As the worlds of broadcasting and telecommunications move towards convergence, SMG is expanding to meet the emerging opportunities of the digital media sector. Earlier this year, SMG made its intentions quite clear: “The aim is to make Shanghai the biggest IPTV network in the world”, said DaZhong Zhang, VP – Shanghai Media Group and CEO of the IPTV venture. BesTV’s Chief Operating Officer Huaiyu Li told Television Asia: “We are currently offering these services in Shanghai and Harbin. The customer base has crossed 350,000-mark recently (after its launch in September last year).” SMG is currently the major player in the segment. SMG has deployed IPTV over China Telecom’s infrastructure in Shanghai and in Harbin, to the north, it is partnering China Netcom for the same service. According to Analysys International, the total number of IPTV users had reached 612,000 by the first quarter of 2007 in China, increasing 36.3% quarter-on-quarter. “Currently, there are a number of smaller cities where trials are going on. It is not always clear how many are real commercial subscribers and who gets it for free and who is under trial etc,” said Li.China Telecom and China Netcom provide IPTV service over the ADSL2+ network. They are investing heavily on infrastructure upgrades such as better performance switching and optical networks besides broadband access including DSL and PON. Li, who indicated that his company’s IPTV service is expected to break even in a couple of years span, acknowledges that the challenge for SMG is not to compete immediately against the relative lower pricing of cable TV but rather to develop attractive content, propagate the intrinsic benefit of such service in terms of bundling option with telephony and Internet, and far better TV viewing experience. “If you consider Shanghai only, there are around six million TV households and the average number of TV sets is considered to be 1.8 or so. Considering the propensity to spend, rather than competing with cable TV, we are seeing dual buying of both access technologies. While cable TV per TV set costs mere US$2 or so to a subscriber, the cost of only TV service under IPTV is $5-$8, with $8 in Shanghai. We along with our partners (China Telecom and China Netcom) are also offering triple play service for $30 or so. This includes telephony (700 minutes worth calls), 2Mbps Internet service and 60-70 channels. These channels are from SMG, CCTV and satellite provincial channels,” said Li. Li said channels from the likes of Star and Viacom aren’t currently allowed on BesTV. As per the information available, in Shanghai, SMG is offering all of its 31 digital pay-TV channels and outside of Shanghai currently 17 are available on BesTV service. In Shanghai, BesTV features an electronic programming guide, with trailers that promote upcoming features, a vertical list of programming by types including a news magazine and a children’s channel, plus buttons for Look Back – a service which retrieves any programming from the previous 48-hours – video on demand, and information channels. “We provide 48-hours Look Back as of now, but we plan to offer this for a longer duration (may be a week or two weeks),” said Li. According to Li, the company is partnering the likes of UTStarcom, ZTE, Huawei, Alcatel and Siemens to penetrate the service. The company is quite optimistic about touching the one-million subscriber mark in the next six months or so as such partners are focusing on delivering IPTV technology that uses low-cost set-top boxes and is viable at a very low ARPU. Other than digital pay-TV and IPTV, SMG is also offering broadband online TV (with 5-10 TV SMG channels) and is involved in the Oriental Dragon Mobile Phone TV service for portable terminal streaming media business. “Our belief is that new access technologies clearly pave wayfor segmentation in terms of content offered. Other than analogue cable TV and digital pay-TV service, which are clearly mass-oriented, other services such as IPTV, mobile TV and broadband online TV offer an opportunity to go niche (vis-àvis traditional distribution). For example, the content we are currently focusing on VoD is TV drama, movies and reality TV. For mobile TV, the audience targeted is slightly younger than one for IPTV, with content tailor-made for such screen,” added Li. Oriental Dragon Mobile Phone TV Company is SMG’s mobile content subsidiary. In conjunction with China Mobile, the company has set up a trial base for a portable terminal steaming media business, and has successfully launched mobile steaming services based on 2.5G mobile network in Jiangsu province and Shanghai, according to Li. Apart from pay-TV platforms, SMG is also focusing on content. “As a radio and TV content producer of news, films, TV series, entertainment, sports, finance and economics, documentary, music, cartoon and drama etc., SMG is building up a large broadcast pool of its own copyright supported by Huaiyu Li, Chief Operating Officer, BesTV brand names,” concluded Li.

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