CAMPAIGN INTERNATIONAL: ISSUE: CHINESE SATELLITE AND CABLE TV - Murdoch’s Star fails to rise in the East - Star TV, News Corporation’s Asian venture, is finding it hard to make headway in China, Iris Lai writes

Although Rupert Murdoch is no stranger to hostility in media markets, his struggles with his Asian satellite TV venture, Star TV, show that he is far from infallible, particularly when faced by a restrictive Chinese government and powerful native media operations.

Although Rupert Murdoch is no stranger to hostility in media

markets, his struggles with his Asian satellite TV venture, Star TV,

show that he is far from infallible, particularly when faced by a

restrictive Chinese government and powerful native media operations.



News Corporation’s joint venture bid with Sing Tel to take over Cable &

Wireless HKT was beaten by Pacific Century CyberWorks (PCCW) at the end

of last month, which puts the latter in a strong position regarding the

future of digital media in Asia. Ironically the founder of PCCW, Richard

Li, sold Star TV to Murdoch in 1993 for pounds 531 million. Even more

ironic was that PCCW’s takeover of C&W had been funded by the sale of

Star TV to Murdoch.



Star TV’s head, Gareth Chang, resigned just hours after the bid was

foiled, thwarting Murdoch’s plans to push News Corporation into the

pay-TV market.



Chang’s departure poses problems for Star TV, which had hired him for

his connections and experience in China. He joined from the Los

Angeles-based Hughes Electronics International in 1998, and was

recruited to expand Star TV’s business in China. Chang planned to

increase Chinese programming and channels on Star to attract the Chinese

speaking markets.



A News Corporation spokesman from Beijing explains: ’News Corporation

and Star TV worked very hard during the 90s to develop strong and

healthy relationships with a range of government people. This has been a

team effort, towards which Gareth Chang made a valuable contribution,

and we are committed to continuing along this path.’



Murdoch faces a market fraught with challenges. In Asia adspend on

regional satellite and cable TV still accounts for less than 5 per cent

of the total TV media budget in the region. Derek Kwok, the corporate

development director of Zenith Media China, says media buying decisions

are determined by ratings: ’Household penetration of hundreds of

millions does not mean hundreds of millions of viewers.’



Star TV is estimated to lose about dollars 40 million this financial

year ending 30 June. Operating in an environment with many different

cultures and languages, regional broadcasters in Asia face a tough

environment for staking out potential revenue opportunities.



For several years China, which has a population of 1.2 billion, has been

the focus for foreign broadcasters. Nevertheless, for them distribution

remains a critical issue.



The broadcasting industry is firmly in the hands of the Chinese

government.



Foreign investment in cable TV networks is prohibited. The programming

content of foreign channels is monitored to ensure it complies with

strict standards.



By the end of last year, China had completed about 2.5 million

kilometres of cable TV transmission networks covering almost 100 million

subscribers.



Kwok believes that it is unlikely the government will allow a nationwide

cable TV network, because it would undermine China Central Television’s

authority. He adds that it does not want to see a ’booming’ media sector

that would be difficult to control.



There is also the problem among cable operators of collecting payment

from subscribers. Cable costs about dollars 36 to install, plus a

monthly charge of dollars 1.70. Once households are plugged into the

cable system, they stop paying the monthly fee. While US and European

cable operators rely on subscriptions and advertising as their major

sources of revenue, Chinese cable networks have to rely on

advertising.



Most foreign broadcasters operate in China by entering into syndication

or affiliate relationships with numerous local terrestrial or cable

broadcasters.



To gain daypart distribution broadcasters offer programming to local TV

stations in exchange for commercial airtime. But since most foreign

broadcasters’ programming blocks are not scheduled during primetime, the

low ratings are a concern for advertisers.



Until the government becomes more receptive to foreign broadcasters,

advertisers will not commit to these channels while audiences are

light.



Peggy Lam, Star TV’s senior vice-president of advertising sales in

China, says creative media selling and flexibility are the key to

attracting advertisers and that local partnerships are vital in gaining

programming distribution within China’s 50 cable networks.



Phoenix, a 24-hour Mandarin entertainment channel, is a three-way

venture owned by Star TV, Hong Kong-based Today’s Asia and China Wise

International.



A television executive explains: ’It makes a big difference if you know

government people - it will eliminate their hostile perception of

you.’



Revenue might not be up to scratch but advertising sales in China grew

by between 50 to 70 per cent annually for all Star TV’s channels,

including Phoenix.



News Corporation is believed to be talking to various telecommunications

operators and internet companies to establish a global broadband media

empire. It has signed a joint venture pact with Renren Media, a Hong

Kong internet company, to develop global Chinese internet content.



Earlier this year Star TV and C&W HKT signed terms for a digital TV

venture to provide a range of interactive home entertainment, digital TV

and internet services in the region. The venture is 60 per cent owned by

C&W HKT and 40 per cent by Star TV, with warrants to increase C&W HKT’s

equity to potentially 70 per cent.



Although the dramatic buyout of C&W HKT by PCCW has raised uncertainty

about the digital TV venture, it is understood that Li and Murdoch will

not give up their respective interests in digital TV when both parties

need each other. Li needs Star TV’s programming platform, which has more

than 50 multi-language channels on board, while Murdoch needs Li’s

telecommunications and cyberinfrastructure to widen the

distribution.



However, the opening of the telecommunications sector in many Asian

countries will not necessarily lead to the liberalisation of the TV

market. In China, the trunk communications network will almost certainly

be built by the government.



Meanwhile, Murdoch continues to look for the best media marriage that

will help defend Star TV as it faces competition from new media.



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