Todays News

South China Morning Post
Tuesday 1 July 1997


Satellites soar as papers go to war

Hong Kong faces greater demand from foreign broadcasters for ownership of satellite uplinking licences, and further consolidation of its newspaper publishing industry, after the handover, say media insiders.

Satellite broadcasters, including some of the industry's biggest names - STAR TV, Turner Broadcasting and CNBC - are operating in an environment where legislation permits only 49 per cent foreign ownership of satellite uplinking licences. The recent trend has been for governments to take back control of their airwaves.

Most of the broadcasters interviewed were optimistic about the opportunities ahead for their companies with Hong Kong part of China, but stress 100 per cent ownership, or a controlling share, of licences is vital for profitability.

A Hong Kong Government official has hinted changes are afoot but no legislation has been passed.

In publishing, the SAR's 10 major daily Chinese-language newspapers will face further consolidation, with too many papers chasing too few advertisers.

A four-month price war begun in late 1995 led to the closure of four newspapers, and entertainment magazines face a similar situation after the handover, says a media analyst.

Regardless of these uncertainties, Hong Kong remains an important centre for satellite broadcasters, satellite launch companies, radio, public relations companies, advertising firms and publishers.

In post-handover Hong Kong the broadcasting sector faces perhaps the biggest changes and greatest opportunities for rewards. Secretary for Broadcasting, Culture and Sport Brian Chau Tak-hay has indicated the 49 per cent cap could be removed to allow foreign programme providers to own the majority of their uplinking facilities.

This would be welcome news for an industry where most operations have been losing money and are still finding it difficult to attract advertisers.

Zenith Media estimates that last year the cable and satellite industry, with 300 million homes wired up in Asia, received barely 1 per cent - US$300 million out of $26.5 billion, or HK$2,320 billion out of a total $17,943 billion - of its advertising income from the continent (excluding Japan). By comparison, America - with fewer cable homes than Asia - generated about 5 per cent.

It must be noted that Asia is still considered an investment region and initial losses were always expected.

The industry could benefit further now that the SAR Government has the authority to draw up its own broadcasting policy - without interference from Beijing. No changes to existing law are expected until at least next year.

If legislation is not passed to offer broadcasters a comfortable environment in which to operate, Singapore and other production centres will continue to lure foreign operators at the expense of Hong Kong.

Gary Davey, chief executive of STAR TV - the territory's largest satellite broadcaster, with an estimated 260 million viewers in 53 countries - said his company always felt there would be no detriment to the regulatory environment after the handover, only long-term benefits.

The broadcaster, owned by Rupert Murdoch's News Corporation, recently won Hong Kong Government reconfirmation of its uplink and downlink licences for another six years.

STAR owns 49 per cent of its licence through News Corp's share of HutchVision. The rest of the licence is owned by a family company controlled by Li Ka-shing.

"We've been advised that later this year there will be due consideration given to foreign ownership of those licences, and the costs of those licences through various regulatory fees have been substantially reduced in the past three months - and that's encouraging," Mr Davey said.

"It's important for the future of Hong Kong as well as China that Hong Kong be confirmed as a sound and stable base to operate media from."

Fung Shing-kwong, president of NBC Asia, which broadcasts on two channels in the region, said the network set up shop in Hong Kong in June 1995 because of its importance as a business centre and the availability of technical staff.

He said the handover would have little effect on the network, other than to strengthen its relationship with China.

One industry analyst believes that Hong Kong may have already lost its pre-eminence as the Asian media hub for satellite broadcasters because proper legislation was not created early enough to allow operators to feel secure.

Susan Schoenfeld, president of Advisers for International Media Asia, said Singapore understood the assurances broadcasters were looking for and provided them. She cited ESPN, STAR Sports, MTV Asia, Discovery Channel and Asia Business News, all Singapore-based broadcasters.

Robert Chua, chairman and founder of the Putonghua-transmission China Entertainment Television Broadcast - seen in 32 million Chinese homes - disagreed, saying it would be easier for foreign firms to operate in China from now on.

"I don't think there will be any major changes. I see opportunity because more people are going to want to learn Mandarin [in Hong Kong]. It won't be a big influx but Mandarin is nationwide and there is a demand," he said.

In publishing, the consensus is for more consolidation among Hong Kong's Chinese-language newspapers but not many opportunities to expand externally.

On May 12 this year, the Oriental Daily News - Hong Kong's biggest-selling paper with a circulation of about 400,000 - cut its cover price from $5 to $2, sparking the latest price war in the battle for circulation.

Yeung Wai-hong, chairman of Next Media (Holdings) - which publishes the 350,000-circulation Apple Daily - said the company would withstand the current war and continue to grow and operate under its two founding principles, liberty and market freedom.

Mr Yeung said Apple Daily, founded by clothing tycoon Jimmy Lai Chee-ying, would expand its classified section in future, since it aimed to be the market leader. Classifieds account for about 10 per cent of its revenue.

"We don't see opportunities in China. We are a Hong Kong paper and we will continue to be," Mr Yeung said.

Kaushik Shridharani, a media industry research analyst for Salomon Brothers, said the industry would remain vibrant. He said consolidation was imminent because of intense competition, largely since the introduction of Apple Daily.

"You will probably see a reduction in daily newspapers and some magazines too. The industry will not benefit as much as it did perhaps from 1992 to 1994 [when there was effectively no competition and] when the economic surge led to an increased demand for advertising," he said.

Mr Shridharani said the Chinese-language entertainment magazines would face a similar situation of consolidation to that of newspapers. The market would fragment, with less demand for generalist magazines like entertainment weeklies.

English-language dailies, Mr Shridharani said, would probably figure less after the handover but papers like the South China Morning Post would continue to have strong circulations.

"It [the English-language press] will matter less in terms of shaping opinion or even being the organ for public thought. But it will probably get stronger, as the bulk of its audience will use it to develop their English-language skills."

Steve Marcopoto, president of Time Inc Asia, said his company had no immediate plans for the China market but was looking at launching some of its "softer" titles - Sports Illustrated, Parenting and Health - at some time in the future.

"We realise the China market is a sensitive one for a general news magazine like Time so we don't have any immediate plans for moving into the country with the magazine," he said.

"Our role is as a strong place for a pan-regional headquarters of a multinational company."

It's important for the future of Hong Kong as well as China that Hong Kong be confirmed as a sound and stable base to operate media from

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