Foreign investment


Changes to media ownership laws have been proposed by the Korea Communications Commission according to a Variety article on 3 September.

Korean President Lee Myung-bak has followed this up with a statement that indicates the government’s desire to have a globally competitive media player with the scale to make an impact in international markets.

The government should create an environment to enable the advent of a world-class media firm with global competitiveness by drastically loosening the string of regulations on the broadcasting and communications sector.

From the KCC report, the government’s strategy to achieve this appears to be not through lifting foreign investment limits but by loosening cross-media ownership laws.

The stringent regulations on ownership and multiple ownership prohibit the broadcasting sector from expanding through new investments and mergers and acquisitions”

New media environments have challenged the legitimacy of incumbent cross-media ownership laws, but one does have to wonder if the way to a more globally competitive media conglomerate would not be best achieved by relaxing foreign investment restrictions, no matter how unpalatable that may be.

In other words, despite ideological resistance in Korea to opening up the media industry to foreign players, this may provide an avenue of providing greater diversity in the Korean media while not restricting plurality and freedom of speech. This is particularly the case in Korea where censorship law are stricter than in many other democracies, and a further concentration of power in the media – and big business groups in general – is precisely what successive administrations have been fighting to reform.

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A press release on the Indian Press Information Bureau has announced that Japan and India have signed a memorandum of understanding on Intellectual Property Rights in Tokyo.

The MoU covers three areas of capacity building, human resource development, and public awareness programs, with each government pledging to draw up annual action plans to implement the MoU.

If you take a look back through many of the Government of Japan’s Intellectual Property policy statements, the three areas mentioned in this MoU are some of the cornerstones of Japan’s IP reforms. Ever since Koizumi’s announcement of the ‘Nation Built on Intellectual Property’ policy in 2002, human resource development, public awareness, and even in it’s unstated form capacity building have carried through to one of the more recent policy documents, the 2006 Intellectual Property Strategic Plan.

The News (Pakistan) article also quotes an Indian Government official:

“The agreement consists of Japan’s support in areas such as the introduction of an electronic application system of intellectual property rights and education of Indian officials in the field,” the official said.

“Helping India in strengthening its policy on intellectual property rights is in the interest of Japanese companies considering investment in India,” he added.

This goes part of the way to answering the question why an MoU on IP with India? It would be interesting to know how much Japanese content IP is pirated in India and whether Japanese technology is also being used without paying royalties to patent holders.

Given Japan’s significant deficit in the terms of trade in copyrights, the government – and the industry – appear keen no prevent any unlawful use of Japanese copyrighted goods including content – just think back to JASRACYouTube incidents.

The protection agreement was Japan’s first with a developing country, he said.

A post regarding a piece of Australian federal budget news on film investment policy – which points to a whole set of questions about the political economy of investment attraction and (sustainable) industry development.

The following Sydney Morning Herald article indicates that the Australian Government is planning to increase the refundable tax rebate for local film and television production as part of a A$283 million package.

Domestic film productions will receive a 40 percent rebate, other productions (eg television) will receive 20, while international films will attract a 15 percent rebate (up from the current 12.5%).

On the one hand, providing tax concessions may be a necessity for Australia to continue attracting international productions if it wishes to stay competitive and attractive in the face of many other international locations. This is particularly so when considering the effort some nations in the region are expending to promote their local industries.

But on the other hand, the question needs to be asked: is promoting the use of Australia as a site for location shooting and other production the most sustainable way to grow the industry? How much of the foreign investment that is attracted in this way will be used on “fee-for-service” work that does not provide local industry players with ownership of copyrights? In theory, “service work” provides locals with income and international exposure (provided a local subsidiary is not being used for the work). Yet without owning any of the property’s rights, firms have little in the way of reusable assets.

Singapore’s Media Development Authority (MDA), for example, gives very little consideration for where the production of projects it supports, such as animated TV series, are taking place. The most important factor for the MDA is that Singaporean firms are engaged in the high-end creative work and are retaining at least part of the rights to the content that is being produced.

In contrast, the Australian Federal Government’s 2007-08 budget seems to suggest that Australian policymakers are still too interested in attracting foreign capital and creativity to utilise the services of Australian talent. Given, the production process of an animated TV series is different to a live-action feature. Yet on first glance the tax incentives appear somewhat short-sighted or parochial on the policymakers front by exacerbating an artificial division between supporting “Australian stories” and allowing international films to use local locations and talent.

The differential tax treatment between local and foreign productions if its aim is to encourage foreign investors to put their money into productions that classify as “Australian” by employing a certain number of key cast and crew. Still, the question remains whether productions that the government has classified as “Australian” will be saleable in the international market.

Why is the government keen to promote the industry? And just what is the notion with ‘bringing Hollywood home’ (was Hollywood ever in Australia to begin with)? Are we witnessing a case of government pandering to lobbying from the local film industry? Australian games developers, for example, are eager to gain access to these funds that are only available to film, television, and documentary properties. While the games developers, who predominantly develop games for overseas publishers, would naturally be eager to access such lucrative tax rebates, it begs the question why does the film industry and not other ‘content’ industries receive such government support?

Should support be provided to the local games industry for the creation of ‘original’ IP rather than service work for international publishers?

