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From Kung Fu Peddler To Media Powerhouse


International Business

FROM KUNG FU PEDDLER TO MEDIA POWERHOUSE

Across China, people are tuning in to programs from Hong Kong's leading TV network, Television Broadcasts Ltd. (TVB). In the southern city of Shenzhen, 90% of viewers get TVB's Chinese soap operas. Along the Russian border, TVB's gangster movies are big hits. "It's a wonderful fit," says Fung Shing Kwong, general manager of TVB International Ltd., the company's overseas distribution arm, "between our product and the market."

Once a small-time purveyor of kung-fu movies and sappy soap operas, TVB is now a leading contender in the race to control the booming media markets of Asia. The company has revenues of $270 million, 80% of viewership and advertising in the Hong Kong market, and ambitious expansion plans, including taking on Rupert Murdoch's Star TV. Through cable and satellite systems, it is forging a network of Chinese-language stations from Taipei to Toronto. The growth plans include negotiating a host of new partnerships with other major players, including Western media giants.

Behind the expansion are two tycoons who each own a third of TVB. One is Hong Kong movie mogul Sir Run Run Shaw, who controls the colony's leading film studio, Shaw Brothers (Hong Kong) Ltd. The other, Robert Kuok, runs the Shangri-La hotel chain. Both are using their extensive guanxi, or connections, throughout the region to make TVB an Asian power.

BARTERING. TVB is well positioned to satisfy Asia's hunger for programming. It cranks out 6,000 hours of TV shows a year and its videos are popular in Southeast Asia, where they are often dubbed into local languages. But it could use help. To gain access to new technology, it is talking to Time Warner Inc., which a senior U.S. industry executive says wants to buy 10% of TVB. The network also needs partners for a proposed satellite service to challenge Star TV, Murdoch's Asian satellite network. For starters, it launched a satellite network in Taiwan last September.

The most promising market is in China. TVB recently struck barter deals with five stations to trade TVB programming for free advertising time. In April, TVB put together a 40-hour syndicated light-entertainment program for 22 Chinese cable systems. Empire building in China will take time. The government is encouraging foreign investment in many areas but prefers to control the airwaves. "It's not a top priority to spend hard currency on movies or TV programs," says Allan Ng, senior analyst at S.G. Warburg Securities (Far East) Ltd.

Meanwhile, promising markets beckon across Southeast Asia. TVB expects sales to skyrocket in Malaysia, Thailand, and even Cambodia as new commercial-TV and cable stations clamor for additional programming. In Indonesia, TVB has linked up with Salim Group, the country's largest conglomerate, which has a new station set to air this spring.

MORE EDUCATED. TVB is no less eager to capture viewers half-way around the globe. It is taking over two Chinese cable stations in Canada. It also runs a Chinese cable network in California, and within two years it plans to upgrade the system by using a direct broadcast satellite to transmit directly to the home. TVB hopes it can snatch an affluent audience of over 1 million viewers, whose demographics would appeal to corporate advertisers. "The Chinese-American population as a whole has obviously higher levels of income and education than Hispanics, African Americans, or whites," says Philip Y. Tam, senior vice-president for TVB Holdings (USA) Inc.

Still, some analysts wonder whether TVB is ready for prime time. Accustomed to grabbing the lion's share of ad revenues in a two-network market in Hong Kong, TVB has yet to prove it has the skills to play on more competitive turf. It also is facing stiffer competition at home. Long limited to TVB and rival Asia Television Ltd., the Hong Kong TV market finally is expanding with the entry of a cable system run by Hong Kong conglomerate Wharf (Holdings) Ltd.

The stations will be chasing a limited number of advertisers as companies start holding the line in Hong Kong while setting aside bigger ad budgets for China. But with TVB's expanding operations in China, it will be able to catch the advertisers at both ends. "It's one of my favorite companies in Hong Kong because it is so focused on one business," says Kirk C. Sweeney, director of research at Lehman Brothers in Hong Kong. That's the kind of reception TVB hopes for as it spreads its signals around the world.TUNING IN TO TVB

PROGRAMMING Over 6,000 hours of Chinese-language programs annually, plus a

75,000-hour library

OPERATING AREAS Covers most of Asia, including Hong Kong, China, Taiwan, and

Indonesia, through conventional and satellite broadcasts as well as cable

networks; now expanding into North America

OWNERSHIP Controlled by tycoons Robert Kuok and Sir Run Run Shaw, who

heads a Hong Kong film studio

GROWTH PLANS Seeking new partnerships with Time Warner, Chinese TV

stations, and Southeast Asian conglomerates

DATA: BUSINESS WEEK

Joyce Barnathan in Hong Kong, with Bruce Einhorn in New York


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