When international multimedia baron Rupert Murdoch proclaimed to the world one year ago that satellite television “poses an unambiguous threat to totalitarian regimes everywhere,” he probably never dreamed that the statement would slam shut all doors of opportunity in highly promising Mainland China – or that, in its place, Taiwan would catapult into position as one of Asia's hottest markets for satellite TV. Murdoch's remark, although delivered at a London news conference and not intended for Asian audiences, aroused the suspicions of many Asian governments, particularly the authorities in mainland China. By November 1993, in response to Murdoch's posturing and to controversial programming beamed via satellite into the mainland, Beijing banned all individually owned satellite dishes in Mainland China and restricted cable companies to carrying only mainland-produced satellite programming.
“[Beijing] sent a clear message to all foreign broadcasters that the PRC was no longer a viable market for satellite TV,” says Tuen-yu Lau (劉瑞裕), a specialist in Asian satellite television and a professor of telecommunications at Purdue University. “From that point on, Taiwan became the hot new market in Asia.” With the mainland market snatched away, satellite TV broadcasters that were developing Mandarin programming quickly shifted their focus to Taiwan audiences, while keeping a watchful eye on developments across the Taiwan Straits.
Wired-more than half of Taiwan households carry cable TV, and most of these receive satellite TV programming from several foreign distributors.
But even before this shift, Taiwan had already been shaping into a promising market for satellite TV. Over the past three decades, the island's population has grown increasingly wealthy, now boasting an annual per capita GNP of about US$ 11,000. The 21 million residents also have a strong TV habit. In a 1994 survey of four thousand Taiwan residents over the age of fifteen, about one-third of respondents reported spending more than three hours a day in front of the tube, and 10 percent said they tune in for more than five hours a day. And although satellite dishes were illegal until 1988, they became popular in the mjd-1980s when residents found they could pick up satellite programming intended for other areas. After Japanese satellite broadcaster NHK began beaming into its home country in 1984, all it took for local families to bring the signals into their living rooms free of charge was a so-called “little ear” on the apartment rooftop. In the years that followed, Taiwan viewers also picked up Australia's ABC and Hong Kong's Star TV and TVBS.
Satellite TV got another boost in Taiwan by riding on the coattails of the fast-growing cable business. Many satellite broadcasters now reach most of their viewers through cable distributors, mainly because consumers know it is cheaper and easier to subscribe to cable than to set up a large satellite dish. Although cable TV was not legal until the passage of the Cable Television Law in July 1993, hundreds of small-scale cable stations began operating in the 1970s and 1980s. Today, according to a 1994 poll by Survey Research Taiwan, about 55 percent of Taiwan households are hooked up to cable. By comparison, the United States, a far more mature viewing market, has a penetration rate of between 55 and 60 percent.
Free time with the family – Broadcasters like Taiwan for its consuming power and strong TV habit. One-third of residents spend more than three hours a day watching the tube.
Passage of the cable TV law followed enormous pressure from the United States to clamp down on operators who were airing U.S. movies, programs, and even entire channels without paying royalties or distribution fees. For this reason, its passage gave a significant boost to the satellite TV industry by alleviating fears of intellectual property rights violations. “Copyright is one of our main concerns in entering a market such as Taiwan,” says Elisabeth Sami, manager of international business development at The Discovery Channel Asia, the Hong Kong-based subsidiary of the U.S. educational program provider. “We need to know that our copyrighted products will be protected and have some assurance that the government will actually enforce these rules.” Chang Chung-jen (張崇仁), chief of the satellite and cable TV section of the Government Information Office (GIO) explains that the law has added stability to the business. “Legalizing the industry means that cable operators will invest more money,” he says, “making them less likely to risk that investment by breaking regulations and losing their licenses.”
One of Taiwan's biggest draws is its high potential for advertising, a major source of revenue for satellite TV channel operators. Local businesses spent about US$3.6 billion in 1993 on all media advertising – more than twice as much as Hong Kong and one-third more than Mainland China, according to Taipei-based Brain Magazine. This gives the island the fifth largest advertising expenditure in Asia. S.K. Fung (馮承光), general manager of Hong Kong's leading television station, Television Broadcasts International (TVBI), says big-spending advertisers were one of the motivations behind TVBI's decision to launch TVB Superchannel, a Mandarin-language satellite channel designed specifically for Taiwan audiences.
