Bottom line: The new alliance between Tencent and Zhejiang TV reflects the growing strength of China’s big Internet companies in online video, and will benefit but also challenge both sides.
By Lin Nanwei
Last week’s World Internet Conference in the scenic water town of Wuzhen attracted media attention due to attendance by most of the sector’s top leaders, even though few said anything substantial. But Tencent (HKEx: 700) Chairman and CEO Pony did a little homework before he came.
The day before the curtain came down on the big event, Ma appeared at another event in nearby Hangzhou to announce a strategic partnership between Tencent and Zhejiang Television & Radio Group, the province’s largest state-owned TV broadcaster. According to reports, the 2 sides will focus on cooperation in development of content, channels and promotional activities. (Chinese article)
The initiative isn’t difficult to understand for Tencent, which is facing stiff competition in online video from Alibaba (NYSE: BABA) and Baidu (Nasdaq: BIDU) through their Youku Tudou (NYSE: YOKU) and iQiyi services, respectively. Tencent is well behind these 2 rivals, and also lacks high-quality content to take advantage of own its high user traffic.
In the past Tencent paid big money for exclusive rights to the third and fourth seasons of Zhejiang TV’s popular “The Voice of China” talent show, bringing it nice returns. The fourth season of the show alone brought in more than 5 billion clicks for Tencent’s video service.
In their new tie-up, Tencent is almost certainly eying some of Zhejiang TV’s other highly rated talent shows, and wants to keep receiving exclusive rights for their online broadcasts. We can guess that the 2 sides will pool their personnel and technology in complementary ways to create new talent programs, allowing Tencent to create better content for big audiences and enhance its competitive position in online video.
Access to WeChat
For its part, Zhejiang TV will get access to many of the functions on Tencent’s popular WeChat platform, such as “shake” and public accounts that allow for more interactive functions across multiple screens. It can also cultivate new value-added services on WeChat potentially worth tens of millions of yuan in new revenue. It can also use WeChat to supplement the limited reach for its TV shows using its traditional broadcasting channels.
What’s more, the tie-up will greatly boost the new media aspirations for Zhejiang TV, which had previously pinned its hopes on its own Xinlan Net online service as one of four main pillars for the future. This new Tencent partnership will bring big new media resources for the traditional broadcaster in areas like new users, business models and data collection.
But the new collaboration is hardly perfect. First off, Zhejiang TV isn’t China’s leading maker of traditional TV programs and channel development, lagging behind better known names like CCTV and Hunan Broadcasting. And Tencent’s own online video lags behind names like LeTV (Shenzhen: 300104), Youku Tudou and iQiyi, raising the question of whether this new partnership can make 1 +1 equal more than 2.
As someone who previously worked at Zhejiang TV and now works at a website, I can personally observe there’s quite a difference in the management styles of such different companies. A traditional media company like Zhejiang TV uses a very traditional style with many layers of management, which often slows innovation. So I hope that in their new partnership, Zhejiang TV and Tencent can overcome this kind of inefficiency.
Finally and perhaps most fundamentally is the question of whether this new partnership will run into problems of one side biting the other while two such huge beasts fight for new food sources. In the end Tencent is an Internet giant, and it’s quite possible that Zhejiang TV could end up dying a slow death through this new tie-up, much the way that web portals are slowly starving traditional print media through similar partnerships.
Lin Nanwei previous worked as a reporter for Zhejiang TV. Contact the author at firstname.lastname@example.org.