SATELLITE PLAYERS ON A ROLL: Years of investment are paying off for cable and satellite operators as critical mass becomes a reality. But new bumps are emerging, not least is the issue of rampant pira

"Competition makes it more attractive to subscribers, and that makes it more attractive to advertisers,

Twiston Davies says. This, he adds, leads to greater investment in service enhancement and in further upgrading technology.

Star's Hayward adds: "We look to the future with an enormous amount of optimism. We think we have weathered this particular storm in extremely good shape ... it's difficult to see where we would change tack. We're very, very upbeat about the next 18 months."

Where other media owners have been nursing their wounds from the global economic slowdown and last year's devastating events in the US, cable and satellite operators have emerged with barely a scratch. And they are now talking up their prospects as pay-TV opportunities open up.

The major networks are investing in ever-greater levels of local content for markets across Asia, and they predict the convergence of new technologies will help drive ratings and advertising income even higher.

"We saw growth last year in excess of 10 per cent across the region in revenue and subscriber growth,

says Simon Twiston Davies, chief executive of the Cable & Satellite Broadcasting Association of Asia (Casbaa).

While a global economic slowdown and the shock of September 11 led advertisers to rein in their spend, there was an upside for pay TV providers - viewers cut back their personal budgets and spent more time in front of the box.

"Obviously the last quarter of last year was very difficult ... but people don't go out for as many meals, they spend more time at home, more time watching TV and there becomes more choice,

Twiston Davies says.

As the war against terrorism unfolded, CNN in particular saw a surge in viewers not just across Asia but the world.

"In terms of viewership, there's never been a time when information or news programming is more relevant. The relevance is always amplified when there's a big news story and news becomes a higher priority,

says Nick Morgan, senior vice-president of news advertising sales at Turner International Asia-Pacific.

"We've been in a very positive situation. I guess that like everyone else at the end of 9/11 we were looking despairingly at business forecasts, but we ended up having a terrifically strong end of year which has carried through into this year,

he says.

While advertisers who previously used four or five media have cut back, Morgan says they have stuck with CNN and in many cases have increased their spend on CNN at the expense of other media.

"Brands in general obviously realised that you don't just take your foot off the gas (in difficult economic times); brands are an ongoing investment and turning the tap off is very dangerous."

At MTV, there is also a sense of opportunity having arisen from adversity.

"I think most media organisations got to the point where there was probably little point in continuing to focus on what the external issues were that were affecting performance and they shifted their focus internally,

MTV senior vice-president of ad sales, Chris Steward, says. "MTV networks was no different, and certainly in the bigger picture we moved into a very aggressive mode of expansion."

Last year, MTV launched its 24-hour service in Japan, the Philippines and Thailand, and is set to go 24 hours in Indonesia on June 1.

Steward says advertising income in 2001 was not far short of targets set the year before, and though he is coy on specifics, he expects growth this year to be "way, way into double digits".

While the major networks are gaining a strong foothold across Asia, the pay-TV industry in the region is still in its infancy. Pay-TV is hugely popular in advanced economies such as Taiwan, but in India, almost half of all households do not own a television set, and many of those who do have sets that cannot receive more than a dozen channels.

Casbaa says the average penetration rate of pay TV across the region is 30 per cent, but the advertising revenue is still described by some observers as "pitifully small".

Pay-TV accounts for about seven per cent of TV adspend, "and that shows there's terrific opportunities for the industry at a time when advertisers are looking for creative and more targeted advertising", Twiston Davies says, predicting growth in advertising revenue of up to five per cent in the coming year.

"Across Asia we're seeing that we're reaching, in terms of penetration, the critical mass where advertisers are beginning to take cable TV seriously,

he says. "As people become more used to the concept of pay TV, which is still relatively new in Asia, it becomes more attractive, and when you hit a certain level of penetration, then advertisers get very excited."

CNN's Morgan is "extremely optimistic

about the potential for new sources of revenue.

"I think there's a huge number of Asian brands with considerable untapped potential and a huge number of publicly traded companies in Asia who have a brand story to develop and who have not done so as yet," Morgan adds.

