Primarily involved in providing nationwide TV advertising coverage and campaign planning, and TV advertisement production services for advertisers and advertising agents.
Business Review - For the year ended December 31, 2012
I. Media Resources Management
In media resources management, the Group is one of the leading operators for CCTV in terms of the longest partnership, an abundance of underwriting resources, largest partnership scale of operations, and has won the CCTV Top Ten Advertising Agencies award and the CCTV Outstanding Achievement Award for Advertising Agency for consecutive years. Leveraging over fourteen years of cooperation with CCTV, a diversified customer base, plentiful working capital and an experienced management team, the Group continues to enjoy notable advantages under a complex market environment.
During the period under review, the Group renewed its current exclusive underwriting contracts and acquired additional exclusive underwriting rights, which consolidated and strengthened the Group's position as an exclusive underwriter of CCTV's program advertisements. The Group had approximately 39,718 minutes of advertising time resources on a total of 50 programs on channels including CCTV-1 (General)/CCTV-News (Chinese), CCTV-4 (Chinese International, including Europe and the US), CCTV-5 (Sports), CCTV-7 (Military and Agriculture) and CCTV-NEWS (English) across a variety of program types such as news, culture, arts, sports, life, agriculture, feature programmes and other topics. Its specific advertising resources include the “Night News” ( 晚間新聞 ) on CCTV-1 (General), “News 30” ( 新聞 30 分 )jointly broadcasted on CCTV-1 (General)/CCTV-News (Chinese), “China News” ( 中國新聞 ), “Across the Straits” ( 海峽兩岸 ), “Exposition of Chinese Cultural Relics” ( 國寶檔案 )and “China Showbiz” ( 中國文藝 ) on CCTV-4 (Chinese International, including Europe andthe US), “Weather Forecast” during “Sports News” programs on CCTV-5 (Sports), programs including “Zhi Fu Jing” ( 致富經 ), “Focus on the Three Agricultural Issues” ( 聚焦三農 ),“Daily Agricultural News” ( 每日農經 ) and “The Rural World” ( 鄉村大世界 ) on CCTV-7(Military and Agriculture), and all programs on CCTV-NEWS (English).
II. Integrated Brand Communication Services
Integrated brand communication services is one of the Group's recent development focus. By consolidating brand communication needs, the Group offers its customers various services including brand positioning and planning, market research and consultancy, media strategy and research, media procurement and placement, planning and execution of public relations, and placement monitoring and evaluation, covering the resources of omni-media brand communication and service solutions on TV, the Internet and mobile Internet, radio, print and outdoor media.
During the year under review, the Group successfully renewed its contracts with the Postal Savings Bank of China, China Life Insurance Company, and the People's Insurance Company of China (PICC), continuing to undertake their media procurement services business for the year. The Group was also engaged by China Construction Bank Corporation, Guangzhou Wanglaoji Health Industry Company and Suning Appliance Company for its TV advertising placement and service agency business. Once again, the Group delivered impressive results in the 2013 CCTV Prime Time Resources Auction. By adopting highly cost effective media strategies, it purchased, on behalf of its clients from the industries such as finance, transportation, food and health care products, advertising resources worth over RMB1.8 billion, representing an year-on-year increase of 28%, with an increase in market share accordingly.
The Group's creative planning case “PICC by My Side” was awarded the “Bronze Award for General Media Placement — Media Planning” at the award ceremony of the seventh China 4A Golden Seal Award. The award is a substantive recognition of the ability of the Group's integrated communication service. Meanwhile, during the year under review, there was an advancing progress in the volume of media procurement business of the Group with the amount of online media procurement exceeded RMB10 million.
The Group also continues to cooperate with MediaCorp of Singapore and the US financial TV station CNBC, building a new global television network resources communication platform to promote the influence of Chinese brands around the world.
III. Creative Production of Advertisement and Content
1. Creative production services for commercial advertisements and microfilms
From the beginning, the Group has possessed an outstanding content creation gene. At present, with a creative and strategic team of over forty members, the Group has provided comprehensive, professional and sophisticated creative advertisement and video content production services to numerous business sectors, corporations and city governmental institutions and regions, covering various formats including advertisements, features, micro films and video programs, and has won a number of national and international awards.
