Abstract:  Based on the new institutional economics theory, the article seeks to analyze the institutional evolution of China’s TV industry and argues that changed market demands, reformed institutional environment and technological progress constitute the main dynamics of this institutional change. The institutional innovation was initiated by the “primary action group” weighting its benefits and costs and completed with the cooperation of the “secondary action group”. The “incremental” type of innovation, such as advertising operation systems and cable TV systems, brings about greater benefits for all related parties and is comparatively easy to implement. The innovation that involves adjustment of interests, or the “stocktype” innovation, encounters great resistance, like the system “separating production and broadcasting”. Market demands, the institutional environment, and the advancement of media technology will continue to be the driving force for the institutional innovation in media industry.

Key words:  TV market demands, institutional environment, media industry system, institutional evolution