The battle for a share of Asia's huge television audience is in full swing, with international broadcasters pouring in vast amounts of cash. But it's the players who provide local programming content that look likely to succeed, writes Helen Johnstone.
Asia seems to be the TV companies' favourite place to lose money. News Corp, through its Asian subsidiary Star TV is losing an estimated US$100 million a year, while MTV says it is losing 'heaps and heaps'. NBC, TNT and Cartoon Channel, and Asia Business News are also working at a loss in Asia, but won't disclose how much. Most executives simply laugh when asked the question.
Nor do they expect to make money soon. Few executives are prepared to estimate when their companies will turn a profit, but many say it won't be for several years yet.
President of MTV Asia, Peter Jamieson, says the network isn't scheduled to break even until the next century. But he's not worried. 'We're losing precisely in accordance with our business plan,' he says.
These companies are in the business of attempting to win market share, and the rewards for those that can stay the distance promise to be huge. More than 100 million additional households across Asia are expected to sign up for cable and satellite services in the coming 10 years, according to industry analyst Baskerville Communications Corp, taking the total up to 178 million by 2005. Baskerville forecasts that the increase could take revenues for the sector from US$5.5 billion today to US$28 billion.
The gold rush has already begun. Most of the world's major television and entertainment companies have launched channels in Asia in the past two to three years and new ones are appearing by the month.
Cable is being laid at a breath-taking rate. In Singapore, the government has mandated that Singapore Cablevision (SCV) connect every home in the city state to a cable network by 1998. SCV is currently wiring up around 5,000 households a week.
Those that fail to build a following now may find it impossible to break into the market in the future. Concern is rising among industry watchers in Asia that the mega-media companies of the West will use their money and power to dominate the TV sector in Asia. Many worry that as the West beams its 'loose morals and imperialist attitudes' into the living rooms of Asia, they will swamp the region's cultural heritage.
Asian newcomers prove fierce competitors
But the battle is not over yet. A handful of Asian companies are proving that, even without the vast resources of Western entertainment conglomerates, they are competitors to be reckoned with. And the Western companies already in the region are also turning increasingly to local film producers, animators and music companies to help them appeal to Asian audiences.
News Corp's Star TV beams into an estimated 44 million households across the Asia-Pacific region, according to Leo Burnett Media, which estimates that CNN International and ESPN have approximately 11.5 million households each.
But accurate viewing figures are hard to establish, as much of the audience falls into an area of semi-legality. Many governments in the region still operate strict controls over what's broadcast to their citizens - even where they allow media companies operating in the country complete freedom in what they beam up to the skies.
In Singapore, for example, the government puts few restrictions on uplinkers (those firms sending the pictures up to a satellite), but expects all domestic cable feeds to homes to be censored in accordance with the country's strict moral code.
Only embassies and select businesses that need time-sensitive information are allowed to install their own satellite dishes.
There are similar restrictions in Indonesia, India and China. But in many countries, there has been little enforcement of the regulations. In Indonesia, MTV estimates there are around 1.5 million homes able to receive its satellite feed. In Yunnan and Guizhou provinces in China, where homes are permitted to have satellite dishes to receive the two local government-run stations, many viewers simply re-tune their dishes to MTV and Star.
The reach of the networks may not be the best evaluation of their success either. Sending the signal up to the six or so satellites covering the Asia-Pacific isn't too difficult or costly. Star is beaming unencrypted signals to much of the region to build up its audience. But sending out a signal does not guarantee Star a return on the network.
'It's very easy getting the uplink,' says Michael Chan, deputy general manager of Hong Kong-based TVB International. 'But getting the return is difficult. To keep it going and make it a success is difficult.'
One failing of the free broadcasting approach is that advertising revenue has not been as strong as originally anticipated.MTV is running its MTV Asia channel as an advertising supported channel, but admits it's nowhere near achieving that. 'We're a long, long way away from being able to fund and finance it,' says Jamieson.Advertisers have been wary of the claimed audience figures, with market research still at an early stage. What advertising there is tends to be from the luxury goods sector, such as cars, jewellery and travel.
