STAR's Paul Aiello

December 2007

By CONTACT _Con-3F4A1850B c s l Mansha Daswani

While most of the major
U.S. media companies have spent the last year or so playing catch-up in the
Asia Pacific, News Corporation has been busy extending its lead. The company’s
Hong Kong–based arm, STAR, today operates more than 60 services, offering
entertainment, sports, movies, music, news and documentaries. Broadcasting in
ten languages, STAR’s channels reach more than 300 million viewers in 50-plus
markets and are seen by some 100 million viewers per day.

Cable and satellite
channels comprise the bulk of STAR’s business, with a bouquet that includes a
mix of pan-regional English-language channels like STAR World; Hindi-­language
and Mandarin-language entertainment services such as STAR Chinese Channel and
STAR Utsav; a host of localized feeds for its Channel [V] music network; and
niche outlets like the Tamil-language Vijay in India.

Investment in
local-content creation has been key to STAR’s strategy for increasing its
market share across the region, particularly in India and Taiwan. As a result,
the company has built a library of 20,000 hours of Indian- and
Mandarin-language content, which it is exploiting through its Fortune Star
distribution arm.

India is STAR’s strongest
market, with numerous offerings, including STAR Plus, home to many of the
country’s biggest TV hits, many of which are produced by Balaji Telefilms, in
which STAR owns a 26-percent stake. STAR has also invested in India’s
competitive TV-news market, entering into a joint venture with ABP for the
Hindi-language STAR News, the Bengali service STAR Ananda and the Marathi
offering STAR Majha.

Leading all of these
efforts is Paul Aiello, who joined the company in June 2006 as president from a
stint at Morgan Stanley, where he was in charge of the telecom, media and technology
group in the Asia-Pacific region. At the beginning of this year, Aiello was
promoted to CEO following the resignation of Michelle Guthrie. At the time,
Rupert Murdoch, the chairman and CEO of News Corp., said Aiello’s “business
acumen, strong leadership and financial skills as well as in-depth knowledge of
the diverse and complex media and telecommunications industries in Asia make
him the ideal candidate to steer the long-term growth and success of the
company.”

Aiello is looking to
increase STAR’s presence in India and Taiwan, and is exploring opportunities in
emerging mar­kets such as Indonesia, where the company owns a stake in the
terrestrial network ANTV. Beyond linear distribution models, STAR is ramping up
its role in the new-media space, with services that include a WAP portal in
India and an online download offering that allows viewers outside of India to
access some of the company’s original Hindi-­language shows. To serve
expatriate Asian audiences outside of the region, STAR is also eyeing further
expansion in the North American market, with plans to continue rolling out its
Indian and Chinese services to cable and satellite platforms across the U.S.

As he builds STAR’s
business, Aiello is negotiating a difficult landscape, with countries across
Asia at different stages of growth and with varying regulatory frameworks, some
more challenging than others. He tells World Screen about the opportunities and obstacles ahead in the
world’s fastest-growing media market.

WS: What has
been your broad strategy for the company since becoming CEO?

AIELLO: What
we want to do is build on the strengths of STAR. We’ve been highly successful
in markets like India and Taiwan, and with what we’re trying to do in Indonesia
right now. It’s about having relevant content and the capabilities so you are
closer to the local viewer. Those are the greatest opportunities in a lot of
these markets, where the growth is phenomenal. We feel that we are uniquely
qualified to do this. We’re able to get the best out of the international
practices and the capabilities we have regionally and at the same time we’re
able to go local and deeper with making investments [in individual markets]. We
really have the footprint and the basic capabilities on the ground to make
relevant local content, build a business, and yet at the same time get the best
advantages of STAR to extend the reach globally of these [local-market] businesses.

WS: Higher
programming costs hurt STAR’s bottom line this year. What are your plans for
continuing to invest in original and acquired content?

AIELLO: From a
cost-to-content perspective, we got a little bit out of whack with some of the
cost structures we had. We had a double hit, where cost-to-content was rising
for some of our key programming, and some of it was getting tired. What we are
trying to do is continue to produce locally as much as possible and also to
build up new genres of content that are relevant to our audiences.

WS: In India
you acquired a stake in the producer Balaji. Is that a model you’ll be
replicating elsewhere as part of your local-content strategy?

AIELLO: We
do own a 26-percent stake in Balaji, which we’re very happy with. The Kapoor
family [which founded Balaji and is its controlling shareholder] has been a
wonderful partner and will continue to be, going forward. Ekta Kapoor [Balaji’s
creative director] is brilliant. She’s close to the market. She grows with the
market. She studies the market. She understands her viewers. She’s evolving
with her viewer. She’s so committed to her product that it’s inspirational. At
the same time, we’ll look to grow, we’ll look to other production partnerships
if they make sense and we’ll look to increase our internal production
capabilities.

WS: And
you’re using your distribution arm, Fortune Star, to exploit the rights to this
content worldwide?

AIELLO: Fortune
Star right now is principally involved with the libraries we acquired over the
years. We have asked Fortune Star to work on the monetization of not just the
libraries but also other STAR content in both traditional and digital means. We
are reviewing how best to make Fortune Star more efficient with regard to the
monetization of our content. To be honest with you, there’s a lot of
infrastructure we need to invest in to be successful in [exploiting] this
content [in new media]. We need to rethink how we structure ourselves. It’s a
big strategic initiative for us. I don’t have the perfect answer right now as
to where it’s going. But it’s a work in progress.

WS: How is
the advertising market across the region?

AIELLO: The
advertising market has been quite healthy over the last 12 months. India and
Indonesia in particular have been very strong. And China, with the buildup to
the Olympics, has been spectacular.

WS: What are
some of the new ways in which you’re working with your clients?

