Obstacles overshadow flourishing culture sector

Investors, authorities throw support behind industry despite barriers

Experts and business executives from China's culture sector gathered along with private equity fund managers Tuesday at the Third Capital Conference for China's Culture Industry to discuss the industry's prospects and latest developments. With government support, new technologies and increased financial investment, China's culture industry is expected to see rapid expansion over the coming decade.

China's culture sector was worth 1.8 trillion yuan ($293 billion) in 2012, a remarkable increase from 310 billion yuan in 2004, representing an average annual growth rate of 23 percent. Although the pace of expansion cooled to 15 percent in 2013, the sector still outpaced overall GDP growth. What's more, the culture industry's contribution to GDP rose to 5.5 percent last year, up from 3.48 percent in 2012.

Since 2013, social capital and financial institutions have paid considerable attention to the domestic culture industry, with several high-profile merger and acquisition (M&A) deals involving film studios, gaming companies and other culture-related businesses.

In the meantime, the central government has also focused on the culture industry by issuing a number of documents to support its development. For instance, in March, the State Council released its Opinions Concerning Accelerating the Development of Foreign Cultural Trade; then, in April, the Ministry of Culture (MC) and the Ministry of Industry and Information Technology (MIIT) issued their Notice on Promoting Cultural and Financial Cooperation in 2014; in August, the MC, the MIIT and the Ministry of Finance jointly issued their Opinions on Enhancing Supports to Small- and Micro-Sized Culture Enterprises. More importantly, the MC is planning a pilot zone to test cultural and financial cooperation measures. The zone is expected to be established next year with the aim of further pushing forward the development of the culture industry.

Despite the above-mentioned supports and signs of progress, numerous challenges still exist across the industry. First of all, the under-use of new technologies in China's culture industry needs to be confronted. Although the country's Internet-based media has experienced rapid growth over the past several years, the culture industry as a whole is still largely oriented toward traditional media such as books, newspapers, magazines, television and radio. Only a handful of companies have taken advantage of advanced technologies like cloud computing and 3D printing. To accelerate industry development, the application of new technologies deserves more attention.

Second, difficulties in cross-media and cross-regional expansion call for structural reforms. Every province has its own publication groups, newspaper groups and television stations, making it almost impossible for a media company to expand beyond its home region or merge with peers in other parts of the country.

Third, more efforts are needed to enhance awareness of copyright protection. Such efforts would not only combat piracy but also increase profits. Compared with Western markets, copyright awareness is relatively weak in China, while the implementation of relevant laws and regulations is also far from satisfactory. This damages the urge to innovate and curbs the development of the industry. For example, a youth art team named "NIKO EDWARDS" recently accused Chinese video steaming website youku.com and social networking company Momo Inc of stealing their idea for a commercial advertisement. In response, youku.com said it would seriously deal with the issue to protect creative works and Momo has stopped broadcasting the video.

Fourth, companies in cultural fields face many uncertainties. Chinese media companies are now operating the midst of sweeping attempts to reform both the economy and the local Internet. Thus, competition is fierce in a market environment complicated by technologic shifts, investor pressures and the successes of overseas rivals. In addition to normal considerations of industrial development, business modeling and company competitiveness, industry decision makers need to also take new policies and regulations into account.

Fifth, the Chinese culture industry is also suffering from a talent shortage. Currently, most of the country's privately owned culture companies are small in size due to a lack of experienced managers. Without professional entrepreneurs and operators to consolidate the sector, the industry has been restrained from further expansion.