Star Tv Learns To Think Small

That's what many rival executives and industry analysts thought when Rupert Murdoch's News Corp. paid $525 million last year for 64% of Star TV, a startup Asian satellite network. Star TV had been launched under the auspices of Li Ka-shing, a Hong Kong magnate known for his savvy. But Star's basic strategy seemed flawed: to beam down a one-size-fits-all set of English-language programming to an area covering two-thirds of the earth's population. Critics 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. In less than a year, the media tycoon's programmers have completely reversed Star TV"s strategy, ditching an English-only format and moving instead to offer Asian TV audiences the local-language music, films, and sports they mostly prefer. Now, even though Murdoch has yet to generate earnings from his prize and the price he paid still looks rich, analysts are feeling a lot better. "It is looking like a very good investment," says Kirk C. Sweeney, Hong Kong-based media analyst for Lehman Brothers Asia Ltd.

A major move in Murdoch's new plan occurred in May, when he realigned Star's music programming to fit Asia's widely divergent tastes. In Taiwan, hearts throb to the saccharin Chinese love ballads of crooners such as Jackie Cheung. In India, meanwhile, viewers prefer elaborate videos from Hindi films where suave males in tight-fitting pants chase coy maidens through gardens, fields, and streets alive with dancers. Says Don Atyeo, Star's music station manager: "The idea that there is a pan-Asian taste in music is a myth."

MELLOW ACTS. So now, Indians and Chinese will get just what they want on Star TV. The northern beam of Star's satellite, which covers Taiwan, Hong Kong, and reaches an estimated 30 million viewers in mainland China, will mostly show Chinese pop music. The southern beam, whose coverage includes India and Southeast Asia, will stress music in Hindi and English. U.S. performers will appear only if surveys show they are liked. The Chinese, for example, prefer mellower acts such as Michael Bolton to rap and heavy metal.

The two channels replace MTV, which appeared until recently on Star, only to be pulled by Viacom Inc., MTV Networks' parent, which wants an Asian channel of its own. To make up for the loss of MTV, Star can secure most music videos it needs from major record companies. Star also still owns the contracts to its popular veejays, who are fluent in English as well as either Mandarin or Hindi.

Such customization by market should bolster Star's ratings, which analysts say have been poor despite the satellite's vast reach. Says Gary Brown, ad agency Leo Burnett Co.'s regional media director in Hong Kong: "The idea of building a primarily English service was fundamentally flawed. Offering programming in local languages is essential." Star executives say their channels' penetration of households has doubled in India, quadrupled in Thailand and risen eightfold in South Korea.

SQUEEZING. More than music is going multicultural. Star 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 backed by an extensive library of programs secured through deals with Hong Kong studios and boosted by some American films. Star plans a pay movie channel in Hindi this fall for the subcontinent. 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.

Technology should help Star TV attain its goal of narrowcasting to specific Asian audiences. Digital compression will soon allow it to squeeze many more channels onto the five transponders of its satellite, AsiaSat 1. Thus, one transponder could simultaneously transmit different sports channels in, say, Thai, Malay, Cantonese, and Arabic.

There's a drawback, though: Customers won't be able to receive digitally compressed channels unless they buy new digital receivers. So to increase capacity for customers who don't want to go digital immediately, Star TV plans to add conventional channels by buying more room on satellite airwaves. Within a few years, says Gary Davey, a News Corp. veteran installed as Star's managing director last year, "we could offer dozens of channels with customized versions of sports and movies."

For Murdoch to really turn Star into a money-spinner, however, he must persuade Asian viewers to pay for some of its service. While subscribers account for 80% of revenue on Murdoch's British Sky Broadcasting business in Europe, Star, under Li Ka-shing's ownership, tried to rely entirely on advertising. The pay movie service, which requires a descrambler to receive, is a move to supplement ad revenue.

It's a commanding strategy, but profits remain elusive as Star expands aggressively. Analysts estimate Star will lose $20 million this year on sales of $150 million. But Murdoch has never been one to shy from red ink. "In the big picture," 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 one of the longest home runs in this tycoon's career.


MUSIC North Asian channel stresses

Chinese pop; South Asian offers Hindi and English-language tunes.

SPORTS Chinese viewers get soccer and gymnastics; Indians get the same plus local

favorites like cricket.

MOVIES Hong Kong studios provide

Mandarin-language films for Chinese viewers. Hindi-language movie channel due this fall.


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