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
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
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
Foreign investment in cable TV networks is prohibited. The programming
content of foreign channels is monitored to ensure it complies with
By the end of last year, China had completed about 2.5 million
kilometres of cable TV transmission networks covering almost 100 million
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
Most foreign broadcasters operate in China by entering into syndication
or affiliate relationships with numerous local terrestrial or cable
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
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
A television executive explains: ’It makes a big difference if you know
government people - it will eliminate their hostile perception of
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,
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
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.