News Corp., AOL Time Warner May Expand TV Presence in China

Rupert Murdoch‘s News Corp. and AOL Time Warner Inc. appear to be a step closer to expanding their television presence in China, a potentially lucrative market that the media companies want to gain access to in the coming years.

News Corp. and AOL Time Warner have been in separate talks about gaining entry to China with an officially recognized entertainment channel or program offerings. At the same time, the Chinese are looking to the companies to provide some kind of distribution for Chinese programming in the U.S., according to people familiar with the talks.

At present, both News Corp. and AOL Time Warner have a toehold in China, but to date the efforts have been limited and tightly regulated. News Corp. owns about 45% of Phoenix Chinese Television, which broadcasts programming on mainland China from its base in Hong Kong.

AOL Time Warner owns China Entertainment Television, a Hong Kong-based operation that distributes programming in parts of Guangdong Province.

For both companies, the agreements would make formal and legal the businesses that have operated in a gray area for a long time. While Phoenix is widely viewed in Guangdong province, and AOL’s CETV also has viewers in the province, those setups aren’t formally approved by the government. “They could yank us anytime, but this [new deal] is formal, legal, explicit,” said the person familiar with the deal. “For the outsider, the difference may not appear to be much, but for us the difference is profound.”

News of the negotiations was reported by the online edition of the Financial Times.

An AOL Time Warner spokesman confirmed that the company has had “positive and constructive discussions” with the Chinese government about both broadening distribution for its China Entertainment Television channel in China and at the same time carrying a Chinese government entertainment channel on some of AOL Time Warner’s cable systems in the U.S. CETV is majority-owned and managed by AOL Time
Warner. AOL executives were in China for discussions last week, the spokesman said.

News Corp. declined to comment, but a person familiar with the situation said the company was in “advanced negotiations” to establish an “officially sanctioned” channel in Guangdong Province in southern China. The negotiations have been proceeding for the past eight months, according to another person close to the situation. But unlike AOL Time Warner, which owns cable systems in the U.S. and could make room for Chinese programming on some channels, News Corp. doesn’t have that kind of channel capacity in the U.S. Any reciprocal effort to carry Chinese programming would likely be contingent upon News Corp.’s successful acquisition of satellite broadcaster DirecTV, which would give it substantial channel capacity in the U.S. News Corp. is in negotiations to acquire DirecTV.

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