Satellite Pay-TV Nets Strong Regional Growth In Asia

Asia is starting to show signs that it offers a fertile market for satellite television services. That was the view offered during a panel discussion about the Asian satellite TV market held in Paris last week during Euroconsult’s “DTH World Summit for Satellite TV Platforms & Channels.”

Satellite pay-TV operators across the region are seeing high levels of subscriber growth that showcases the universal appeal of Direct-to-Home (DTH) services and businesses. In addition, those satellite TV service providers tend to have strong balance sheets.

In Japan, SkyPerfect aims to reach more than 3.6 million subscribers this year, ramping up to more than 5 million subscribers in 2007. The company has become a major success story in the region after enduring teething pains during its early years. In South Korea, SkyLife already has more than a million subscribers. That total is impressive when one considers that the digital satellite service was only launched in March 2002. According to the panelists, a number of positive stories beginning to emerge in the region.

New Zealand

John Fellet, CEO of SKY Television, spoke of the company’s improved free cash flow (FCF) and how drastic measures in the last few years helped to turn its fortunes around. New Zealand is a market with 1.4 million homes and more than 500,000 subscribers. SKY Television’s future appears bright but it was not always this way.

In 2001, programming costs accounted for 50 percent of its overall revenues. That figure was much too high. By the end of the first half of 2004, Fellet expects the programming costs to fall to just 40 percent of revenues. The company has eliminated a number of well-known channels, and it taken other steps to bring costs down. After those restructuring moves, the operator has a strong balance sheet, and it appears to be well-positioned. The major driver for pay-TV in New Zealand has been sports and, in particular, Rugby.

Malaysia

One of major pay-TV success stories has taken place in Malaysia. Here, Astro has been a strong performer, quickly building up a substantial and profitable business. In its latest results, as of January 2004, the company’s total residential subscriber base was 1.28 million (27 percent) of Malaysian TV households. Its subscriptions, including schools and commercial subscribers, totaled 1.39 million.

Astro also launched a successful IPO in 2003. David Butorac, COO of Astro All Asia Networks, told the conference that one of the reasons for its success was the Malaysian government’s understanding of the regulatory environment needed for Astro to thrive. “We were granted exclusive DTH licenses and favorable license conditions. The government wanted to create an environment where private equity invested in infrastructure,” he said. “We have now turned profitable. There is a proper commercial infrastructure in place. The consumer economy is growing rapidly in Malaysia.”

Malaysia’s market dynamics are particularly interesting. The operator has to cater to the Chinese, Indian and Malay demographics. In terms of TV households, a touch more than 50 percent are Malay, yet half of Astro’s subscribers are from the Chinese market, so there is a clear opportunity for the company to grow its subscriber base.

The company appears to have learned lessons from others in the West, investing heavily in content. It has the world’s largest Chinese film library. It also is producing 1,200 hours of programming this year, with half of it Malay, clearly targeting that market.

“We have invested heavily in local programming and reality TV. It has proved very popular. We are investing in content and the localization of our channels,” Butorac commented. “Programming is the key to growing our business. We hope for substantial consumer growth – 45-percent penetration over the next five years.”

Australia

The demand for pay-TV is increasing down under. In Australia, Foxtel just launched a new digital pay-TV service aimed at accelerating the rate of pay-TV growth there. Earlier this year, AUSTAR announced it would enhance its digital satellite television service in regional Australia with the launch of New AUSTAR Digital. It doesn’t really compete with Foxtel, and its offer really is in tandem with the new digital offer from Foxtel that gives Australians the latest in digital pay-TV services.

In a cooperative agreement with major telco Telstra, AUSTAR also will look to bundle satellite-TV services with a telephony service. The company ended 2003 with more than 425,000 television subscribers. The new digital service launched in March, and it expects to introduce more interactive features. In the first quarter, the operator added more than 14,000 new subscribers. Deanne Weir, group director of corporate development and legal affairs at AUSTAR Entertainment, commented, “We are launching Box Office (PPV Movies) next week. Very soon, we will be launching Sports Active and News Active.”

AUSTAR has spent the last two years getting ready to launch a digital service, and Weir confirmed the operator expects to be profitable in the next 12 months due to healthy subscriber uptake of its new digital service.

— Mark Holmes

(Deanne Weir, Austar, 00 61 2 9251 6999; David Yap, Astro, 60 3 9543 6688)