Toby Hayward, executive vice-president of advertising sales at Star, says the rapidly-maturing markets of China and India present the best opportunity for growth in Asia, and sees untapped potential remaining in Korea, the Philippines and Indonesia.

Zenith Media figures show that while total advertising as a percentage of GDP in Australia is 1.2 per cent and Hong Kong 1.6 per cent, it is only a fraction of that in less developed Asian economies - at only 0.4 per cent in China and 0.3 per cent in India.

"We really think that if we can grow in this sort of market when many sectors have been declining, we can post very strong growth when these sectors rebound,

Hayward says. "We're confident that when they recover and grow their spend, we will grow with them."

Star's current programming strategy, along with many other players in the market, is to focus on localisation and special events. Following the huge success of an Indian version of Who wants to be a millionaire, locally-produced soaps and general entertainment programmes have followed, along with an Indian version of Popstars, which is being sponsored by Coca-Cola.

Last month, Star launched its new Chinese general entertainment channel Xing Kong Wei Shi, and earlier this year co-ordinated the Chinese Music Awards - attracting 170 million viewers - in a joint venture with the mainland's national broadcaster, China Central Television.

CNN is also pursuing a localisation strategy. In January, it revamped its 6am to 9.30am timeslot with the launch of News Biz Today, a programme produced in Hong Kong featuring breaking news coverage and live updates from around Asia. CNN.com/asia was launched about a year ago.

And it's a similar story at MTV. Steward says: "Localisation absolutely is the game. It's not about taking an American culture and force-feeding it down the throats of young Thai adults in Bangkok or young Koreans in Seoul.

"They want to see Korean culture and Korean music, and they want MTV to showcase that while also being a window to trends and influences and other sources of cool, wherever they may come from."

Special events are also being used as a catalyst for revenue and viewership increases. The first MTV Asian Music Awards were held on February 1 this year, and the network is producing music and lifestyle awards in individual markets across the region.

Bucking this trend is relative newcomer Bloomberg Television, which has seen spectacular growth in the past year with a package of financial information aimed at a highly-exclusive target market. If Star and CNN look to provide something for everyone, Bloomberg's strategy is just the opposite; its average subscriber has a net worth of US$1.4 million and an annual income of US$335,000, according to the broadcaster.

Bill McHugh, who heads distribution, readily acknowledges that the product is "very niche ... while the average TV viewer is looking for ", but so far the plan has worked. Total household viewership in Asia has risen 77 per cent in the past 18 months, and more than 42 million homes now receive the service. Hotel distribution has doubled in the same period.

One of the main hurdles to all networks' growth in Asia is rampant piracy.

Not only do vast numbers of viewers watch pay-TV for free with unauthorised set-top boxes - Hong Kong's i-Cable is estimated to miss out on US$46 million a year this way - but advertisers face an equally serious issue.

Region-wide adverting is often stripped and replaced with locally-made spots. In Taiwan, for instance, some networks are losing up to 80 per cent of their advertising coverage to "masking

of network commercials with local TVCs.

Casbaa and individual networks are working with regulators to try to stamp out piracy, and the problem does not appear to be putting off new entrants to the pay-TV sector as markets open up to competition and technological advances provide new opportunities.

In its "Pay-TV Report

published in February, Howorth Communications says a "360 degree approach

to revenue-raising and brand-building will become the norm as broadband, television and other technologies come together.

"Convergence is also going to create a seismic shift on advertising," the report's author, Owen Hughes, says.

"Basing a campaign around 15 or 30-second TVCs and a few print and outdoor ads, could soon be as old-fashioned as a typewriter, as products are sold over TV, through the worldwide web, via personal hand held devices and in formats designed for video and audio streaming media.

"A dual income stream drawn from advertising and subscriptions is essential, but, increasingly, channels seek to monetise any other value they can offer, especially for consumer-focused products, like music, sports and children's/family channels. It is a question of identifying and creating products that are related to your core business that you can sell via the mediums of e-commerce, m-commerce and t-commerce."

Steward, of MTV, agrees that embracing new technology will help secure pay TV's future. MTV recently signed a broadband deal with Hong Kong-based NOW.com.

"All of these things are areas of opportunity for us. We absolutely don't see them as a threat,

he says. "We want to be available in different forms for when and wherever that young adult consumer wants us."