China has a vast and growing market for the Internet and mobile devices. Over the past decade that market has been largely confined to China – most businesses have had enough domestic demand and opportunities inside the country to keep them busy.
But now companies in China’s dynamic Internet and mobile sector are seeking out new markets outside the country. Both online shopping service Alibaba (alibaba.com) and Weibo (weibo.com), the Chinese version of Twitter (twitter.com), are seeking to list on the New York Stock Exchange. The excitement this news has generated shows how many people want to get a piece of the large Chinese market for technology, social networks and online shopping. It is also sending a chill through America’s Silicon Valley – home to the country’s innovative high technology sector – that they are missing out on China’s fast-growing marketplace. Many American services are banned from operating in China. Even more worrying for Silicon Valley, these home-grown Chinese companies, with the market sewn up at home, are now set to compete globally for customers using their increasingly deep pockets.
One example is Tencent (http://www.tencent.com/en-us/index.shtml), owner of popular Chinese social messaging application (app) Weixin (weixin.qq.com), known as WeChat (wechat.com) outside China. Used on mobile phones and smartphones, Weixin has gained 300 million users in just three years, becoming the dominant social messaging service in the world’s largest smartphone market. Its has been so successful that many rivals are trying to chip away at its customer base.
Weixin, pronounced way-shin, allows smartphone users to send messages and share news, photos, videos and web links with friends. One of its selling points is its claim to not store messages on its servers.
Building on its success in social networking in China, it is looking to expand in other markets, including Southeast Asia, Europe and Latin America. It also wants to grow its offerings in online payment and e-commerce.
One factor in Weixin’s success is the ability to send messages by recording a voice message rather than just typing in characters: very useful for non-Latin script users, and especially for Chinese-language users, who use thousands of characters in everyday communication.
One ambitious forecast claims Weixin could reach 400 million users and make US $500 million revenue within a year.
Cosmetics marketer Jenny Zhao, who uses an iPhone 5, told The New York Times: “I’m probably on Weixin six hours a day. A lot of what I do revolves around it.”
“I use Weixin every day,” said Zhang Shoufeng, a food and drinks seller. “My friends are on it and my boss is on it. We are talking about where to eat, where to hang out and where to meet for company conferences. This is how we communicate.”
Analysts believe Weixin has benefitted from not having to compete with banned-in-China American company Facebook (facebook.com).
“Even if Facebook had permission, it’s probably too late,” said Wang Xiaofeng, an analyst at Forrester Research. “Weixin has all the functionality of Facebook and Twitter, and Chinese have already gotten used to it.”
Tencent is an example of a wider trend: As Chinese companies and offerings have become stronger, wealthier and more innovative, they increasingly look to build their customer base outside China.
Founded in November, 1998, Tencent, Inc. has grown into China’s largest and most used Internet service portal. Its most popular services include QQ (QQ Instant Messenger), WeChat, QQ.com, QQ Games, Qzone, 3g.QQ.com, SoSo, PaiPai and Tenpay, as well as Weixin.
The company claims to put innovation at the heart of its business, with more than half of its employees devoted to research and development. The Tencent Research Institute, established in 2007 with RMB 100 million (US $16 million), calls itself “China’s first Internet research institute, with campuses in Beijing, Shanghai, and Shenzhen.” It has patents for technologies it has developed for instant messaging, e-commerce, online payment services, search, information security, and gaming.
Tencent was driven to innovate by a fear it could quickly become irrelevant in the information technology space. Weixin is also pioneering ways to book taxis, hotels and airline flights through the service and even ways to control home appliances.
“Chinese Internet companies are no longer behind,” said William Bao Bean, a managing director at the venture capital firm SingTel Innov8 (http://innov8.singtel.com/). “Now in some areas, they’re leading the way.”