See also SMH article ‘Filmmakers get…’

On the 9th March during a visit to Seoul, the Malaysian Deputy Prime Minister Datuk Seri Najib Tun Razak announced the establishment of an animation centre in the Malaysian Multimedia Super Corridor (MSC) town of Cyberjaya.

The press release on the MSC website indicates the Malaysian Government’s belief that the content industry can be a significant source of growth, innovation, and augment economies to produce higher value-added products and services to compete internationally.

The content industry has a huge global market and the setting up of the centre will give our people, who have a high level of creativity, numerous opportunities to venture into the existing market.

And in a move to an intellectual property-driven economy, animation appears to be the ‘industry of choice’ for various governments to make a foray into supporting content industries. The dominance of Japanese animation in world markets and the emergence of Korea as a competitive ‘animation-nation’ has undoubtedly prompted various policymakers in Asia to adopt a “me-too” (?) approach. This combined with the steady rise in international animation trade, and the ‘ease of entry’ into animation (both from technical and export market adaptability perspectives) has resulted in a number of countries looking to animation as a key to entry into international media content markets.

Another notable item in the press release was the announcement of collaborative agreements and MoUs between Malaysian and Korean animators, and the Malaysian Multimedia Development Corporation (MDeC) and the Korea Culture and Content Agency (KOCCA)
With more and more nations looking to morph their inward-looking local content industries into ‘vibrant’ ‘competitive’ industries situated in ‘global media cities’, one has to wonder about the potential for “success” in an environment where multinationals, investors, and creative talent have an ever expanding suite of options to choose from.

Is there a hint of location tournaments in the air? The issue raises a series of questions.

  • What policy instruments are governments using to attract industry players?
  • How much effort is being placed on the development of human capital and building of capacity locally?
  • To what extent are generic policies that encourage free movement of capital, freedom of expression, education, and a high standard of living being used compared to specific industry policies that provide incentives, tax concessions, and subsidies for local firms or multinational entrants?

The answers to these questions are a start to deciphering some of the government rhetoric and determining which policy settings are suited not just for foreign investors but for the growth of domestic industries and local economic development.

Warner Brothers’ Chinese joint venture company, CAV Warner Home Entertainment Co., will aim to beat DVD pirates in China at their own game, according to Xinhua News Agency feed.

The company, which is the only sino-foreign JV company licensed to sell audio-visual products in China, says that it will compete head on with pirates by matching them in price while providing significantly higher quality products and faster release.

This follows on from Warner pulling out of their Chinese cinemas venture and making a decision to distribute content directly via DVD (see my Nov 10 entry).

CAV Warner will also distribute locally produced Chinese-made films throughout China, both a signficant step towards a localisation strategy, and an attempt to further curb losses from film pirates recording movies in US cinemas and sending to China for bootleg production and distribution.

According to director Jia Zhangke, whose film Still Life Warner are distributing, problems with DVD piracy are compounded by the Chinese central government’s restriction on the number of foreign films allowed to be imported each year. While I don’t condone restrictions on any imports, it is interesting to see a local director come out in support of increasing imports…

As the Korean Wave continues, Number 3 South Korean broadcaster SBS has teamed up with Taiwanese broadcaster Gala Television (GTV) to launch Entertainment K Channel, broadcasting Korean content 24 hours a day. According to the news article, the export of Korean programs has increased Korean’s influence in the Asian reigon.While the channel will initially air programs from SBS with Chinese subtitles, Entertainment K Channel eventually intends to buy programs from other Korean broadcasters KBS and MBC (which would arguably tend to be more popular).

There is nothing stopping the other broadcasters launching their own channel with a Taiwanese partner however, so GTV and SBS will presumably be putting in the hard yards early to build the Entertainment K Channel brand and show viewers it is the channel for quality Korean TV programs.

Warner Bros. (Time Warner) have announced on Wednesday that they will be withdrawing from their investment in cinema complexes through China, after a change to the foreign investment laws required Chinese interests to hold a majority stake.

The news, which was reported in various publications (china.org.cn, Herald Tribune) indicated that Warner had been allowed to hold a majority share of cinemas in major cities, resulting in them holding 51 percent investment with the rest held by Chinese investors. Yet changes in 2005 forbid foreign interests from holding a majority share of investment in cultural industries, of which cinema is included.

China is not the first country to restrict foreign participation on the basis of preserving cultural identity (Korea’s cinema quotas are one example, Australia’s local content requirements for free-to-air television broadcast are another), but it is questionable whether placing investment restrictions on foreigners at the distribution/exhibition level will boost the production and consumption of high-quality local content.

While the imperative to  promote and protect (to a degree) cultural heritage is understandable, restricting foreign investment is not necessarily going to deliver for local cultural industries. While I am not championing the interests of US-based multinationals, it could be easy for the actions of Chinese policymakers to be interpreted not only as a reversion to protectionism, but as a way of developing local industries by allowing foreigners to establish businesses only to force them into the hands of locasl – not by compulsory acquisition but by requiring Chinese interests to take a controlling stake.

Alternatively, news in the International Herald Tribune (from Bloomberg – link above) suggests that Warner may have another strategic interest in exiting the cinema business. In an effort to thwart bootleggers, Warner are considering releasing movies in China on DVD at the same time they screen in the US, indicating that they view cinema’s as an ineffective (or less profitable) distribution channel by which to exploit the earning potential of content they hold copyrights for.