Local TV advertising dollars are rising steadily and analysts expect that the medium may soon catch up to newspapers, the long-time media leader. In 1993, spending on TV ads rose from 32.2 percent to 33.3 percent of all media advertising, topping US$959 million, according to Asian Advertising & Marketing. Meanwhile, newspapers fell 2.5 percentage points to 37 percent for a total of just over US$1 billion. But industry insiders stress that it is still too early to tell how satellite and cable TV will affect the way advertisers allocate their media spending.
No matter how appealing the Taiwan market becomes for satellite operators, a major part of the attraction is its potential to serve as a springboard into the vast Mainland Chinese market. Most regional satellite broadcasters are developing and airing Mandarin-language programming with hopes of beaming it to the 1.3 billion people across the Taiwan Straits as soon as mainland authorities relax their restrictions on satellite dish ownership. In the meantime, satellite programming providers are eyeing Mandarin-speaking communities across Asia, and around the world.
Consider TVB Superchannel (TVBS), launched in September 1993 as a joint venture between TVBI and ERA International, a Taipei-based media company. TVBS offers two satellite channels showing a variety of Mandarin-language programs, from variety shows to news and sports. Although currently beaming into Taiwan only, TVBS aims to be a player in mainland China and throughout Southeast Asia. Parent company TVBI already boasts the world's largest library of Chinese-language programming and has the capability to produce more than six thousand hours of programming annually. It also dubs videocassettes of movies, self-help programs, and other entertainment into seven Asian languages, distributing these through a worldwide network of video shops. The company expects this vast sales network to provide a vital advantage when it begins distributing its own satellite programming across Asia.
Star TV has also beefed up its Mandarin programming. In April, partly in response to Beijing's displeasure with what it considered to be controversial coverage of the mainland, Star dropped the BBC World Service Television news channel and introduced its first movie channel, Star Movies. The new twenty-four-hour channel features a 3:2 ratio of Chinese and English films. It is Star TV's first “pay channel,” meaning that it is sold to cable subscribers for an extra fee above the basic cable subscription cost. Taiwan is the first market, but Star plans to beam the channel into Hong Kong, the Philippines, Japan, and mainland China. Jonathan Karp, Hong Kong-based correspondent for the Far Eastern Economic Review, stresses the importance of the Taiwan market. “No one is going to make any money in satellite TV in Mainland China for several years to come,” he says. “Replacing the controversial BBC news service with a pay TV service targeting Taiwan holds greater immediate promise for Star TV.” Media analysts believe Star gets the largest share of its revenue from Taiwan.
But while many program producers are creating Mandarin programming with an eye toward attracting Chinese viewers around the world, they are also realizing the need to cater more carefully to specific audiences. Many satellite broadcasters have found that big is not necessarily good, marking a dramatic turnaround from early strategies to beam the same programming throughout Asia. “The pan-Asian strategy is dead,” declares telecommunications professor Tuen-yu Lau. “Television is a culture-specific medium. It was ludicrous for satellite broadcasters to think that in Asia, an area that encompasses hundreds of different languages and cultures, they could force-feed the same programs to everyone. Even the Chinese in Hong Kong, Taiwan, and Mainland China are very different from one another in their tastes.”
Famed film producer Chiu Fu-sheng (邱復生), who is also general manager of TVB Superchannel and president of ERA International, explains how tastes differ among Asia's different Chinese audiences. “The Taiwan audience likes romance stories and dramas,” Chiu says. “Mainland Chinese devour educational programs that introduce foreign things and ideas, although they enjoy romances as well. Hong Kong audiences, on the other hand, like shows that are straightforward – that are purely entertainment and don't force them to interpret too much. The different preferences in these three areas are largely a result of different histories, politics, and life experiences.”
Chiu's insight is not news to advertisers, who have been quick to shun the idea of sending the same message to dozens of vastly different audiences – a strategy that can be downright detrimental. Star TV, which broadcasts five channels to 42 million households in 53 countries and territories, is one satellite provider that has had difficulty selling pan-Asia advertising. Adweek magazine reports that only 20 percent of the satellite broadcaster's ad time is being booked and that advertising revenues contribute only about US$25 million to the network's total US$125 million annual operating costs.