For the channels to make money from advertising, they need to attract advertisers in the fast-moving consumer goods (FMCG) sector. So far, satellite and cable TV has failed to excite the FMCG companies, which tend to split their advertising budgets along national lines and don't have funds for pan-Asia advertising. Many are not interested in creating a single advertising campaign to cover the region, because product and marketing campaigns differ from country to country.
Apart from MTV and Star, few companies are prepared to go on providing the service 'free to air' and have concentrated on getting distribution through cable networks and on building exposure through terrestrial TV. Asian companies have had a fair amount of success in this regard.
China Entertainment TV (CETV) has distribution through cable channels in many provinces of China, giving it an estimated audience of 28 million homes across the country. Brokering deals with China's local state-run cable channels has meant a lot of hard work for CETV's team in China, but it still does not have distribution in the major cities.
CETV founder, chairman and CEO Robert Chua has the advantage that his programming philosophy is acceptable to the Chinese authorities. His Family Channel has a policy of 'no sex, no violence, no news'. 'What I'm doing is really government-friendly,' says Chua.
He says he has been more successful than Star TV in China because of his lengthy experience in Hong Kong and China. Having worked at TVB since 1967, where he started as a property assistant, he calls himself Hong Kong's 'grandfather of TV'. Even before he started up CETV in 1994, he had worked extensively with China.
'The West does not understand the sensitivity of the situation. I've been in China since 1979 - I understand the cultural sensitivity,' he says.
Star, meanwhile, has no formal distribution in China, despite an estimated 30 million viewers. In Singapore, it failed to negotiate a deal for its Star Movies channel with SCV because it could not - or would not - censor its movies in accordance with the broadcasting laws of Singapore.
TVB International has been selling its programming and bartering airtime in China since 1983. But it says that it's still finding it difficult getting distribution. 'It helps to have a lot of patience,' says Chan, who says TVB has had a retail joint venture with Xinhua for three years but hasn't opened its first store yet.
MTV also struggled to gain two hours of airtime a day on China's state television (which MTV is providing free). Jamieson says negotiations with China were done 'mainly on our knees'.
Even where there has been greater access to cable, Western companies have not found acceptance to be automatic. SCV offers 40 channels, 28 in the basic tier, and four and eight channels in each of the two premium-rate tiers. In the basic tier, vice-president of programming at SCV, Sandie Lee, says the company is obliged to carry two Malay, one Tamil and four Singaporean channels free to air. Beyond that, SCV takes a mixture of local and international channels that serve specific niche markets, such as sport, business news and documentaries. 'We are very selective in what we put on the channel,' says Lee.
SCV has to be confident it can sign enough subscribers to cover the cost of taking the channel. Although most channels charge on a per subscriber basis, the cable providers are still carrying the cost for many of them. And, Lee says, many are charging SCV more than they would charge a US cable operator. She says SCV only has around 10 'drivers', or channels that pull in subscribers; the rest are running at a loss.
Being high on the list for distributors is even more important in India, where most TV sets are not capable of dealing with more than 14 channels.
Competition forces rethink on content
The intense competition for distribution has forced many of the international channels to rethink their strategy in Asia. Companies such as NBC began broadcasting to the Asia-Pacific region using the same feed and same programmes as they did all over the world. But by the beginning of this year, it became apparent that this approach wasn't working. US-based shows weren't attracting Asian audiences.
'We are going to customise for key markets,' says June Teng director of programming at NBC news channel CNBC, which has already split its feed into two, for China and Taiwan. In China, NBC's local partner now selects the programmes it wants and dubs them into Mandarin. The Taiwan channel, which was due to launch on September 16, will be up to 70% subtitled, and there will be local stock market reports and financial news. 'It helps with the distribution if you have local content,' says Teng.
