officials as a force of U.S. cultural imperialism.
"It's all based on mutual respect," Redstone says. "We have great respect for their music. We have great respect for their culture. ... We create music with local people for local audiences respecting local culture. I think that's one of the reasons that we have been so successful in China. ... The Chinese always respect people who respect their heritage and their culture."
While many entertainment CEOs have traveled to China, Redstone feels he has earned a particularly strong standing in the country thanks to consistent exchanges with the Chinese.
"I have often been referred to by Chinese officials as China's ambassador to the rest of the world," he says. "That's something I've worked for, and it's genuine, because we truly want to be in that position. We want Viacom to become a vehicle for cultural exchange between China and the rest of the world."
Speaking of exchanges, industry executives often wonder how difficult it is to make oneself understood as an American doing business in China.
"A lot of Chinese speak English, and a lot is translated," Redstone says.
Viacom's presence in the country has always been very focused on TV product, but the film, outdoor advertising, Internet and mobile phone businesses could well play a larger role down the line, he says.
"The overarching strategy is simple," Redstone says. "We recognized very early in the game that 98% of the world's television audience is outside the United States."
More than 1.3 billion people reside in China. Of that, there are 340 million TV households, according to recent estimates from Austin-based IMS Research.
"China is the world's largest television market," Redstone continues. "When you see that, you recognize that means huge growth potential, particularly for youth-oriented brands like Viacom's."
Brand awareness
With 22.9% of China's population being younger than 15, according to the 2000 China census (which is conducted every 10 years), the market has particularly strong appeal for Viacom's young cable network brands, such as MTV and Nickelodeon.
"From a Viacom standpoint, China is fundamental to any global strategy," Redstone says.
Guided by this belief, Viacom a few years ago launched the 24-hour MTV China channel that is mainly available in the southern province of Guangdong and has continually expanded its reach. It was available in about 10 million homes after another such expansion announced in September 2004, and Redstone believes there is an even broader audience to be tapped. "We expect to triple distribution over the next year," he says.
Redstone says he is proud of the original programming on MTV
China, particularly "Tian Lai Cun," which is one of the network's trademark shows, mixing videos, artist profiles and music news segments.
Making connections
|
Teaming up
|
| Viacom has partnered with various companies to expand its reach in China. Here's a snapshot of some of its ventures.
Partner: Beijing Television
The deal
Partner: China Central Television
The deal
Partner: China Mobile
The deal
Partner: Shanghai Media Group
The deal
Partner: Tsinghua Tongfang
The deal
|
Beyond the fully branded MTV China network, Viacom's MTV Networks unit has, over time, managed to get MTV and Nickelodeon into Chinese households via a cornerstone of the company's China strategy -- namely partnerships with local firms.
Viacom's key partners in China read like a who's who of the country's media elite. Among them are CCTV and Shanghai Media Group, one of the country's largest media conglomerates. (SMG and VNU, parent company of The Hollywood Reporter, have recently signed a strategic cooperation agreement to develop projects together in China.)
Just like in the U.S., such deals tend to come about after various informal and formal conversations with company officials, according to Redstone. Asked, for example, how Viacom ended up picking SMG as a partner, he says, "We had met them first socially -- at dinners and so on -- and then we sat down and we worked out a deal."
The cooperation agreement with SMG early on included the syndication of MTV and Nickelodeon programming on SMG channels and the co-production of the MTV Style Awards.
That partnership worked well enough to be expanded last year.
In March 2004, Viacom and SMG unveiled a newly formed joint venture that saw Viacom take an equity stake in SMG. This was hailed by Viacom as the first deal in which a major U.S. entertainment outfit took a stake in a major Chinese content firm.
"We're very pleased with that deal," Redstone says, "because it was a particular honor for Viacom since no other (major) foreign (media) company yet had been permitted to have an equity interest." (Sony Corp. has an equity television joint venture with Hua Long, a unit of the state-run China Film Group, that also was approved. While Viacom was the first to announce its deal, which company's formal approval came first is a matter of some debate in industry circles.)
The venture led to the launch in May of children's programming in Shanghai on SMG's Oriental Children's Channel, with the co-produced, co-branded programming block HAHA Nick. The block has done well in the ratings with Nickelodeon content such as puppet shows "Little Hand Oobi" and "Magic Castle" and the live-action hosted studio show "HAHA Nick Weekend Play."