Published: April 2014
1) Weibo: Sina Weibo is a Chinese microblogging (weibo) website. Akin to a hybrid of Twitter and Facebook, it is one of the most popular sites in China, in use by well over 30 per cent of Internet users, with a market penetration similar to what Twitter has established in the USA. Website: weibo.com
2) Laiwang: A variation on the WeChat service, its biggest competitor. Website: laiwang.com
3) WhatsApp: WhatsApp Messenger is a cross-platform mobile messaging app which allows you to exchange messages without having to pay for SMS. Website: whatsapp.com
Development Challenges, South-South Solutions was launched as an e-newsletter in 2006 by UNDP’s South-South Cooperation Unit (now the United Nations Office for South-South Cooperation) based in New York, USA. It led on profiling the rise of the global South as an economic powerhouse and was one of the first regular publications to champion the global South’s innovators, entrepreneurs, and pioneers. It tracked the key trends that are now so profoundly reshaping how development is seen and done. This includes the rapid take-up of mobile phones and information technology in the global South (as profiled in the first issue of magazine Southern Innovator), the move to becoming a majority urban world, a growing global innovator culture, and the plethora of solutions being developed in the global South to tackle its problems and improve living conditions and boost human development. The success of the e-newsletter led to the launch of the magazine Southern Innovator.
The controversial Nordic Satellite Distribution consortium is in danger of collapsing because of a row between two of its three big shareholders.
The row, between Swedish programmer Kinnevik and Norwegian telephone company Telenor, threatens the chances of the consortium coming up with a restructuring that will win acceptance from European Commission competition officials.
NSD has been trying to turn the 1 degree West orbital position – home to the Thor and TV Sat-2 satellites – into Scandinavia’s “hot bird” position. But Kinnevik also plans to take a substantial slice of capacity on the Swedish Space Corporation’s planned digital satellite Sirius-2, at 5 degrees East. Telenor is furious.
It is demanding that Kinnevik drop the plan and also give up its existing transponders at the 5 degrees East position, on the Tele-X and Sirius-1 satellites. Kinnevik already plans to give up its Astra transponders, to the relief of Telenor.
Kinnevik is buying capacity on the rival system simply as a way of hedging its bets. Sirius-2, with 16 transponders offering a mix of digital and analogue channels for the Scandinavian market, could become a powerful satellite and Kinnevik is worried that a strong rival service might be developed on it. The company is thought to be negotiating for six of the 16 transponders (another 16 transponders are aimed at the rest of Europe).
Per Bendix, chairman of the NSD, said that the group could continue without Kinnevik, although it would be difficult to find another company with such large pockets.
He downplayed the rows between the shareholders: “Of course, there are tensions between Kinnevik and Telenor. You can’t imagine a process like this, a complicated business deal, without some frictions which create some warmth. None of the partners can stop this initiative, it has gained too much momentum.”
TeleDanmark, the third member of NSD, has tried to play a mediating role between Telenor and Kinnevik.
One source close to the consortium said: “Kinnevik is definitely interested in investigating other satellite operators for the digital future. The company is known for doing exactly as it pleases, which clashes with Telenor which is trying to get 1 degree West into shape.”
Kinnevik and Telenor have clashed repeatedly over Kinnevik’s refusal to give up the 5 degrees East position, where it transmits five channels on Sirius. The issue has been exacerbated for Telenor by the fact that the mostly unencrypted Sirius/Tele-X package has achieved a better penetration than the encrypted Thor package.
The two companies have also been at loggerheads over the restructuring of the consortium, forced upon it by the European Commission.
Last July, competition commissioner Karel Van Miert ruled that NSD, which was planned as a vertically-integrated company providing programming, subscriber management and satellite capacity, was anti-competitive.
He ruled that NSD would “create or strengthen a permanent dominant position as a result of which effective competition would be significantly impeded” in the Nordic market for satellite broadcasting. It would dominate the provision of satellite transponders in Scandinavia, cable television in Denmark and direct-to-home pay-television distribution.
Bendix, with the backing of Telenor, has been trying to broaden the shareholder base by bringing in other Scandinavian programmers. But Kinnevik opposes the move because it does not think that it will meet Brussels’ concerns. It also does not want to play second fiddle to other programmers.
The shareholders have looked at other options, including one of splitting NSD into separate companies covering transponder-leasing, subscriber management and programming. The companies could have different ownership. Pele Tornberg, Kinnevik’s deputy managing director, would not say what alternative plan Kinnevik is proposing.
