Sun Bin: Super Girl economics

I would be happy to answer your questions about the assumptions and specifics about related industry specifics in China. Please visit this discussion forum thread.

Background

First episode 3/19 (Sat), 14 prelims in 5 regions (4/3/3/2/2)
For each of the 5 regional episodes: GZ/CS/ZZ/CD/HZ, there are 5 episodes after prelim: 50to20, 20to10, 10to7, 7to5, 5to1; all live broadcast
But only the 5 regional finals were broadcast in Friday evenings, since May 6th (the rest are day time programs), plus the pre-final episode (15to10) on July 8
7 episodes on Final round: 3x(10to8), (8to6), 6to5, 5to3, Finale: starting July 15, ended Aug 26
Total 14+25+1+7=47 episodes (starting on Mar 19): 7+1 final rounds & 5 finals in evening, 34 day time
regional finals and finale = 3 hour, other = 2 hour programs
Co-produced by Hunan Satellite TV (HNSTV) and a production company called Tianyu (Sky Entertainment) based in Shanghai
Prelim is also called "sea sieve"(海选), about 150k people entered sea sieve. Everybody is given 30 seconds, and Super Girl also has its "william hungs"

Ad revenue

It was reported that the average ad revenue per episode is about 2-3M, but it is likely to be higher in August, esp after the price hike in July (production cost was said to be about 3-4M per episode in the final rounds, but this may have been exaggerated, as some other estimated the total production cost to be 10-15M)
Since most of the ads were sold before the unexpected popularity, HNSTV was only able to charge for a regional STV price for most of the slots. Although 15 sec ad price was raised to match that of CCTV's, from 75k to 112.5k, after grp reached 10% in later July. Some of the slots were probably already taken
To triangulate the numbers:

gross ad revenue for each episode, about 20-30 min * 4 * 75k =7.5M, and 25*4*112.5=11M; average gross revenue is likely to be 8-9M
However, about 25-35% are non-revenue ads (e.g. HNSTV's own programs), so net is likely to be 6M
Pre-season discount of 30-45%: reduce to 3.5-4M
15-40% commission will be paid to ad agents, so the net revenue is around 3M, close previous estimate (a bit less on the first 15 episodes)

Total ad revenue: (34*.3 + 5x2 + 2 + 7*3)=43M net ad revenue for HNSTV, plus 14M sponsorship by Mengniu, total is around 55M, sharing this with Tianyu, HNSTV probably gets around 30-35M

SMS revenue

to be shared with partners Linktone, and Telecom Service Providers (SP) including China Mobile (CM), Unicom, China Telecom/CNC (PHS + fixed lone)
Registration for a monthly VAS fee 6.0, then receive 15 special message costing 1.00 each. i.e. 21.0/month basic feesThen, registration per episode via SMS, cost 1.0 on CM, 0.5 on Unicom/PHS, 3.0 on fixed-line
Each SMS vote then cost 0.1, up to 15 votes per registered number
It is reasonable to assume that most votes (perhaps over 80%) are sent through Unicom/PHS, and many people max out the 15 votes because of the high fixed cost, for an average cost of around 7.0/episode on 15 votes (21/4+0.5+1.5)
Total SMS votes for 10to8: 2M; 6to5: 2M; 5to3: 5M; Finale: 8M; regional finals 0.5-1M
Additional SMS (non-voting) comment revenue (audience can send SMS and will be queued to be displayed on TV screen)

SMS revenue will be split between SP, Linktone, Tianyu and HNSTV

SP will get about 20%, HNSTV likely to have more than 50%, Linktone 10-15%, same for Tianyu

SP charges 0.05/SMS network charge, plus around 15% as commissions

Tianyu once estimated the average revenue for HNSTV is around 1M/episode in July (a lot more in Finale)

this implies the gross revenue was around 2M for total votes of about 1M, higher in August
1M vote is probably generated from 80-250k subscribers (assuming average vote/sub at 4-15), at an ARPU of 7.0/episode, which makes sense
Estimated total gross revenue (by Chinese media): 13M for season 1 (2004), at least 30M for 2005 season (episode 1-2)
8M votes in Finale, for which ARPU=21/4+0.5+15=20, sub voted=0.6-2M, gross revenue=5-10M
Total seasonal SMS revenue is likely to be 10*1+6*2+6*2.5+final=42-47M (Chinese media estimated the total at 30M, which has probably ignored the price hike at the finale)

