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MURDOCH IN ASIA: THINK GLOBALLY, BROADCAST LOCALLY
Rupert has been snookered. That is what rivals said when Rupert Murdoch's News Corp. paid $525 million last year for 64% of Star TV, a startup Asian satellite network. Critics saw Star's basic strategy of beaming a one-size-fits-all set of English-language programming to an area covering two-thirds of the earth's population as badly flawed. They figured Murdoch couldn't build audiences and attract advertisers in a market covering dozens of countries and languages.
Well, it doesn't pay to underestimate Rupert Murdoch. Star is a long way from profitable: analysts estimate it will lose $20 million this year on sales of $150 million. And it faces upcoming competition from former partner Viacom Inc., which plans to launch a Mandarin-language MTV and relaunch English-language MTV in Asia. Star formerly broadcast the network in Asia.
Still, in less than a year, the media tycoon has scrambled to completely reverse Star TV's strategy, ditching its English-only format in favor of local-language programming for its Asian audiences. Household penetration has improved, and analysts figure ratings are on the rise as well. "It is looking like a very good investment," says Kirk C. Sweeney, analyst for Lehman Brothers Asia Ltd.
PAN-ASIAN MYTH. Murdoch's big move occurred in May, when he began customizing Star's music programming to fit Asia's widely divergent tastes. In Taiwan, hearts throb to saccharin Chinese love ballads. Indian viewers prefer high-action music videos. "The idea that there is a pan-Asian taste in music is a myth," says Don Atyeo, Star's music station manager.
Now, Indians and Chinese will get just what they want on Star TV. The northern beam of Star's satellite, which covers Taiwan and Hong Kong and reaches an estimated 30 million viewers in mainland China, will mostly show Chinese pop music. The southern beam, which will cover India and Southeast Asia, will stress Hindi and English music.
Star is adopting its strategy of playing to local tastes in other areas of programming as well. It has split the signal on its sports channel to give a heavier dose of cricket to Indians and more soccer, gymnastics, and track to the Chinese. On May 1, it launched a pay Mandarin movie channel, and plans a pay-movie channel in Hindi this fall. In the northern beam, the movie channel will replace the British Broadcasting Corp.'s English language news service. Critics say Murdoch dumped the BBC after Beijing protested its hard-hitting coverage of China, but Murdoch says it was booted because few people watched it.
Eventually, using new digital compression technology, "we could offer dozens of channels with customized versions of sports and movies," says Gary Davey, a News Corp. veteran installed as Star's managing director last year.
For Murdoch to really turn Star into a solid performer, however, he must persuade Asian viewers to pay for some of its service. For now, profits remain elusive. But, says Lehman Brothers' Sweeney, "what is important is the home run potential." Capturing the leading share of the biggest television market in the world would be ene of the longest home runs in this tycoon's career.
STAR'S NEW fARE
North Asian channel stresses Chinese pop; South Asian offers Hindi and English tunes
Chinese viewers get soccer and gymnastics; Indians get the same plus cricket
Hong Kong studios provide Mandarin-language films for Chinese; Hindi-language movie channel due this fall
DATA: COMPANY REPORTSPete Engardio in Hong Kong