NSD has until next month to present Brussels with a revised shareholding structure.
Helsinki Media, the Finnish broadcaster, has rejected an approach to rejoin NSD, which it left in 1994 in a row over Kinnevik’s influence. President Tabio Kallioja said that the company maintained its view that NSD gave Kinnevik a stranglehold on the allocation of satellite capacity to other programmers. He added that Helsinki Media was interested in the plans for digital satellite television being developed by NetHold and by Telia Media, owned by the Swedish PTT, Telia.
As a reporter for two Financial Times newsletters, New Media Markets and Screen Finance, I covered the rapidly growing UK (and Scandinavian) television and new media markets and the expanding film-financing sector in Europe.
From Special Report: NMM (New Media Markets) Spotlight On The Emergence Of Satellite Porn Channels In The UK
The aspect of satellite and cable programming most feared by the British government when it pushed the development of new media in the mid-80s looks set to become firmly entrenched as a part of the emerging television era.
Next Wednesday, the USA’s most famous soft-pornography channel will arrive in the UK, almost certainly heralding a satellite porn war for the eyes of the British public.
The Home Office, which used to look after televsion, was worried that porn would be one shock too many for the British and would create havoc with British television laws. But the mores of the marketplace have changed the climate, although the Broadcasting Act and the Independent Television Commission (ITC) still create limits that are stricter than in most other countries.
Hard-core pornography – such as that shown on several continental channels which can be picked up in the UK – remains out of bounds, as evidenced by the Department of National Heritage’s recent proscription of the hard-core TV Erotica.
But the drawing of the line between hard-porn and soft-porn changes over time: the programming now permitted by the ITC is a lot stronger than many might have thought likely a few years ago. The porn channels have learned how to push the boundaries of acceptability and, with competition increasing, are likely to push their luck even further.
Politicians, journalists and old-fashioned new-media programmers – for instance, the United Artists people who were dismayed at the decision of parent company TeleCommunications Inc to bring Playboy over to the UK – may believe that porn channels serve only to cheapen the quality of life.
But the supply side of the marketplace detects that there is a widespread demand for porn and (ironically) religion and so programmers will follow the demand by supplying suitable programming.
The soi-dissant “adult” channels estimate their potential audience at between 7 per cent and 30 per cent of cable and satellite homes – between 400,000 and 1.7 million homes at present penetration levels.
Their main target market is the consumer of “top shelf” magazines which range from the glossy, even glamorous Playboy to the more downmarket magazines of the “reader’s wives” variety. According to the Campaign Against Pornography, the top six pornographic magazine titles sell about 2.5 million copies a month. Altogether, there are about 200 pornographic titles on sale in the UK.
Deric Botham, programmer at the recently-launched Television X – The Fantasy Channel and a porn-industry veteran, estimates that the total UK sex industry – from videos and magazines to sex aids, but excluding prostitution – generates revenues of £4 billion a year, a figure which is difficult to substantiate but is equivalent to 10 times the investment in the UK film industry in 1994.
According to Botham, “our research shows that people want this thing and the majority of people want it to some degree.”
The porn channels are finding it relatively easy to find satellite capacity, largely because they are forced by the rules to operate at a time of day (i.e. night) when most channels have quit their transponders and are only too happy to find someone to sub-lease them to.
The first of the new porn channels will be the Playboy Channel, which likes to think of itself as being a cut above the others. The others, it claims, are for “sad, lonely men”. Playboy, on the other hand, is for “happy, heterosexual couples”.
The channel, probably the softest of the genre, will be launched on November 1 by Flextech, BSkyB and the US Playboy Channel.
It will be followed by the not-so-soft Penthouse which is being launched in the UK by a joint venture of Penthouse magazine owners General Media and Graff Pay-Per-View, which already owns the UK Adult Channel.
Two other channels have received licences from the ITC – David (Sunday Sportnewspaper) Sullivan’s Babylon Blue and the Adam and Eve Channel. With the Adult Channel and Television X already broadcasting, there could be six porn channels on offer to UK viewers.
