POISED TO MAKE PIRATES PAY

In pay-TV's high-stakes battle against pirates, it's make or break time. Revenue from advertising and subscriptions lost to piracy is expected to top US$1.3 billion this year in Asia, but can the industry win the war, Jo Bowman asks.

With the war against pay-TV piracy being fought on so many fronts across so many markets, it's difficult to see the big guns of industry beating the pirates altogether.

But there have been small victories of late, lifting hopes for the success this year of an all-out attack on those undermining the industry's growth.

Through the Cable and Satellite Broadcasting Association of Asia (Casbaa), stakeholders in the pay-TV industry are stepping up their efforts to change laws and make sure that existing anti-piracy legislation is properly policed.

Their goal is to convince regulators, governments - and the public - of the need to protect the legitimate pay-TV industry.

And with the current losses as big as they are (Casbaa puts these at US$1.2 billion for last year, excluding mainland China and Australia), they must act quickly.

Part of the problem, however, is that what needs to be done varies immensely from market to market, and rapid developments in technology present the danger that as quickly as one regulatory loophole is closed, another is exposed.

"Cable television piracy is still a big problem for us," says Lawrence Yuen, senior VP and general counsel, legal, business affairs and HR, HBO Asia.

"And countries differ widely in how they deal with it. Some countries do not have the necessary regulations to combat piracy. Some other countries do, but lack enforcement."

In Thailand, for instance, there are an estimated 850,000 to one million unauthorised cable subscribers who have signed up with pirate cable operators; the regulations that could put these operators out of business are already in place, but the political will to enforce it is not.

In India, meanwhile, some cable operators are believed to be massively under-stating subscriber numbers, so they pay less to the networks whose channels they carry. The Telecom Regulatory Authority of India, the new regulator of the country's pay-TV sector, has just invited public comment on its plans to firm up the legal framework for the industry there.

In the Philippines, where under-declaration of subscriber numbers is similarly widespread, the situation is all the more frustrating for the region's pay-TV industry.

"It's the same issue as in Thailand, where you have a regulator who will not regulate," says Casbaa CEO Simon Twiston Davies says. Illegal cable operators, particularly in the south, are "tolerated" by officials who he says are not necessarily controlled by their superiors in the capital.

In Hong Kong, meanwhile, thousands of cable TV viewers watch for free thanks to illegal set-top boxes, and across the region there is a huge 'grey market' in pay-TV services, which are sold by an operator authorised to sell in one country but who also sells in another.

At the same time, cable operators in some markets are 'masking' ads on the major networks with spots they have sold themselves.

"We estimate that in 2004, losses will go up by 11 per cent, and the industry's becoming extremely concerned that theft is becoming endemic to the market," says Twiston Davies.

This year, therefore, Casbaa is spending "significantly more" than ever before to combat piracy, planning legal action in several countries and considering hiring a full-time anti-piracy officer. In June last year, Casbaa won court action in Hong Kong against individuals found to have breached copyright law by selling illegal pay-TV decoders. Similar suits are expected to follow in other markets, starting with Thailand and the Philippines.

The other focus will be on persuading governments to strengthen regulations, and then to enforce them. The problem, Twiston Davies says, is that regulatory authorities are in many cases instruments of politicians, whose ideas about the cab-sat industry are at odds with its long-term success.

"Pay-television is not a human right," he says. "Regrettably, the idea that everyone should have free pay-TV service has a great resonance with a lot of people.

"But any relationship with the regulatory authorities is a long-term issue, and we don't expect to change the world overnight. It's a matter of building trust between the industry, the regulators and the community as a whole."

Scarlett Li, head of Channel V in mainland China, sees public opinion as a significant factor in the fight against piracy, whether it's pay-TV signal theft or black-market copies of music CDs and DVDs.

"If there's demand, there's supply," she says. "Even if government regulations are strong, if you want to stop every person selling pirate DVDs on every street corner in China, how many people and what resources would you need? A big part of the problem is that nobody is ashamed to buy a pirated DVD."

Together with governments, the pay-TV industry needs to make the public aware that by providing pirates with a business, they are threatening to kill the very service they're watching or listening to.

Channel V in November held a huge pop concert in Shanghai aimed at driving this message home to teenage music fans, with the help of artists Jaye Zhou, F4 and Faye Wong.

Casbaa acknowledges that the industry itself must be responsible, at least in part, for raising community awareness about the effects of copyright infringement and piracy - not least the growth of organised crime.

At the same time, it is attempting to tackle other regulatory hurdles to the industry's growth in the region - ranging from caps on monthly subscription fees in places like Korea and Taiwan, and a regulatory system in Japan that is incredibly complicated.

The good news is that with the convergence of television and telecommunication technology with broadband internet, many Governments in the region are having to rip up their regulatory rule books and start again; the idea of watching pay-TV content on a computer or telephone simply isn't allowed for in most instances.

This, Twiston Davies says, gives the pay-TV industry a chance to lobby Governments and regulators afresh on how best to address the problems they face now - with piracy chief among them - and how to best make provision for future developments in technology.

"It's a good opportunity and a chance to rethink exactly what we can achieve."

INSIDERS' VIEW

Need for transparency

Without the support of our regulators and their political masters, industry and economic development will be held back.

We need clarity of objectives and transparency of execution in terms of regulation. We also need to address the issue of consolidating regulatory regimes to take into account the mass deployment of broadband networks.

Relax the restrictions

Although the broadcast sector is one of the most dynamic in China, increased foreign access continues to be strictly controlled by the Government.

As a result, international broadcasters still only have access to a fraction of the population and the huge advertising revenues that are being generated through domestic television.

REGULATORY ISSUES - PAY-TV HURDLES ACROSS ASIAN MARKETS

Market Piracy Foreign Foreign Subscription Advertising

content investment rate caps controls

caps caps

Hong Kong Y

Singapore Y

Australia Y

India Y Y Y

China Y Y Y Y Y

Taiwan Y Y Y

Thailand Y Y

Malaysia Y Y Y

Philippines Y

Indonesia Y

Vietnam Y

South Korea Y Y Y

Source: Casbaa

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