AIELLO: Other
than the 30-second spot, a critical differentiator for us going forward is
creativity in working with advertisers and our clients to deliver the best
results. We had tremendous success recently in Indonesia on National Day [with] a cross-country bicycle race. That was a way to redefine an event on Indonesian
television with a major sponsor. That’s the kind of thing we want to build on.

WS: What are
you doing in the new-media space?

AIELLO: We
have about 13 properties on the new-media side. We have done a review of
these. What we plan to do over the
coming year is really deepen the focus and prioritize some of these websites
and digital capabilities. A big thing we need to do is invest in the infrastructure
within STAR. It’s very easy to get a website up, it’s easy to get traffic, but
you will not be able to build a sustainable business unless you have the proper
infrastructure. We’re building the business for five, ten, twenty years, not
for one- or two-year short-term hits. This all fits hand in hand with our
discussion about Fortune Star and the investments required to further enhance
our capability to distribute our content using all the new technologies that
are available around the world in an efficient manner. We have some really
exciting websites. For instance, in Taiwan, Woo.com.tw [is a site for] our
Channel [V] shows Lollipop and Blackie’s
Teenage Club. It generates
tremendous content and loads of traffic. We’re seeing that some of our programming
has led to some exciting new-media results. 7827, our SMS franchise in India,
continues to perform fantastically well, with KBC3 [Kaun Banega Crorepati, the local version of Who Wants to Be a
Millionaire?] and SMS games and
voting—that’s a great
business. We acknowledge that we’re probably only scratching the surface of
what we can do, and what we want to do is build capabilities so that when we
scale up this business, we don’t trip over ourselves. We want to make sure that
we build a business that’s healthy and sustainable over a long period of time.
We’re in the middle of that. We’re coordinating with other News Corp. entities
such as MySpace and Fox Mobile Entertainment. And the key here is investment
and focus on growth that is healthy. We’re trying to avoid short-term
investment and short-term excitement. We want to get this right.

WS: What are
the opportunities for video-on-demand services?

AIELLO:
Platforms are starting to make it available. It takes time for the pay-TV
operators in Asia. Many of the cable companies don’t have the [DVR] boxes. As
the phone companies continue to develop their IPTV services, obviously a main
product for them will be VOD. To date, there have been some great instances of
success, but I would have to say it has not been a game-changing event so far.

WS: How is
the transition to digital progressing in the region?

AIELLO: It’s
inconsistent and choppy right now. There are certain markets that are
world-class, like Korea. Other markets are hyper-emerging, where the infrastructure
has got a long way to go, such as Indonesia. But over the next three to five
years I think you’re going to see tremendous advances in the network
capabilities of the cable operators, the phone companies, as well as the
mobile-phone networks in Asia—that’s a big part of the story. Wireless
broadband, wireless mobile capabilities, will be a much bigger story in Asia
than they are in Europe and the States. Indeed, in many cases these
capabilities will bypass Europe and the States.

WS: On the
distribution side, you have a venture in India for DTH pay-TV services. How is
that business progressing?

AIELLO: Tata
Sky is doing very well. We have well over a million subscribers. It has clearly
positioned itself in the marketplace as the premiere pay-TV service. We’re
getting great customer-service feedback. The infrastructure at Tata Sky is
world class. We’re very positive about that business. [We’re offering] interactive services and some of the pay-per-view services which have not been
historically well developed [in India]. That story could change as the cable
operators are being forced to digitize in the wake of Tata Sky and some other
potential new entrants coming into play. [We’ve contributed to] the general
elevation of the game of customer choice.

WS: You also
have an interest in the cable sector in India.

AIELLO: We
own about 22 percent in Hathaway, an MSO. We look towards further expansion of
that. The company recently sold a stake to a private-equity group in India,
ChrysCapital. The proceeds are being used to help fund the purchase of local
cable operators and fund growth.

WS: And you
also have a cable investment in Taiwan?

AIELLO: We have
an investment in CNS, the largest MSO. We have sold a majority of the systems
but not all them. We sold [them] because the valuation was compelling and it
was a sensible deal. Strategically we’re still committed to Taiwan but we feel
we can continue to grow our channel business and our content business without
an investment in this platform.

WS: How is
your business outside of Asia?

AIELLO: Growing. We have a very
interesting business that’s been growing in the Middle East. The Indian content
in particular resonates well. We’re also enhancing our capabilities in Europe,
Africa and the U.S. We just made a commitment to add some more resources in the
States as well as in London on the
sales force with regard to our distribution capabilities. And we believe
there’s a major strategic opportunity for us. Frankly, it’s an area that we’ve
under-monetized historically.

WS: What do
you love most about your job?

AIELLO: I’m
pretty passionate about this company. It has the greatest parent shareholder in
News Corp., [which] supports the vision of a growth company and believes in
emerging markets. The footprint is incredible. We’re in the middle of an
explosion in the demand for content. We’re in the middle of an explosion of
technologies available to deploy that content. It’s an unbelievable
opportunity. Right now we’re in a great revolution here. I’m so fired up. My
only hope is that I can take advantage, with my management team, of all the
opportunities available. We need to revisit our cost structure and improve our
programming mix. While we’re focusing on existing businesses we have to
reinvest and diversify. We’re clearly in investment mode. The key thing is
we’re trying to take STAR to the next step. It’s had a great 15 years or so.
What are the next 15 or 20 about? It’s my job to set the foundation now for the
next phase of growth. We’ve had great success in the past. You can’t be
comfortable with that. Indeed, we need to be paranoid and need to realize that
the success of this company has [occurred] when we’ve changed the paradigm of
the way business is done in different markets. We need to continue to reinvent
how viewers watch [our content] and how we sell it to our advertisers and our
affiliates. We need to listen and be humble about it and then come up with
really creative programming and solutions for our clients.