Following the trend toward localization, this past May, Star TV split its music video channel into a northern beam targeting Taiwan and a southern beam targeting India in order to cater more directly to its two largest markets. Since then, local viewers of Channel V have noticed more Mandarin content and more local celebrities. The channel has production teams stationed in both Taipei and Bombay. Star TV has also split its 24-hour Prime Sports channel into northern and southern beams. Local audiences now hear live Mandarin sports commentary overlaying the original English.
The Discovery Channel Asia has also hustled to focus, its programming. Elisabeth Sami stresses the need to be culturally sensitive and to respect the politics of each country. “That means not showing the preparation of pork during Ramadan in Malaysia, no documentaries about East Timor in Indonesia or Tibetan independence in Mainland China.” As part of its strategy to become known as an Asian programmer, the satellite broadcaster plans to run more documentaries covering regional issues and to co-produce programs with Asian companies.
The rapid development of satellite hardware and technology is also helping to increase opportunities in Taiwan. The Apstar 1 satellite, which was launched in June, will be a formidable competitor to Star TV's Asiasat 1. The new satellite is already carrying HBO Asia, CNN, ATVI, ESPN, The Discovery Channel Asia, and TVBS, and it will soon begin transmitting programs from Ted Turner's TNT movie service and Cartoon Network, the Time Wamer Channel, and Viacom's entertainment channel. The 24-hour music video channel MTV Asia, which left the Star TV network in May, is also planning a comeback in the region via Apstar 1 by the end of 1994.
But beaming programs from a satellite is the easy part of the satellite TV business. Making money is more difficult. In the past, satellite broadcasters simply allowed any viewers with a satellite dish to pick up their programming free of charge, figuring that their revenue would come from advertisers. But this strategy has not proven effective. “It is almost impossible to run a free-to-air service and survive without relying on subscription money,” says Eric Lui (雷國夫), marketing manager Of TVBS. “Your programming has to be so good that you can rely only on advertisers.” He stresses that it is extremely difficult to attract a base of loyal advertisers, or viewers.
Collecting subscription fees is not easy either. To do so, satellite broadcasters must have so-called ground relationships in each country it beams into, either through setting up their own representative offices, forming a joint venture with a local company, or contracting these responsibilities to a local representative agent. In Taiwan, the trend has been toward the latter option, which has created enormous opportunities for local companies.
Satellite programming providers say finding a knowledgeable Taiwan representative is vital given the chaotic nature of the island's recently legalized but still somewhat shady cable industry.
Taipei-based Videoland Inc. is one of the local distributors benefiting from the new demand for local distributors of satellite TV programming. A subsidiary of the United Communications Group (UCG), which is owned by the China Trust Group, Videoland has secured sole distribution rights for CNN International and The Discovery Channel Asia and is seeking to represent other foreign programmers in Taiwan. “We hope to be able to represent one channel operator in each category of programming, for example one cartoon channel, one music video channel, and so on,” explains Billy Huang (黃炳雲), vice president of Videoland.
UCG's, strategy is to control the upstream programming as well as downstream cable station. The company has established subsidiaries in every aspect of the cable television business, including program production, hardware engineering, marketing, advertising, and cable station management. In choosing a foreign programming provider to represent in Taiwan, Huang stresses that a well-known brand name for the programs and channels carried is the single most important factor.
TVB Superchannel is also competing on the distribution side. The company has already signed sole-agency contracts to represent HBO Asia in Taiwan. The arrangement allows HBO to enjoy economies of scale in operations, marketing, and promotion. With local marketing know-how, Eric Lui says TVBS can help foreign programmers find a niche for nearly any product. “Every program in the U.S. has the power to enter Taiwan,” he says. “Even if there are already five or six music video channels in Taiwan right now, it's still possible to introduce another one. All you have to do is find a special niche for it, and we can do that.”
Another positive repercussion of the satellite TV explosion is the boom in opportunities for local programming producers. This is fueled by a requirement in the Cable Television Law stipulating that at least 20 percent of the programming carried on cable TV stations be locally made. While many in the industry consider the regulation unreasonably high, it is good news for the island's independent producers and hundreds of production houses. “It's a seller's market,” says Chang Chung-jen, of the GIO's, satellite and cable TV section.
