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Living-room strategy reboot

By Qiang Xiaoji (chinadaily.com.cn)
Updated: 2009-07-10 17:48

In the past six months, Internet companies have been actively working with Chinese TV makers like Changhong and Haier to combine Internet services with traditional TV sets, in hopes of creating a lifestyle of surfing the Internet on TV in the living room.

The plan is viewed by observers as Internet companies' ambition to expand their business from the PC market to a much larger TV market, like what Shanda Interactive Entertainment Ltd intended to do several years ago.

The convergence of the Internet and traditional TV industry is carefully progressing as the government has yet to release any relevant policies, according to a report by 21st Century Business Herald on Thursday.

Internet-ready TV

In March and April of 2009, TV manufacturers such as Changhong, Haier and Skyworth launched their Internet-ready TV sets and partnered with Internet service providers to promote a variety of online entertainment services on TV.

Zheng Linang from the marketing department of Haier Group, one of the biggest home appliance manufacturers in China, told the newspaper that Haier had worked with Baidu, China's largest Internet search engine, to provide video search service on its TV sets.

This year, Haier has partnered with Sohu, a leading Web portal and Xunlei, one of China's largest downloading and video sites, to provide online high-definition broadcasting and high-speed video downloading services on its newly released Mo-card TV sets.

Sina, the well-known Internet service provider, has also established cooperative relations with over 10 TV makers to provide Internet services on TV.

With the new technology, users can connect their TV sets to the Internet through a router, download videos using wireless keyboards and remote controls and watch them on TV.

"Shanda Box Plan"

Cooperation between Internet companies and TV makers can be seen as another wave of the living-room strategy as Internet companies are attempting to enter the TV market, years after Shanda's failure to do so.

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As early as 2004, Shanda, one of the largest online gaming providers in China, promoted its "Shanda Box Plan" in the hope of expanding its business outside the online gaming market.

China has a much larger population of TV viewers than Internet users. Shanda wanted to shift some of its entertainment services, including online gaming and music downloads, from the computer platform to the TV platform through a set-top box, dubbed the "Shanda Box".

With a set-top box, a traditional TV set can be connected to the Internet and provide functions such as digital video recording.

The highly anticipated plan cost Shanda over $450 million but ended in failure due to the high retailing price of the box and lack of policy support from regulators.

Obstacles

According to a document released by the State Council on revitalizing the electronic information industry in April 2009, technical innovation will provide opportunities for the strategic development of the TV industry. That is also what prompts Internet companies to work with TV makers on Internet-ready TV sets, the newspaper said.

Some industry insiders point out that combining the Internet and TV depends on the networks provided by telecommunication operators, which have always been trying to take a share in the content services.

However, in China, telecommunication operators and broadcasters are regulated by different administrative departments. Overlapping these businesses would cause conflicts between telecommunication and broadcasting regulators, the paper said.

In the past, telecommunication operators tried to be involved in broadcasting services by promoting Internet Protocol TV (IPTV), which enabled broadband Internet users to access TV broadcasting services on a computer, but they encountered obstruction or pressure from local broadcasting regulators.

The old boundaries and conflicts remain even today.

Whether the living-room strategy can be materialized will largely depend on the attitude of the State Administration of Radio, Film and Television (SAFRT), which is also the country's top supervisor of the content of Internet broadcasting and IPTV, the newspaper said.

Some Internet companies and TV makers have already sensed pressure from the SAFRT, the paper said.

For example, Sohu is still waiting for the SAFRT approval on the above-mentioned cooperation deal with Haier, the report said, citing a Sohu employee.

Though Sohu and Haier held a news conference to announce their cooperation, no legal documents or contracts were signed, in case the deal fails to get the nod from the SAFRT.

A source from the SAFRT told the newspaper that bringing Internet services to traditional TV will increase regulatory difficulties. The SAFRT has been following the development in the Internet and TV industries closely since earlier this year, but its stance on the marriage between the two industries remains vague.

Moreover, the cooperation between Internet service providers and TV makers will affect the audience ratings and advertisement revenue of traditional TV and radio broadcasters.

Analysts say regulators will intensify their supervision of Internet services on TV, but will not immediately halt cooperation between Internet companies and TV makers.