In late July, a publicly-traded local television distributor in China’s northwestern province of Shaanxi was sued by the content distributor of five national entertainment channels after failing to pay three years of subscription fees. In most national television markets around the world, such circumstances would be unimaginable. Try to picture Comcast in arrears with the Walt Disney Company year upon year as it openly offered the channels ABC and ESPN to millions of satellite television viewers. The quick and clean solution to such a breach, no doubt, would be for Disney to simply shut off the content. 

But the case of Shaanxi Broadcast & TV Network Intermediary Group, which agreed in mediation in August to pay Zhongguang Movie & Television Satellite Company (CBSAT) close to 10 million US dollars for the above-mentioned breach, is unique owing to the odd circumstances of China’s media landscape. While both CBSAT and Shaanxi Broadcast & TV may look and act like private, commercial ventures — and while the latter is traded on the Shanghai stock exchange — they have an intimate family relationship. Through an intermediary, Shaanxi Broadcast & TV is majority controlled by the Propaganda Office of the Shaanxi Committee of the Chinese Communist Party (CCP), which means it is directly under the provincial Party leadership. The Beijing-based CBSAT, on the other hand, is fully owned by China Central Television, the national broadcaster directly under the powerful China Media Group (CMG), and ultimately the CCP’s Central Propaganda Department. 

The Shaanxi-CBSAT dispute is an excellent case to illustrate how political control interweaves with business deal-making in China’s tightly restricted yet commercially assertive media space. 

In this consanguine affair, the central Party is the forceful yet somewhat indulgent father, and the provincial Party is the wayward son. At issue in the dispute is the distribution to television viewers in Shaanxi, which number close to 40 million, of content from five national entertainment channels — including two sports channels, CCTV-5 and CCTV-16, and a further three covering the arts, movies and TV dramas (CCTV-3, CCTV-6, and CCTV-8).

All in the Family: Sharing Power and Revenue

The family relationship in this case can explain why CBSAT acted with such apparent indulgence as the Shanghai-listed “client” failed again and again to pay the required licensing fees. 

In China’s semi-commercial broadcasting landscape, provincial cable networks cannot simply receive and rebroadcast CCTV’s satellite signals, despite the fact that it is a national state network. Instead, broadcasting companies must contract with the national intermediary (CBSAT in this case) to pay regular distribution fees — likely from advertising revenue — and gain encrypted access.

In this case, for reasons that remain unclear, Shaanxi Broadcast & TV failed to make its payments as contracted. On July 24, Shaanxi Broadcast & TV Network published a formal notice disclosing the lawsuit from CBSAT, according to its obligations as a publicly-listed company. The case arose from a contract dated to March 2024 that granted Shaanxi the right to distribute CCTV’s encrypted signals to viewers in the province. CBSAT sued for the delayed payments and for Shaanxi’s continued use of the signal beyond the lapsing of the contract. It sought 80.3 million yuan, around 11 million dollars, to cover the payments plus interest.

Rather than going to court, the dispute was resolved last month through court mediation in Beijing. Shaanxi agreed to pay about 10 percent less through an installment plan running between now and 2028. 

So far, no coverage in China has drawn out the larger implications of the Shaanxi-CBSAT dispute. Why would a provincial broadcaster, handed a monopoly on a platter in a local market of nearly 40 million people, fail to make licensing payments? The answer may have to do with the generally poor state of the local television industry in China. 

The Shaky Family Balance Sheet

While China is generally not open about problems in the media sector, the country’s local television industry is by some accounts in freefall. According to reporting by Initium Media in April last year, translated by CMP, pay cuts and layoffs have hit hard at stations nationwide as ratings collapse and advertisers scatter. Nearly 2,000 local stations have reportedly faced shutdown, unable to secure revenue that is increasingly shifting toward digital online platforms. As pressures have mounted, reporters have been pressed to moonlight as advertising salespeople, working under strict revenue quotas — a trend referred to as “salesification” (销售化). Even at the national broadcaster, CCTV, the Initium Media report revealed, these pressures are coming to bear. 

China’s provincial broadcasting companies are no exception to this generally worsening commercial outlook. Cable television viewership is down as the audiences are moving to streaming online channels. And Shaanxi Broadcast & TV may in fact exemplify this struggle. The company has recorded a net operating loss for three consecutive years. 

Shaanxi’s financial struggles also stem from credibility problems. In July 2024, in fact, the Shaanxi Regulatory Bureau of the China Securities Regulatory Commission (中国证券监督管理中国证券监督管理委员会陕西监管局), an organ responsible for the supervision and management of listed companies, found that the company falsified its 2022 profit figures, boosting them artificially. These findings led the regulator to not only flag the company to the stock market but also fine the chairman, the deputy chairman, and the chief of operations for “failing to completely fulfill their duties and responsibilities” (未能勤勉尽责).

While the Shaanxi-CBSAT dispute is a fascinating display of commercial dealing within China’s tightly-controlled media space, it is likely far from unique given the broader industry problems outlined above. When it comes to sharing the pie, there is trouble in the family: the central Party can hardly afford to support another wayward son.