International -- Asian Business: MEDIA
ASIA'S TV PICTURE IS ALL WIGGLY LINES (int'l edition)
The currency crisis is clobbering a once booming industry
For Ashish Chawla, a TV producer in Singapore, 1998 was going to be the year his company hit the big time. The vice-president of UTV International, a $60 million startup partly owned by Rupert Murdoch's News Corp., had plans to produce 500 hours of TV shows in Indonesia and other Asian countries--a fivefold increase over last year. Then the currency crisis hit. With networks strapped for cash, satellite operators retreating, and competitors merging, UTV is now finding few buyers for its programs. It has stopped producing entirely in Indonesia--where the rupiah has plummeted 80% since last July. "My margins in Indonesia are completely wiped out," sighs Chawla. "There is no point in doing a production there."
Once one of Asia's most promising growth businesses, the TV industry is reversing course. The middle-class Asian consumers who were expected to spring for the latest in digital cable and satellite TV are feeling a lot less affluent. Everyone from Western media giants to local newcomers is reconsidering investments and scaling back plans, perhaps for good. "The hard reality is that the market is generally not as ready as people thought," says Stephen T.H. Ng, chairman of Hong Kong's Wharf Cable, which is reconsidering a $250 million expansion after losing $40 million last year.
The crunch is forcing companies to consider alliances they previously would have scorned. General Electric Co.'s CNBC Asia has joined with once bitter rival Asia Business News, controlled by Dow Jones & Co., as part of a worldwide merger. Thailand's two main cable operators merged in mid-February. And Murdoch's Japan Sky Broadcasting is in talks with rival PerfecTV in Tokyo, which has half the 1.5 million subscribers it needs to make a profit. "If we join forces, we will be strong," says Yasuhiro Saito, PerfecTV general manager.
The pain has spread even to Southeast Asia's satellite-TV operators, which enjoy virtual monopolies. Indovision, owned by President Suharto's son Bambang Trihatmodjo and developed with Murdoch's StarTV, has had starting delays and fewer customers than anticipated. "I haven't got a bloody clue what to charge a subscriber," says Indovision Chief Executive David Dennis. "The exchange rate moves faster than I can change my underwear."
In Malaysia, where tycoon T. Ananda Krishnan launched his Astro network in 1996 with strong government support, new customers are getting big discounts. Astro has had to slash prices by almost 50% to keep attracting them, even though imported equipment costs more because of the ringgit's 40% depreciation. A year ago, Astro had big plans to make Malaysia a regional center for programming. "Obviously, we have to reassess" regional expansion plans, says Astro exec Paul Edwards. "The market has dried up quite a lot."
ONLY A BLIP? Some of these troubles would have developed even without the crisis. Taiwan's economy has been spared the worst of the Asian flu, but its media is increasingly protectionist. Rebar Telecommunications Co., which dominates Taiwan's cable market in a near-monopoly, has bumped Time Warner-controlled CNN, TNT, and Cartoon Network off its systems to replace them with channels of its own. U.S. executives are crying foul, but Rebar says local taste is to blame. "There's no market for CNN here," says Sarah Feng, Rebar's director of worldwide business.
Yet optimists like Frank Brown, head of MTV's Asian operations, contend that there's no reason to reassess the market. "This is a short-term blip," says Brown. In 10 years, he says, ad spending in Asia will increase threefold, to more than $21 billion. The downturn, he contends, gives deep-pocketed companies like MTV a chance to go shopping or keep expanding. Hong Kong Telecom, for example, is pushing ahead on an interactive TV service that promises video on demand, home shopping, and banking.
Local governments also have a strong commitment to media technology that could help companies in distress. Singapore's government, for example, has offered incentives to UTV to produce more programming there. "Governments see they need it for national development, so you will see support that you won't see for the property industry," says Kaushik Shridharani, a Salomon Smith Barney analyst in Hong Kong. With Asia's TV boom preempted for now, many in the industry have a big stake in making sure it hasn't been canceled for good.By Bruce Einhorn in Hong Kong, with Emily Thornton in Tokyo and bureau reports