INDUSTRY SEES REAL PICTURE: Convergence was all the industry could talk about last year

<p>But grim economic times have forced Asia's cable and satellite </p><p>operators to take stock, switch channels and bring the focus back to </p><p>traditional development goals. Which explains the race among rivals to </p><p>sign new content and distribution pacts. </p><p><BR><BR> </p><p>In the twists and turns of the multi-billion dollar battle for regional </p><p>supremacy, cable and satellite operators have downgraded the importance </p><p>of the internet on their business development priority list - at least </p><p>for the moment. </p><p><BR><BR> </p><p>It's now a matter of refocusing efforts along more traditional lines </p><p>after the dotcom bubble burst and pessimism grows about the state of the </p><p>global economy. </p><p><BR><BR> </p><p>As with other business sectors, many of the industry's major players had </p><p>invested heavily in the internet last year. Pockets were opened in the </p><p>belief that the web held the key to the future. The idea of convergence </p><p>- the merging of television and the internet - was too dazzling a </p><p>proposition to ignore. Although the internet has lost much of its gloss, </p><p>convergence is still viewed as visionary stuff, but something to embark </p><p>on in the longer term. </p><p><BR><BR> </p><p>More pressing matters are at hand. The sagging economy has prodded the </p><p>majority of operators to redirect resources and redouble efforts to </p><p>providing the best quality content to viewers and developing more </p><p>innovative, value-added marketing packages for advertisers. </p><p><BR><BR> </p><p>The strategy these days is far more basic: find ways to stop viewers </p><p>from cancelling their subscriptions, while giving advertisers more </p><p>compelling reasons to book campaigns on a regional platform. </p><p><BR><BR> </p><p>So far so good - a number of the large satcasters claim their revenue </p><p>base continues to grow strongly year-on-year. </p><p><BR><BR> </p><p>The reason, they say, is because they continue to achieve steady gains </p><p>in penetration through delivering better quality programming. In the </p><p>last few weeks alone, a number of content-boosting deals have been </p><p>struck. </p><p><BR><BR> </p><p>Among them are Star Movies' deal to air Hollywood blockbusters owned by </p><p>Canal+, including Billy Elliot, Bridget Jones' Diary, Mulholland Drive </p><p>and Apocalypse Now; National Geographic and ESPN Star Sports (ESS) </p><p>securing a new distribution pact with Cable TV in Hong Kong; and AXN </p><p>clinching the sole regional rights to broadcast Survivor Africa, the </p><p>third and latest installment of the hit Survivor series. </p><p><BR><BR> </p><p>Each of the announcements has been loudly trumpeted. In Star's case, it </p><p>heralded the deal with Canal+ as an opportunity of positioning Star </p><p>Movies as "the only choice in Hollywood movies on TV" in Asia. </p><p><BR><BR> </p><p>The focus on content is where the ratings skirmish is being fought today </p><p>as competition grows more intense. As Cable & Satellite Broadcasting </p><p>Association of Asia (Casbaa) president, Frank Brown, puts it: "As </p><p>advertisers become more cautious in their spending in recent months, </p><p>media companies have been forced to refocus on their core brands to </p><p>ensure they meet their financial objectives." </p><p><BR><BR> </p><p>In part, this means ensuring quality content. National Geographic </p><p>Channel Asia managing director, Ward Platt, adds: "We're concentrating </p><p>on programming content more. There's no difference between our </p><p>programming blocks and our 24-hour channels - the name of the game more </p><p>than ever before is to make the programming as popular as possible." </p><p><BR><BR> </p><p>AXN Asia managing director, Todd Miller, notes: "Our investment now is </p><p>in programming and marketing. That will be the case for some time." </p><p><BR><BR> </p><p>But the process of building up viewership numbers doesn't stop </p><p>there. </p><p><BR><BR> </p><p>Distribution is another crucial variable, and with that comes more </p><p>dedicated feeds for specific markets. For instance, Channel V and MTV </p><p>beefed up their operations in Korealast month; this month, ESS rolled </p><p>out an encrypted Southeast Asia feed; and National Geographic appears to </p><p>be on the verge of launching an operation in Japan. In the recent past, </p><p>National Geographic and BBC World also added Korea to their </p><p>networks. </p><p><BR><BR> </p><p>Mark Froude, CNBC Asia-Pacific vice-president of international sales, </p><p>says: "CNBC is no exception to the rest of the field. We'll have more </p><p>customised feeds where appropriate. It's driven by language and cultural </p><p>factors and the fact that we are striving to meet the needs and wants of </p><p>markets in which we believe we can deliver a programming schedule in a </p><p>cost-effective manner." </p><p><BR><BR> </p><p>Being able to offer a multitude of customised feeds, including local </p><p>language subtitling, is a big drawcard for advertisers because it allows </p><p>for greater choice and for marketing communications campaigns to be </p><p>rolled out in an integrated fashion. </p><p><BR><BR> </p><p>Froude says a diverse network is crucial because advertisers don't </p><p>normally go for regional buys unless they want to air a corporate image </p><p>campaign. </p><p><BR><BR> </p><p>"The majority of clients, about 80 per cent, go for specific feeds like </p><p>Japan, India or Australia, or they choose a mix such as East Asia and </p><p>India." </p><p><BR><BR> </p><p>One of the main reasons for having split feeds is