The growing need for satellite TV support industries such as Chinese subtitling, hardware development, cable hookup and maintenance is also providing booming business opportunities in Taiwan. Industry analysts estimate the total hardware expenditure by cable stations in Taiwan will soon top US$800 million. In fact, the government hopes to build Taiwan into a hub for Asian satellite television. An official proposal to develop the island as a regional operation center includes guidelines for promoting it as a media center.
Getting hooked – Although illegal until 1993, hundreds of cable operators set up in the 1980s. Today, they deliver satellite programming from Japan, Hong Kong, Australia, and the United States.
But industry insiders warn of an inevitable shakeout in the satellite TV business. “Everyone thinks it's so easy to open a foreign movie channel,” says Thomas Yu (游守義), executive vice president of Rebar Tele-communications, a Taipei-based programming supplier. “But there are already more than ten foreign movie channels in Taiwan, and Star's new movie channel has proven not to be as profitable as expected.”
And the competition is expected to intensify. About a dozen new satellites are scheduled to be launched in the region over the next two years. Meanwhile, data compression technology is already making it possible to squeeze many more channels onto a single transponder. With these developments, the once prohibitive cost of operating a satellite TV network has plummeted. Three years ago, leasing a transponder cost about US$3.5 million a year; today the high-end of the price range is US$1.5 million. The new ease of entry into the industry will likely mean that scores of networks, including many smaller players, will be chasing limited profits.
“We could all lose our buns-a lot of these networks are going to lose a lot of money for a long time,” Ted Turner warned delegates at a pan-Asia satellite and cable television conference in March. “The difficulty of entering the satellite business is not very great. All you have to do is lease a transponder, hire ten people, and start running some shows. And then you just have to hope that the programming is not so expensive.”
Elisabeth Sami of The Discovery Channel Asia believes prospective entrants should expect to remain in the red for eight to ten years. In her view, controlling programming costs is the key to survival. “You absolutely must own the programming if you want to compete in this market,” she says. “Otherwise, forget it. The cost of acquiring programming is just too high.”
Surviving as a cable company will also be tough. Many are already struggling with the process of shifting from the lucrative days when pirating movies and shows was an industry norm. The leap from free to high-cost programming is a huge one. “The problem is that most cable operators only have a limited amount of money set aside to purchase programming, and in Taiwan they must get government approval before they can raise subscription rates,” says Elisabeth Sami.
Joseph Shen (沈中焜), planning department manager at World Horizon Communications, a Taipei cable system with more than twenty thousand subscribers, says his budget for purchasing programming accounts for 50 to 60 percent of the company's revenues. Shen estimates that most Taiwan cable operators spend half their income acquiring material to air. “That's an enormous sum of money to pay out every month for only one aspect of running a cable business,” Shen says. The average cost per channel in Taiwan is 63 to 74 cents per subscriber per month.
Cable operators are especially incensed at the price hikes for international programming. HBO costs US$4.50 per subscriber in Taiwan but around US$3 in the United States, ESPN charges 80 cents in Taiwan compared to 40 cents in the United States, and The Discovery Channel is priced at 55 cents locally but only one-half cent in the United States. Foreign program providers say they need to raise prices to ensure that they make a profit in Asia's still developing markets. In Taiwan, they also need to compensate for the common practice among cable operators of understating the number of their subscribers.
The most recent target for opposition from Taiwan cable operators is Star TV. When it introduced its Star Movies channel in April, local cable operators boycotted, balking at the high cost of US$1.19 per subscriber and voicing concern over “cultural pollution” from too much Western programming. But the main issue of contention, according to Joseph Shen, was Star's demand to supply only those cable companies with 7,000 or more subscribers – far exceeding the average minimum of 3,000 homes. “Many in the industry expect that Star will eventually raise its [per household] price,” Shen says. “With a non-negotiable minimum of 7,000 homes, the total cost could spiral out of control.”
Despite the obstacles, none of the satellite broadcasters show signs of slowing their momentum in developing the satellite TV industry in Taiwan. The overriding atmosphere within the industry is one of adventure. Many local insiders would agree with Ted Turner, who recently compared the satellite television business to a voyage of the Starship Enterprise in the TV series Star Trek: “We are boldly going where no one has gone before. Of course we can't know what is going to happen.”
Minh-Ha Nguyen spent ten months as a Fulbright Research Fellow in Taiwan analyzing satellite and cable TV developments in Asia. She currently works as a business consultant in Boston.