But two other channels are beamed into the UK for those willing to pay the cost of extra reception equipment: the continental pirates, Rendezvous and Eurotica. There is also the now-banned TV Erotica.
Cable and satellite was bound to be an attractive medium for the porn channels, given the possibility of encrypting the signal and imposing a subscription fee and, as a consequence, benefiting from the lighter regulation that has seemed likely. Sex-channel executives say that the ITC has become increasingly flexible in what it will allow.
Three other factors have fuelled would-be channels to turn to cable and satellite:
The replacement of the independent high-street video store by big video superstores has robbed the porn industry of a key outlet. New-media distribution should bring in consumers who are embarassed to hire a porn video from a shop. Yet buying a subscription to a porn channel may be a more embarassing act within the family environment.
The Adult Channel is regarded as demonstrating that there is an audience for porn in the UK: it is thought to have about 224,000 subscribers.
Cable and satellite has far more potential for the porn industry than the traditional-format channel. The prize, which will make everything worthwhile, is pay-per-view (ppv). Bill Furrelle, Playboy Channel’s sales director, said that he had been asked by several UK cable operators about providing a ppv service next year. The operators want Playboy, the Adult Channel and Adam and Eve to contribute to the Home Cinema ppv service which they hope to put together.
Susan Sontag, the renowned American essayist, described pornography as a “crutch for the pyschologically deformed and brutalisation of the morally innocent.” The Campaign Against Pornography in the UK believes that pornography exploits women and children “in a degrading and humiliating way, often with the message that we enjoy this and want to be abused.”
The campaign encourages its supporters to take direct action against any distributor of pornographic material as part of its wider campaign to put the industry out of business.
The porn channels dismiss arguments that they degrade women and encourage male violence against women. Playboy managing director Rita Lewis argues that “women are happy to consume erotic imagery like pin-ups. Women are not hung-up by this anymore, they are not threatened by the fantasy women we show in our programming. We hope Playboy will lead to couples’ making love together.”
Andrew Wren, financial director of the Adult Channel, also dismisses the link between pornographic programming and sexual violence. “I don’t think there is anything in programmes that would encourage men to go and rape. Women are interested in sex as men are.”
Television X’s (Deric) Botham says that porn programmes are “a bit of titilation” in the fine, upstanding tradition of the British Carry On films. None the less, he admits that “I wouldn’t want my daughter to get involved in pornography.”
He says that the women involved in the programmes, some of them housewives, are willing participants and enjoy the opportunity. “I don’t produce anything that is against the law. We speak to the individuals concerned. If you have a reluctant model, it doesn’t work – I just won’t buy the video.”
The Campaign Against Pornography sees it all rather differently. Ann Mayne, a member of the campaign’s management committee, was particularly critical of two programmes on Television X – Shag Nasty and Mutley and Fly on the Wall.
She said that Shag Nasty and Mutley, in which a presenter approaches women in the street or in supermarkets and offers them £25 to look at their knickers, or £50 to be filmed having sex with him, gave the message that women were simply objects and that it was acceptable to harass them.
“It is complete prostitution of female sexuality,” she said. “Botham wants full-on, across-the-board prostitution of women. In his view, every woman must have a price.”
Mayne said that Fly on the Wall, in which real-life couples are shown having sex, was an open invitation for men to coerce their partners into being filmed, possibly to the point of abuse.
UK laws on satellite porn among toughest in Europe
UK regulations on what can be shown on sex channels are tougher than in most countries of the European Union. Channels such as the hard-core Swedish TV Erotica and the recently-launched French Rendezvous are licensed in their respective countries and transmit explicit scenes of sexual intercourse, straight and gay, featuring close-up shots of copulating genitals.
Graff Pay-Per-View, the experienced US sex channel operator, consciously decided to exclude the UK as a market for its hard-core Eurotica channel which is licensed in Denmark and, like the other hard-core channels, transmits via a Eutelsat satellite. But pirate smart cards for the channel, as for the other channels, are available in the UK in specialist satellite shops.