to counter advertisers </p><p>going for terrestrial buys in what is perceived as a way of cutting </p><p>costs as the economy takes a tumble. The major cable and satellite </p><p>players claim that despite the slowing economy, they have managed to </p><p>keep revenue growth at a respectable rate because they can deliver </p><p>specific feeds to specific markets and they target an audience which </p><p>represents the elite of that market. </p><p><BR><BR> </p><p>Says Casbaa's Brown, who is also the president of MTV Networks Asia: </p><p>"The more customised feeds you have, the more you can deliver what the </p><p>terrestrials offer but with a lot less wastage." </p><p><BR><BR> </p><p>The consensus is that more customised feeds are likely to pop up in the </p><p>near future. If the issue of foreign ownership of media entities is </p><p>resolved, China for instance could offer opportunities for having </p><p>separate feeds for the major cities of Guangzhou, Shanghai and </p><p>Beijing. </p><p><BR><BR> </p><p>But while the current emphasis is on bolstering viewership figures and </p><p>enhancing the distribution network, the internet has not been totally </p><p>forgotten, although convergence is more wishful thinking than </p><p>reality. </p><p><BR><BR> </p><p>AXN's Miller says: "Convergence for us is something that is still far </p><p>off. Broadband to allow convergence is only available in a few thousand </p><p>households - primarily Singapore, Hong Kong and Korea. Everyone knows </p><p>that watching TV without broadband is not a pleasurable experience but </p><p>the change to large-scale broadband usage is further over the horizon </p><p>that we had originally anticipated." </p><p><BR><BR> </p><p>Last year, the industry followed the dotcom craze with major investments </p><p>in cyberspace. That, according to CNBC's Froude, is a thing of the </p><p>past. </p><p><BR><BR> </p><p>"We weren't the first movers in this area, but it's safe to say that the </p><p>internet is less of a priority at this moment in time." </p><p><BR><BR> </p><p>Platt of National Geographic adds that the concept of convergence is not </p><p>without its pitfalls for the industry. "In the era of convergence, when </p><p>people can log onto the internet and download programmes to watch, there </p><p>is a danger that the channel's identity and purpose could lose its </p><p>importance. It's something to think about." </p><p><BR><BR> </p><p>However, the internet is recognised as having tremendous value when it </p><p>comes to customer relationship management (CRM) and branding. BBC </p><p>Worldwide Asia head of network development, Nic van Zwanenberg, says: </p><p>"The internet has become an indispensable marketing tool. It's not just </p><p>for promotional purposes but, more importantly, for receiving feedback </p><p>from our audience." </p><p><BR><BR> </p><p>Many agree, adding that the web formed the backbone of advertisers' </p><p>desire to integrate campaigns in as seamless a way possible. An example </p><p>is AXN's hugely successful Eco-Challenge show. "With Eco-Challenge, our </p><p>on-air presence is complemented by daily updates on our website and this </p><p>adds greater impact to our programming as well as to the branding of our </p><p>sponsors," Miller says. </p><p><BR><BR> </p><p>Brown says that MTV is already using convergence technology: the screen </p><p>is split so that viewers can watch the video and the VJs, send messages </p><p>to the VJ and other viewers and finally read the replies on scrolling </p><p>text. </p><p><BR><BR> </p><p>But he stresses that the roll-out of the technology across the region </p><p>will be gradual, with markets like Japan, Taiwan, Hong Kong and </p><p>Singapore leading the way, not just in Asia but across the world. </p><p><BR><BR> </p><p>Which is also the view of Star's vice-president of corporate affairs and </p><p>publicity, Jannie Poon, who says that an enhanced television system, </p><p>which gives viewers more interactive options, will be unveiled in Taiwan </p><p>and India next year. </p><p><BR><BR> </p><p>"The uptake of new technology in those two markets is high. The only </p><p>difference is that cable penetration in Taiwan is much higher. However, </p><p>in absolute numbers, India's market size is several times the Taiwan </p><p>figure," she says. </p><p><BR><BR> </p><p>This is underlined by ACNielsen figures which show that the average </p><p>weekly cumulative audience in India was 58 million at the end of July, </p><p>more than three times the 17 million for Taiwan. </p><p><BR><BR> </p><p>But despite the harsher operating environment and keener levels of </p><p>competition, the industry is optimistic about its long-term </p><p>prospects. </p><p><BR><BR> </p><p>CNBC's Froude says: "The upside potential remains high. Penetration has </p><p>by no means reached saturation point. In some countries, penetration is </p><p>just 20 per cent of what we perceive that market to potentially be, </p><p>while in others it's around 80 per cent. There's still a lot of play </p><p>left." </p><p><BR><BR> </p><p>China is the market that the industry is keenest on. The country's </p><p>economy continues to grow at a rapid clip, making it a likely hub of </p><p>cable and satellite activity in the future. </p><p><BR><BR> </p><p>However, legal restrictions limit the industry's distribution potential </p><p>to hotels, foreign compounds and programming blocks on local cable </p><p>channels. </p><p><BR><BR> </p><p>But optimism remains strong. The BBC's Zwanenberg says: "With WTO </p><p>looking like it's just around the corner and the 2008 Olympics, it's </p><p>going to be a very different ball game to what it is now in a few years' </p><p>time." </p><p><BR><BR> </p>