The HAHA Nick block, which airs seven days a week, reaches about 3.5 million households in China's second-biggest city after Chongqing.
Redstone is happy with the performance of the block to date. "It's going very well," he says.
When Nickelodeon's animated program "CatDog" went on air in May on the newly launched CCTV Children's Channel, it earned a Nielsen Media Research rating of 10 in Beijing.
One Nielsen ratings point represents 65,470 viewers in Beijing, which means that when "CatDog" achieved a 10 rating, it was seen by 654,700 people living in China's capital, where the total TV universe, as measured by Nielsen, is 6,547,000 potential viewers. (Nielsen is owned by VNU, parent company of THR.)
CCTV Children's Channel reaches 120 million homes and Nickelodeon programming is on for two hours every day, Li says, adding that "The Wild Thornberrys" got a Nielsen rating of 8 in Beijing when it launched in August. ("CatDog" and "Thornberrys" are not currently airing.)
"The concepts of our shows that we've created here (in the U.S.) travel in China and around the world -- even though the language is different," Redstone says. "The kids love 'CatDog.' The kids love 'Thornberrys.' The Chinese kids will go crazy for 'SpongeBob.' "
Viacom's CCTV connection runs much deeper though.
On Sept. 10, the two partners co-produced the first-ever CCTV-Nickelodeon Kids' Choice Honors, in Beijing's Tian Qiao Theatre. The awards aired later in the month on several CCTV channels that reach into more than 300 million Chinese homes. The show is expected to become an annual fixture.
In a long-standing deal with CCTV, Viacom also has co-produced the popular CCTV-MTV Music Honors show, which hands out awards to musical talent from mainland China, Hong Kong, Taiwan and other parts of Asia.
That annual event, whose seventh edition took place in late July, has aired on various CCTV channels in China, is broadcast to all of MTV's more than 180 million TV households across Asia and also is made available to all MTV channels worldwide, which reach more than 400 million TV households globally.
Viacom's MTV China runs music programming in Guangdong as well as in Hong Kong and in hotel and luxury housing compounds on the mainland reaching a total of about 10 million households. (Its reach is broader, to 138 million households, when it syndicates locally produced programming to cable channels across China.)
Beyond the CCTV and SMG relationships, Viacom also has created other partnerships with Chinese companies that Redstone believes will have further upside over time.
For example, in September 2004 Viacom unveiled a strategic partnership with Beijing Television for Chinese content production in the music and entertainment areas.
While the two haven't made big splashes with major production news to date, the relationship gives Viacom another connection with an industry heavyweight in China.
In more technology-heavy deals, Viacom last year entered a strategic alliance with one of China's leading computer firms, Tsinghua Tongfang, to pursue opportunities for content and other partnerships in the digital, broadcast and other arenas.
And during the spring, the company started offering MTV-branded content to the more than 200 million subscribers of China Mobile, the country's largest cell phone service provider.
Customers are able to access MTV-produced music charts and entertainment news as well as download music ringtones and ringback tones, according to a company statement earlier in the year.
Redstone didn't detail how well this business has been doing so far but says it has the potential to be "enormous."
He declines to provide details of the financial performance of his conglomerate's operations in China.
"We are profitable," he says. "We have turned profitable relatively recently, but the profits are increasing now."
Expanding on the topic, he says: "It's taken a long time. And the reason it's taken a long time was our emphasis. We always take a long-term view, and I certainly have (done that) all my life. I concentrate not so much on the money part but on the relationship part. Now, we have those relationships, and those relationships will enhance, and are now enhancing, our ability to move ourselves forward economically in China."
The major media conglomerates traditionally don't break out their financials by country. Asked how much revenue China brings in for Viacom per year, Redstone will only say: "I know, and it is increasing. But I'm not allowed to give you the number."
Emerging areas
Even after the current Viacom splits into two, as is planned to happen by year's end, Redstone is expected to lead the China charge of the new Viacom and CBS Corp., which will be headed up, in CEO positions, by current Viacom co-presidents and co-chief operating officers Tom Freston and Leslie Moonves, respectively.
While the new Viacom is likely to continue to have the bigger exposure to China thanks to its ownership of the MTV Networks unit, Redstone says CBS could well surprise some.
"You never know because Les is very entrepreneurial, and he's indicated to me he's going to find ways to be a big businessman in China and everywhere else," he says.