SMS has been hot, even CCTV has been trying profit from this. A notorious case was the one during the Beslan crisis last year (a few hundred students were killed in Chechnya), CCTV4 had a SMS "game" for guessing the number of death. Since then such activities (game with prize) were forbidden by SARFT

Economics for HNSTV

Ad revenue 30-35M, SMS revenue around 20-25M, total 55M

Total cost likely only 50%-70% for this program
Plus additional benefit for the HNSTV brand, and ability to command fees to local CATV, and expand relay coverage in local CATVs (spillover effect for local CATV, see chart on the right for Sichuan Economic TV in season 1, 2004, a niche local CATV channel which relayed Super Girl. Yellow bar=grp, blue=market share)
Spillover for other HNSTV programs
Additional revenue for re-run and derivatives

Economics for Mengniu ("Mongolian Cow" the dairy company 2319.hk, Morgan Stanley is one of the private equity investors)

Estimated sales for Mengniu Yogurt this year would be at least RMB 2.5-3bn in 2005,

Mengniu had planned for 2bn sales at beginning of 2005 it was reported that the monthly capacity of 250M packs were sold out 20 days after Super Girl program tarted. since then 2 more production lines were added. This would mean at least 3BN packs sold in 2005
wholesale price is arounf RMB1/250mL pack, retail at 1.9, recently dropped to around 1.6
compare this with sales of 800M for FY2004, when the product first launched
market leader Yili sold 2500M in 2004, but Mengniu has already surpassed Yili in brand recognition (based on CCTV CSM Sofres survey)

If one assumes organic growth of 50% (i.e., without this sponsorship), one can attribute 1.2-1.8bn of the new growth (unplanned growth) to the Super Girl effect. Adding the overall brand spillover for other product line (base sales of 4-6bn, add any percentage you like, I would put 10-20% conservatively), the Super Girl has brought to Mengniu additional sales of perhaps 2-3bn, for a total A&P cost of about 0.1bn
Ad/Promo on Super Girl is about 14M(sponsorship)+16M(pop/etc), total A&P around 100M, the original plan to to spend 5% of the target sales 2bn, which is already lower than the historic (and industry) figure of 6-8% (higher for new product line like yogurt for Mengniu).
Now it is more likely 3-3.5%, a total success for Mengniu (this has not taken into account the more long term brand effect, for Yogurt, and the Mengniu brand)
However, there is a downside to the rapid emergence of Mengniu, as it has already triggered a new round of price war in the dairy industry

Benefits for Tianyu is the whole franchise and music sales, apart from 20-25M revenue it shared

Benchmarking similar franchise in US, TV revenue is only 40% of the total
Tianyu is going to exploit Super Boy, Super Child, etc. Although unlikely to match the success of Super Girl, it will still be a decent cash cow

P.S. To appreciate the numbers below it is better to use PPP to convert to USD for comparables in US (e.g. 2M RMB roughly corresponds to 1M USD in PPP, or even using 1:1 conversion. c.f., RMB 220k for top rated 30 sec ads in China, vs USD 250k in US for prime time in big 4 network news, with 4x population but 1/20 GDP/cap), and this back of the envelope calculations below is more illustrative on the profit margin (%) rather than the absolute numbers (e.g. for SMS where there is basically no marginal cost)

Sources:
超级女声短信掀起圈钱狂潮,
短信带给超级女声的财富狂欢,
整合营销“超级女声”的商业价值,
Sponsorship Plan,
电广传媒（000917）广告代理合同,
超女“催肥”10亿生意, 超级女声钱钱钱钱,
冠名、广告、短信三大收入超级女声收入上亿,
超级女声VS超级策划