While the Western media giants have faltered in Asia, local companies such as TVB, CETV and China Television News have begun to gain a foothold. What they lack in financial clout, they have more than made up for in their understanding of local tastes. 'Entertainment is culture,' says TVB's Chan. 'It's an advantage if you can identify with the audience.'
CETV's Chua says many Chinese don't connect with US-made films and soap operas because they find it hard to tell one white person from another. He is scathing of the international channels' approach to programming. 'They think that whatever they give, the Chinese will like,' he says.
It's hard to imagine a Western TV company adopting CETV's 'no sex, no violence, no news' programming philosophy, but the formula seems to be working for CETV. Its variety shows, game shows and educational programmes have struck a chord with Chinese viewers. The station receives around 300 letters a week from viewers, some of which Chua's wife, Peggy, reads on air.
In Zhenzhou in China, research obtained by CETV shows that its output ranked higher in popularity than Star's Chinese-language Phoenix channel, despite a lower penetration among viewers. Phoenix was being received by 16.6% of households in the region, compared with 14.6% for CETV's Family Channel. But asked to pick their favourite channels, viewers elected CETV to 17th most popular position and Phoenix to 24th. 'Penetration is no big deal to us,' says Chua.
Scramble to localise programming
Almost all of the international channels are now scrambling to localise their programming. CNN International introduced two Asian news analysis programmes to its daily schedule and is opening news bureaux across the region to boost the Asian content of its news. 'And there are going to be more programmes for Asia,' says Eason Jordan, executive vice-president of CNN.
In 1995, Star TV embarked on a strategy of increasing local content and producing channels tailored to national markets. It split its Chinese channel into two - one aimed at Taiwan, the other at mainland China - and launched two channels for the Japanese market in the first half of this year. Another four or so are in the pipeline. In May, Star began broadcasting a Tagalog movie channel, Viva Cinema, in the Philippines.
Hong Kong film production company First Film Organisation is one of those companies that Star has been negotiating with for content. Managing director Hoi Wong says Star has been looking for programmes with strong commercial appeal and has been particularly keen to buy the rights to the firm's action-oriented movies. In other areas, such as India, Star has been signing up local companies as joint venture partners to give it more appeal.
Helping the trend towards localisation are advances in technology that make splitting a feed relatively easy. Many broadcasters have begun using digital compression technology in the last year, which makes it easier to divide the beam and provide multiple channels.
Exception to the rule
The exception to the localisation rule is TNT/Cartoon Network. All of its programming comes from the US studios owned by its parent company, Time Warner. During the day, Cartoon Network carries cartoons from Warner Bros and the Hanna Barbera studios; at night, the TNT network shows films from the library of 8,000 titles from the MGM studio.
Although it has recently invested in an animation studio in the Philippines, senior vice-president and general manager of TNT/Cartoon Network, Celia Chong, says there is no immediate plan to introduce programmes from outside the company.
'If it's something we're going to do, we want to do it well,' says Chong. 'We want to do what we're best at. People have asked "why don't you buy Hindi movies for TNT?" But that's not something we know about. Would we do Hindi movies justice?'
Localisation is also expensive - a substantial proportion of the US$100 million Star is losing is thought to be going on its localisation programme. For that reason, many international broadcasters have been keen to use their in-house productions in Asia, rather than buy in local content. Star has its own secret for keeping costs down: according to some sources, the company does not pay up front for programmes it buys in, but bases the fee it pays on the return it gets from the programmes.
Finding local content is not always easy for the international broadcasters. MTV's Jamieson says the station is aiming to buy 75% to 90% of its content from local sources, but has only reached 50% to 70%. 'We haven't achieved it yet because [local] music video production is not up to the level at which the audio market sits,' he says.
TVB has benefited from having in-house production facilities. At its HK$400 million (US$51 million) office and production centre in Hong Kong, it has more than 40,000 square metres of studio space and an outdoor shooting area covering 100,000 square metres. In the past few years, it has invested millions of Hong Kong dollars in high-tech computer graphics equipment.