For example, CBS will be in charge of a recent venture into the Chinese outdoor advertising market.
The Viacom Outdoor unit late last month unveiled an agreement to acquire a 70% controlling stake in Magic Media, which sells advertising rights on the Beijing bus system, with an option to buy the remaining 30% in five years. Financial details weren't disclosed at press time.
"We have a group of people working in China now to exploit opportunities because this is a great business," Redstone says. "The outdoor business is no longer just our outdoor business in the United States and in Mexico and in Canada. We've taken about 12% of the European market, we're looking at billboard companies in many parts of the world, and we have a whole crew working in China. That's a possible new (growth) business for us in China."
Also a possibility for CBS is a future theme park in China, which at least one region in China has suggested.
"When I was in Changsha (the capital city of Hunan province) last time, the governor of Hunan talked to me about all kinds of joint ventures. (Among other things), he also talked about the possibility -- only the possibility -- of a theme park."
The piracy issue
For the post-split Viacom, one of the things it may have to decide is whether to explore film business opportunities in China. The fight against piracy and for increased market access -- both tangled up in competing government bureaucracies -- are prime among the hurdles that have kept the company from pursuing an aggressive film and home video strategy to date.
"There are several issues," Redstone says. "Much of what we produce in the United States would not be acceptable in China. Secondly, and very important from our standpoint: piracy."
The Chinese government is doing more against piracy now than in the past, he says, hinting that still more needs to be accomplished.
"I gave a speech on this a year or two ago in China," Redstone says. "The basis of the speech was, if you want an entertainment industry, you're going to have to pay attention to piracy. Because if people will produce for you, the writers and so on, they're not going to produce material to see it get stolen. So there has to be a new emphasis on piracy in China."
That said, top SMG brass on a recent U.S. visit discussed with Redstone and people at Viacom unit Paramount Pictures possible ways to jointly produce Chinese movies or make movies in China, according to Redstone.
"But I have nothing that I can report on that yet," he says.
The future
Something that has been in the works for several months, meanwhile, is the planning for Viacom's tie-ins with the Summer Olympics coming up in China in 2008, according to Redstone.
"We plan to be a participant there," he says. "We will be running concerts."
Pressed for more details, he says the concerts taking place during the Olympics could be broadcast on MTV and the channels or stations of other potential TV partners. The concerts are scheduled to feature "largely Chinese music but also international stars," he says, without providing more insight.
The new Viacom also has suggestions for a possible new educational channel in China on the table.
SMG officials have said they are impressed with Noggin, which targets U.S. preschoolers and their parents.
"We would seriously consider (such a channel in China), if given the opportunity," Redstone says. But he declined to speculate if and when such a decision would be made.
Finally, Redstone indicates there could be a consumer products business in China for Viacom, even though no decisions have been made on that front. "We may even do some consumer products work with China Central Television," he says. "They suggested that last time, and that could be a major business for us in China."
Either way, Viacom's roughly 100 employees in China, working out of offices in Beijing, Shanghai and Guangzhou, have been busy.
Just as busy as their boss is when he visits the country.
"When I'm in China, almost every night a banquet is given for me and my wife, Paula, by Chinese officials," Redstone says. "When I go there, I truly go damn close to 24 hours a day."
So, what special insights and tips can the Viacom boss share with industry executives who haven't done business in China before?
Redstone suggests that while some aspects of business culture are different in China, certain behavior will lead to success in both China and the U.S.
For example, he emphasizes that Chinese businesspeople are "very concerned with status, with title" and with hierarchy. "But, generally speaking, behaving in a decent, considerate way is important (in the U.S.) and in China," he adds.
"As long as you follow your own rules of kindness and tolerance and decency and respect for their views, I don't think you'll have any (problems)."
He also feels that U.S. businesspeople who have never traveled to China tend to underestimate the lifestyle in the country's big cities and people's level of sophistication.
"I think China is very much misunderstood around the world," he says. "When you walk down the streets in China ... the people are happy, they thrive, they're going into shops. I know they don't have a democratic government like we do, but you have the sense of democracy and capitalism."
He adds: "I am well aware of the fact that there are human rights issues in China that have created controversy with other countries in the world. But, for us, we are treated so well in China. China is a destination point for Viacom. It's critical to our global strategy."
Jonathan Landreth in Beijing and Alex Woodson in New York
contributed to this report.
Share on LinkedIn