Graff’s seeming respect for the UK regulations may not be unconnected with the fact that it owns the Adult Channel and would be wary of upsetting the ITC. Broadcasting unacceptable material into the UK could provoke the ITC into seeing Graff as a body unfit to hold a licence, thereby threatening the Adult Channel.
The ITC’s guidelines on sexually explicit material state that representations of sexual intercourse can be shown only after 9pm and that “the portrayal of sexual behaviour, and of nudity, needs to be defensible in context and presented with tact and discretion.”
There has been some relaxation of the rule. The ITC will, on an experimental basis, allow the watershed to be broken by a ppv or video-on-demand service. It is not, however, prepared to give this freedom to a porn channel, at least not in the early days, because it does not want to be seen to be licensing pornography. The relaxation will affect only general services.
The ITC will also monitor any ppv service to ensure that there are no cases of children accessing the programming before deciding if the programme code should be revised.
The transmission pf 18-rated films on terrestrial or new-media channels is not permitted before 10pm. Films with a 15-rating are not allowed before 9pm on terrestrial channels such as BSkyB’s Sky Movies or the Movie Channel. These are minimum requirements. Some 15-rated films, for instance those which show scenes of sexual intercourse or drug-taking, would not be deemed suitable for transmission even on an encrypted channel at 8pm.
In practice, the ITC does not permit depictions of erect penises, anal intercourse, close-ups of genitalia or ejaculation.
Where channels have overstepped the mark and gone abroad to get licences from less strict authorities – the late Red Hot Dutch and TV Erotica – the ITC has recommended that the channels be proscribed, action which has subsequently been taken by the Department of National Heritage. The ITC is now monitoring the Rendezvous channel, which shows a mix of gay and heterosexual hard-core pornography with graphic scenes of sexual intercourse.
The DNH issues proscription orders under Sections 177 and 178 of the Broadcasting Act. The orders make it a criminal offence to supply equipment to receive the channels or to market and advertise them.
The European Union directive on transfrontier broadcasting lays down that one country cannot prevent the reception of channels licensed by other European Union countries. However, it allows individual governments to take action against any broadcast which could damage the physical, mental or moral development of minors.
The Playboy Channel, due to launch in the UK on November 1, is trying to position itself as being a cut above the existing sex channels with which it will compete for subscribers.
The channel, which is running an advertising campaign costing more than £1.5 million, believes that its big budgets and slick production values will attract viewers who have hitherto been uninterested in so-called “adult” entertainment. It hopes to win an audience among women as well as men.
Managing director Rita Lewis dismisses the other sex channels as being aimed at people who are “a bit sad and on their own”. The channels promote “deviant” behaviour.
Playboy hopes to attract happy, heterosexual couples who will treat the channel as an aid to foreplay: “We hope Playboy will lead to couples’ making love,” said Lewis, who believes that women, as well as men “are happy to consume erotic imagery like pin-ups.”
In the USA, according to Lewis, 70 per cent of the audience for the channel comprises couples.
She said that the UK Playboy will run programmes that have more in common with programmes like Channel Four’s The Good Sex Guide. “These days, a whole bunch of people are sampling erotic programming like The Good Sex Guide. It is very sexy programming with mass-market appeal.”
Playboy’s movies would have a high standard of production, she said, very different from what she claims to be the cheap programming made for the other channels, often home videos and often shot with hand-held cameras.
Playboy’s programming will comprise sex films, interviews with “centrefold” models, documentaries on the sex industry and general-entertainment programming such as quiz shows.
The rival channels claim that Playboy will not be a big threat to them. The Adult Channel’s Wren says that all the new channels “hype the market, which helps us.” In any case, adult entertainment consumers have already been weaned on harder mix of programming and do not want something that offers little more than what Channel Four shows.
The UK Playboy Channel, which is owned by UK programmer Flextech (51 per cent), British Sky Broadcasting (30 per cent) and Playboy Enterprises (19 per cent), will transmit from between midnight and 4am on the Bravo transponder on Astra 1c.
New Media Markets and Screen Finance were published by the Financial Times in the 1990s.
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