International -- Asian Business: HONG KONG
CNBC ADJUSTS ITS DIALS IN ASIA (int'l edition)
The business TV channel is cutting costs to survive in Asia
For money-losing Asia business broadcaster CNBC, it was an accomplishment to crow about. By signing a key Indian agreement on Feb. 13, CNBC became the most widely distributed TV business network in the region, leapfrogging Dow Jones & Co.'s Asia Business News (ABN). "It's a game-changing event," boasts Fung Shing Kwong, president of NBC Asia, who predicts the demise of ABN within a year. "We have instant commercial mass."
The agreement with India's largest cable operator, the Hinduja group, is a much needed piece of good news for a network that has been hammered by huge initial costs and paltry ad revenues since it started up in mid-1995. CNBC shows how hard it can be for U.S. companies to succeed in Asia. "It's a tough go. I won't deny that for a second," says Thomas S. Rogers, president of NBC Cable in New York. Despite reports of internal turmoil and programming blunders, Rogers exudes optimism. He's spending huge sums to build a network in this market, just as CNBC lost millions in the U.S. before it became a money machine. Rogers expects NBC's Asian channels to break even sometime around 2000. When that happens, he says, "the asset values become enormous."
PANIC. That may be true, but NBC is suffering. Industry sources estimate that by yearend NBC will have spent $150 million on the staff, studios, and satellite transponders needed for the business channel and NBC Asia, a separate channel showing mostly NBC programs from the U.S. Rogers calls that figure "a bit high."
Yet sources say top NBC executives panicked in mid-1996 when it became clear that revenues were falling far short of expectations and that costs were way over budget at CNBC. A stream of consultants and execs camped out in Hong Kong in mid-1996 to fix the operation. Their solution was to slam on the brakes. News has taken the biggest hit: From a peak of 120 staff last summer, it's down to 60 today, as those who resign or are fired aren't replaced. Although Fung won't confirm layoff figures, he says: "People call it downsizing. I call it rightsizing."
Rogers admits cuts in the business-news budget but says overall spending has increased with the launch of NBC Asia. CNBC's anchors have dwindled from nine last October to four today. Although Tokyo is the region's largest financial market, its bureau has been pared, and the daily satellite news feed to Hong Kong headquarters was eliminated in January.
The biggest issue is the relatively low level of ad money spent on satellite channels in the region. Researcher A.C. Nielsen SRG estimates total ad spending for satellite-based TV services at $295 million last year in Asia. Industry sources say that after discounts only about half that much cash changes hands. Star TV, CNBC, ABN, and CNN have to fight over this small sum, which advertisers are reluctant to increase because there's little market research to show who is watching what. Estimates of advertising spending on cable were not available.
NO NICHE. CNBC is now about to shuffle its programming yet again amid rumors that the operation is in serious trouble. Even though CNBC airs 13 hours of Asian programs each day, critics say the channel isn't clearly focused. Its broadcasting is a mix of Asian, U.S. and European coverage--including everything from personal finance to breaking market news. "There are concerns in the industry that CNBC hasn't found its niche," says Susan J. Schoenfeld, president of AIM Asia Ltd., a Hong Kong media consultancy. Rogers defends the mix, saying that viewers want global news.
Although CNBC initially won praise for its quality, cost-cutting could threaten standards and further dilute the Asian focus. Not so, says NBC News President Andrew Lack, who just assumed supervision of programming in Asia. "How many people you have working on a program is a silly indicator of how good the program is," says Lack. "This is how we operate in the U.S. I'm constantly changing my programming."
RIDICULE. NBC executives say their strategy has been validated by the deal with Hinduja, which delivers an additional 2 million subscribers. Hinduja dropped ABN to pick up CNBC. With Dow Jones sinking $650 million into its troubled Telerate business, Fung says, "I wouldn't think they would have the appetite to continue much longer [with ABN]." ABN Chief Executive Paul France ridicules Fung's contention that ABN is likely to be out of business within a year. He says the broadcaster is on track to make a profit in 1999.
But Hong Kong advertising and media executives wonder how valuable the Indian deal is. Many believe NBC is paying its Indian partner to carry its programming. Rogers won't comment, but he says the Indians will eventually pay NBC. He adds that NBC gets paid for content in "most markets" except China.
NBC may yet pull off a win. Its goal is to build a prize asset over the long haul, not book major ad revenue immediately. And the Hinduja deal does deliver a big boost to distribution. But in the long term, ad revenue must materialize to make the business plan work. That means delivering consistently high-quality programming in Asia. To get there, CNBC probably has to spend a lot more on programming before it sees a penny of profit. It's still an uphill struggle in Asia for America's top broadcaster.By Mark L. Clifford in Hong Kong and Elizabeth Lesly in New York, with bureau reportsReturn to top