China Networks (OTC BB:CNWHF)

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Company Description

China Networks Intl Holdings came public via a share exchange transaction with a blank check company.

China Networks Media is a television advertising company formed in 2007 for the purpose of investing in, consolidating, expanding and streamlining PRC television advertising assets in partnership with municipal and provincial level TV stations. In June 2008, CN Media raised $28 million in a private placement for the consolidation and operation of the advertising operations of two television stations: Kunming and Yellow River.

According to publicly-available information, China’s total advertising spend in 2007 of approximately $16 billion represented 33% of total worldwide spend, ranking fifth overall in total spend. Industry experts project that China will experience a compound annual growth rate (“CAGR”) of 17.33% from 2007 to 2010, which is nearly 4% higher than the next fastest growing advertising market among the ten largest markets, which is Brazil, and nearly triple the worldwide average of 5.97%.

China’s Advertising Spend by Category ($ million)

	2005		2006		2007		2008E	2009E	2010E
Advertising Spending: ($ million)
TV		4,670		5,311		6,187	7,826	8,452	9,128
Newspapers & Magazines		3,693		4,426		5,152	6,094	6,385	7,343
Radio		511		752		876	1,074	1,181	1,287
Outdoor		1,655		1,890		2,202	2,678	3,348	3,850
Internet		535		927		1,606	2,618	3,553	4,598
Cinema		20		22		26	29	32	37
Total		11,084		13,327		16,049	20,319	22,951	26,243

Source: Advertising Expenditure Forecasts (2008.06), ZenithOptimedia p. 51

In the television advertising sector, China has not demonstrated the same weaknesses currently affecting the United States and Western Europe, namely the trends towards personal video recorders and other time-shifting devices, migration of viewers from premium mass-audience channels to cheaper specialist channels and competition from the internet. As a result, China’s television advertising industry has grown rapidly in recent years and now comprises 38.5% of the total advertising market, representing approximately $7.8 billion in 2008, according to industry reports. China’s television advertising market has developed significantly over the last decade, and is expected to continue to grow in the coming years. By 2010, China’s television advertising spending is projected to reach US$9.1 billion according to industry reports, implying a CAGR of 13.8% from 2007 to 2010. This compares favorably to growth of 8.2% in Hong Kong, 4.9% in Korea, and 1.5% in the United States.

Last updated June 29, 2009