Spotlight on China
Joanna Doolan & Florence Wong
New Zealand businesses cannot afford to ignore China’s burgeoning media and entertainment industry.
The figures are eye-watering and enough to excite even the most hard-nosed number cruncher: annual compound growth of 17%, one billion mobile phone subscribers, 569 million internet users, and the world’s second largest film market which, by 2020, is expected to be number one.
Most homes have television and even an industry sector such as publishing, which is struggling in more mature markets, is thriving in China. The real story, however, is digital. Social media, online gaming and online video lead the pack.
The Chinese are described as avid digital consumers and the largest internet market in the world –a feat achieved with less than half of its population online.
With ongoing exponential growth in China’s media and entertainment industry, the question is whether and how New Zealand businesses can benefit.
EY’s latest Spotlight on China outlines the challenges and opportunities.
The Chinese government has a clear objective, as outlined in its latest five- year plan, to move from an export investment-led economy to one driven by consumers.
The cultural sector has been given a clear mandate to become an engine of growth.
Unlike our government-led initiatives, that start with lofty ideas but degenerate into Tui billboard fodder, the Chinese government is supporting its objective with huge infrastructure investment, and by removing regulatory impediments and tightening piracy rules.
Other factors under-pinning this sector’s growth are the expanding middle class, the increase in disposable incomes, the convergence of networks, devices and content, the digitization of distribution infrastructure, the expansion of advertising and the growth of second-tier cities.
But the challenges to foreign businesses are not insignificant.
There are the ongoing intellectual property rights infringements, government controls over content, changing consumer preferences in a diverse marketplace, an evolving and highly competitive digital landscape and price sensitivity.
The report indentifies four key factors and associated best practices critical to success in China.
These are building a strong brand, succeeding in digital, forming and operating successful partnerships and navigating the regulatory landscape.
The digital market is highly competitive and constantly evolving. Another issue foreign firms will encounter is price sensitivity which can be significantly higher than in other countries due to the high level of access to pirated materials.
There have already been Kiwi success stories from China in the media and entertainment sector: partnerships between New Zealand companies and Chinese TV stations, and ongoing work in the area of post- production and media and entertainment education.
So in spite of the obvious obstacles, New Zealand companies can achieve success.
The overall message is that companies must be willing to invest long term and be able to understand and anticipate both the complexities and possibilities the market presents. If combined with good advice, those companies will be positioned for success.
Joanna Doolan is the chairperson of EY NZ China group and Florence Wong is the leader of the NZ China group. This article was written with assistance from Taylor Whittred, a senior consultant in the EY NZ China group.