Tue, Jan 17, 2006 - Page 8 News List

Taiwan's TV industry doesn't need protection

By Chang Ming-chung 張明宗

On Jan. 10, the Government Information Office's (GIO) strategy team issued a report on reviving the nation's television industry. The report suggested that restrictions should be placed on broadcasts of foreign programs during prime time -- a suggestion prompted by the popularity of South Korean soap operas.

In fact, from the perspective of industrial economics, Taiwan's television industry is a model industry, because it encompasses two rare features. First, the barriers to entry to the television market are low. There are no restrictions on foreign TV programs, and if one wants to work as an entertainer, lacking rich parents, being unglamorous or having a low level of education are not obstacles.

Second, the degree of ownership concentration in the television industry is very low. There are about 135 stations (due to restrictions on coaxial cable bandwidth, cable TV users can only see 90 of these stations), and they are owned by a large number of different companies. The result is that when the South Korean soap opera Tachangchin -- which gets the highest ratings on cable TV -- is broadcast, audience share still crawls only past the 3 percent mark. By comparison, its highest ratings in South Korea often exceed 20 percent.

In economic terms, when both entry barriers and level of concentration are low, competition intensifies. This may increase efficiency and facilitate the flattening of wage levels.

In laymen's terms, the nation's television industry has managed a couple of notable achievements. First, because entry barriers are low, anyone can try to make it in this industry.

Second, there are all kinds of TV programs offering everyone something they want and maximizing their pleasure: TV series from North America, Europe, Japan, South Korea, China and Hong Kong, knowledge-based programs on channels such as the National Geographic Channel, local entertainment shows, TV series, news, knowledge-based programs and talk shows.

Third, although TV programs produced in Taiwan have not made it into the international arena, local consumers are quite international in their tastes. This makes Taiwan a bridgehead for broadcasting foreign shows, giving Taiwan a crucial position as a middleman. For instance, the broadcasting of Tachangchin to Southeast Asia and China is controlled by Taiwanese businesses.

South Korea's model for industrial development is to concentrate capital in the hands of a few. Samsung, for instance, owns 25 percent of all national resources. This model has been called the "national champion" model, and it has one obvious advantage: It is easy for the companies to make an international name for themselves.

Regardless of whether or not we like the "national champion" model, it is politically unfeasible in Taiwan. Taiwan and South Korea have protective policies to protect their car industries, but Taiwan's car assembly industry is considered a failure.

There is, however, a deep-rooted reason for this failure. Taiwan has a traditional suspicion toward concentration of capital. Even during the authoritarian period under the Chiang family, this tradition meant that the government was afraid of supporting the domestic car industry as much as the South Korean government. For example, South Korea went as far as to use tax investigations to harass people who bought foreign cars. Small wonder that the proportion of foreign cars in South Korea is only 3 percent of all vehicles.

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