During the year under review, the following works were selected in the “IAI Annual Book of Chinese Advertising Work” (IAI 中國廣告作品年鑒 ) after an overall evaluation bythe book's editorial board, including video assignments: “Beauty beyond Imagination — Tangshan” ( 想不到的美篇－唐山 ); “The Interview — Everbright Bank” ( 訪談篇－光大銀行 ); “The Ultimatum — Royal Ruyi” ( 極致篇－皇家如意 ); and “Tailor-made —Nogara” ( 定制篇－路嘉納 ). Print products “The Roller Coaster — Durex Pleasuremax”(過山車篇－杜蕾斯螺紋裝) and “One Person, One World — Everbright Private Banking”( 一人一世界篇－光大私人銀行 ) . SinoMedia's 2011 Annual Report, a product designedon the theme of “Breakthrough” by the Group's visual art center was also awarded the “League of American Communications Professionals Silver Award” and “Cover Design Honor Award (Media and Advertising Companies)”. During the year under review, the Group has produced more than twenty video assignments in total, including: the initial public offerings propaganda video, two micro films “Action to Wish” ( 心願行動 ) and“Always with You” ( 一直在你身邊 ), and a promotional video “Warm Life Series” ( 溫暖生活篇 ) of PICC; the propaganda of Changbaishan International Resort of Dalian WandaGroup; “Country's Luck — Testimony” ( 國緣－見證篇 ) and “Luck for this Life —Nostalgie” ( 今世緣－懷舊篇 ), commercials for King's Luck Brewery; “The World” ( 世界篇 ), a commercial for Yunfu Stone; and the commercials for Henan Province TourismAdministration, etc.
2. Creative production and syndication of public service advertisements
Beijing Taihe Ruishi Advertising Company Limited, a wholly-owned subsidiary of the Group, is the only operator in China that has a nationwide public service advertising broadcast network of 150 regional television channels. This platform creates a good social morality and promotes progress in social civilisation through the dissemination of public service advertisements beneficial to the social concept, so as to create a macro effect on the society and the public. During the year under review, through optimal adjustment in organisational structure and management, there was a signifi cant improvement in the quality of media collaboration for the company. It was also in collaboration with the public service advertisement production business of CCTV to strive for the development goal of becoming the “communication experts in public service brands”.
3. Video dynamic management services
With the only media asset management system in the advertising industry, the system's database provides clients with the dynamic management services of gathering, collating, editing and applying video information. The database is proven in practice to substantially shorten the production cycles for clients' promotional videos, and provides a full range of source materials for production, resulting in a more effective and systematic video promotion campaign for clients. At the same time, the system signifi cantly improves the efficiency of the Group's post-production team and the quality of its video production services. The system continued to provide highly efficient services during the year under review, and the Group planned to create dedicated databases for more customers to generate management income.
IV. New Media Investment and Integration
New media investment and integration plays an important role in the Group's ambitious expansion to the upstream media business and its integration of the industry value chain. The Group believes that in order to achieve its strategic transition from an advertising agency to a media corporation, it is vital for the Group to secure a strong and long-term foothold as well as advancement in respect of “Channel+Content” development in the upstream media business. In terms of “Channel”, the Group strongly believes that in the next decade, with the increase in the Internet population and the development of mobile smart terminals, the Internet, especially the mobile Internet, will accelerate changes in the media industry and promote the consolidation and development of various media. Accordingly, the Group has continued to pay particular attention to the development of content platforms in the new media industry and, leveraging its own strengths, focused on the development of video-related business. During this process, creative content production with communication capacity will be the core competitiveness for all video media.
During the year under review, the Group's first self-developed agricultural information portal website was officially launched online, and key strategic investments in the digital TV channel “Super Channel” ( 環球奇觀 ) and the video clips website “boosj.com” ( 播視網 ) waspreliminarily completed.
Details of the Group's investment projects during 2012 are as follows:
1. Boosj.com (播視網 )
In December 2012, the Group acquired Hangzhou 3G Media Company Limited ( 杭州三基傳媒有限公司 ), the operator of the video website boosj.com. Boosj.com is currently aleading integrated video website in Mainland China with WEB2.0 technology as its core element. With the concept of “New Videos, New Life”, boosj.com integrates a wide variety of program resources with in-depth information regarding the hot news, entertainment, travel, fashion, cars and games. Boosj.com is devoted to establishing a video clips sharing video website dedicated to users in Mainland China and Chinese users from around the globe.
Leveraging its own robust development momentum, boosj.com has won various awards provincially and within the industry for consecutive years. According to data from iResearch, as of September 2012, boosj.com was ranked 12th place among the integrated video websites in China, 7th place among the professional video websites in Mainland China, and one of the top three among unlisted or not yet acquired integrated video websites.
The acquisition is of utmost importance to realise the Group's strategic goal of setting “video media management as its core business”. Following the establishment of the selfdeveloped agricultural information portal “wugu.com.cn” as well as the acquisition of equity interest in projects such as the digital pay TV channel “Super Channel” and the mobile TV platform “100TV”, the Group has completed its “Three Screens” strategic layout of “TV+Internet+mobile”.