At the moment, the majority of viewers of its satellite channel - TVB Super Channel - are in Taiwan and mainland China. It has already begun expanding into other areas of Asia with TVB Super Channel, but with less success because there are significant cultural differences. 'We strongly believe TV is actually culture,' says TVB's Chan. 'Unfortunately, culture does not travel very well when you get outside certain ethnic groups.'
No 'killer' programmes
For the international companies, that means there is no 'killer' programme or event that would draw in viewers across Asia.
In Europe, hundreds of thousands of satellite dishes were sold when English premier league soccer was bought by BSkyB.
In Asia, says ESPN Asia vice-president and general manager Chris McDonald, the primary sport varies from country to country. American sports, such as basketball, are popular in the Philippines, baseball is big in Taiwan and badminton is strong in China.
'Sport is at an earlier level here,' says McDonald. 'It hasn't achieved the same pace and sophistication.' Nor does it have the stars. TVB is now planning to build up its sports programming, but Chan says there is still a long way to go in building up a sports celebrity system to draw large numbers of viewers. Tennis player Michael Chang has begun to draw major TV audiences, but there are few sports players with the same pull.
As Chan points out, the 'bad boy' of the English football league, Eric Cantona, is known around the world. But, for example, outside China, very few people would be able to name a single Chinese football player.
As satellite TV takes off around Asia, more money is going into sports sponsorship. In a similar way, the investment in the music industry has increased.
Demand for music videos by channels such as MTV and Channel [V] has encouraged more local music producers to invest in video production.
Bollywood - India's thriving film industry centred in Bombay - has also seen good business. 'There is a boom in the cinema industry, and television has acted as the catalyst,' says Ravi Gupta, managing director of Bombay's government-owned film production company, the National Film Development Corp. He estimates that there are around 400 films a week being shown on Indian TV, most of which are produced in India.
Satellite and cable TV are now turning Asian culture into a major local export. Films and videos produced for local consumption are finding their way, via the international broadcasters, onto screens in Europe and the US. And films by expatriate Asian directors, such as Trial by Fire, directed by Deepa Mehta (Asian Business, June 1996, page 68) and received with much acclaim at the recent Toronto and New York film festivals, are also finding enthusiastic audiences in Asia as well as worldwide.
This exposure is giving Asian producers access to markets overseas that they have never known before. Satellite TV has been largely credited with creating the Bangra beat craze that hit British dance clubs in 1995 and boosted sales of Indian music.
No threat to culture
Gupta says many in India who were initially concerned by the influx of foreigners onto the TV scene have now put their fears behind them.
'I don't see any threat to [Indian culture],' he says. 'It's too large, there are too many things involved and it's been there for thousands of years. This will only end up enriching it.'
But there's still a nagging worry among many of those involved in the TV industry in Asia that the mega-media companies will inevitably influence the culture of Asia. Even the strong Japanese entertainment industry is feeling the effects of well-marketed US products (see box, this page), where foreign films make up more than 60% of films screened. Some US culture has travelled well: Baywatch has not flopped yet and US National Basketball Association matches are watched by millions in China.
And while the Asian TV companies may have made the most of their knowledge of local tastes and their connections on the ground so far, the international players are catching up fast. As their content becomes increasingly local, the gap will close.
Many local TV companies are already worried that they will be knocked out of the bargaining for key sports events or entertainment programmes by companies with larger chequebooks.
Even with greater consolidation in the Asian TV industry, it will be hard for local companies to match the spending power of the likes of News Corp, Turner Broadcasting and Walt Disney/Cap Cities ABC.
At the moment, few Asian companies have gained Asia-wide success and many in the industry do not expect them to be able to make the move into the big league.
As one Western TV executive said of his Asian competitors: 'None of them can compete outside their own markets.'