2. Wugu.com.cn (吾谷網)
With an objective of becoming the largest and the most authoritative agricultural portal website in China, wugu.com.cn officially went online in February 2012, and is one of the Group's projects devoted to expanding its business to the upstream of the media industry value chain. Through obtaining capital injection and professional support together with elites and talents from the fields of Internet technology, agriculture and brand communication, wugu.com.cn has been positioned as the fastest growing new media platform amongst the agricultural media in Mainland China. In an effort to establish an integrated agricultural portal website which provides information communication services within the full agricultural industry value chain, wugu.com.cn is the first website to introduce the concept of “Origin in China” ( 中國原產地). Adhering to this concept, it has also launched a “Specialty Page”, which acts as a new base for information exchange regarding agricultural specialties in Mainland China.
In just a few months after its official launch, wugu.com.cn has developed rapidly and was ranked one of the top three in terms of Internet traffic amongst integrated agricultural websites in China. As of December 2012, wugu.com.cn had an average number of visits per day of 320,000 with visits from 86,000 independent IP addresses. Accordingly, it was ranked the first in the Alexa global ranking amongst agricultural Internet media in China.
3. Super Channel (環球奇觀)
In March 2012, the Group entered into an agreement with Global Broadcasting Media Group ( 國廣環球傳媒控股有限公司), a company under China Radio International, to invest and participate in the operations of Super Channel, a digital pay TV channel. The digital pay TV channel Super Channel is approved by the State Administration of Radio Film and Television as a humanities and science educational TV channel featuring various spectacles. Since its first broadcast through satellite television in 2007, the channel has broadcast in 252 provinces and cities through cable networks, covering a TV audience of nearly 50 million.
The three abovementioned new projects, together with the Group's investments in the projects of CNLive and 100TV in 2011, has further strengthened the Group's channel layout which acts as a key framework for the Group's “Channel+Content” strategic development into the upstream media business.
Business Outlook - For the year ended December 31, 2012
In 2012, China achieved a growth of 7.8% in gross domestic product, among which the growth in the fourth quarter amounted to 7.9%. The growth not only ceased the receding trend over the last seven consecutive quarters, but also outperformed the market expectation. The Group believed that it was an explicit sign of “national economy operated in stability, and economy and society advanced in deliberation”. Regarding the industry, as one of the key components of the mass culture industry, the media advertising industry shall see historic development opportunities during the “12th Five-Year” period, with the support of the State's policies, development of national economy, advancement in information technology and extended experience gained by the industry over years. According to the “12th Five-Year development plan for the advertising industry” announced by the State Administration for Industry and Commerce, the State's government will give extended support to the media advertising industry through its fiscal and taxation policies, enhance the industrial level of integration, specialisation and internationalisation, in a bid to further maximise both economic and social contributions of the media advertising industry. Therefore, with continuous attention to the prevailing economic landscape and active capture of business opportunities, the Group remains positive to the outlook in 2013.
In the time when opportunities abound and yet industry consolidation accelerates, we believe that swift changes in the industry require its leading players to set up examples and standards in a number of aspects, including brand influence, market share, resource deployment capability, operational system, organisational management and talent cultivation, combine with its own strengths, and walk along an innovative path under clear strategic goals.
Hence, the Group will adhere to the principle of “video media management as its core business”, continue to refine the operation of all business sectors from upstream to downstream of the media industry value chain which has been established during the year, and consolidate the communication platform involving all media. With regard to media resources management, the major business contributor of the Group, we strive to deeply plow our current customer base in the vertical level and expand clientele, maintain market share and continue to highlight our industry advantages. From the perspective of customer servicing, providing omni-media communication service under renowned brand name remains a dominant trend. We will develop each component of the multimedia and achieve breakthroughs in the brand management consultancy business. Meanwhile, by making use of the self-developed HUI tender system and M-cube investment driver, the Group will exert major efforts on promoting the brand of its integrated brand communication services, with an aim to gain reputation and distinguish itself from other competitors.
The “Channel Content” media platform of the Group has been established during the year. The Group has also acquired the leading platform resources required in the development of video media operation. For those completed strategic acquisition projects, general development approaches in the coming year have been set out: the Group will re-position and re-package boosj.com for integration before further development, improve the profitability of the TV channel Super Channel, and strengthen the brand and marketing power of wugu.com.cn. The mid-term target of the Group is to focus on developing the mentioned media channels and build up interaction and linkage among them. Upon effective integration of branding and marketing resources of the Group, we strive to facilitate survival, growth and expansion of various media in their respective realms and ultimately maximise values in communication, thereby forming a new bolster for the Group's core business.
We believe, along with the media advertising industry gaining support from steady economic growth in China and policies formulated by the State, directors, the management and all staff of the Group will aim at developing a top-ranking media corporation both domestically and internationally with radiative effect in the industry, keeping on to reap great investment returns for our investors.
Source: SinoMedia (00623) Annual Results Announcement
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