Pay Day

This article originally appeared in the MIPCOM 2014 issue of TV AsiaPac.

In Asia’s ever-more-crowded pay-TV landscape, channels are on the hunt for new ways to innovate.

Four years ago, pay TV in Asia finally crossed the 50-percent penetration rate. It was heralded as a new milestone for the business, a sign that Asian consumers were finally willing, in significant numbers, to pay a premium for entertainment they wouldn’t be able to find on the terrestrial dial. Today, the subscriber numbers are still massive—about 514 million pay-TV customers across the region, according to a Dataxis intelligence report from earlier this year—but growth of the overall pie is no longer on the rapid trajectory seen in the past.

“The general trend is one of deceleration,” observed Vivek Couto, executive director of Media Partners Asia, in the recent Asia Pacific Pay-TV & Broadband Markets 2014 report, which projects a 60-percent pay-TV penetration rate for the region in 2018. “Channels that do not have compelling consumer propositions across linear and nonlinear conversations will not have a long-term future on the pay-TV dial in any of the key markets,” Couto stated. “Television Darwinism will be coming to Asia Pac in force.”

SURVIVAL OF THE FITTEST
So what does a pay-TV channel have to do to survive intense competition, slower industry growth and a small (albeit fairly healthy) ad market? First and foremost, get the programming mix right. And on that front, there are no easy answers as pan-regional channels figure out how much to take from the big U.S. content houses backing them, how much to spend on the top-flight American imports that everyone wants, and how much to localize.

“Do we need to make a Korean or Chinese or Filipino version of 24 or NCIS?” is a question that Joon Lee, executive VP of content and communications at FOX International Channels (FIC) Asia Pacific and Middle East and managing director for Hong Kong and Southeast Asia, says he and his team debate regularly. “It’s still something we need to think about more. It’s not just a business conversation—as in, can we make enough money doing it?—but rather it’s about, Does FOX need to do this? Do we need to go into local production? We are the home of U.S. dramas and U.S. entertainment shows.”

The flagship FOX brand in Asia has indeed defined itself as the home of the best of the U.S.—as have a number of other general-entertainment channels.

AXN was the first pay-TV network in Asia to bet big on American drama imports. Today, its schedule includes CSI: Crime Scene Investigation, NCIS: Los Angeles and The Blacklist. Hui Keng Ang, senior VP and general manager at Sony Pictures Television Networks, Asia, concedes that the battle to secure hot U.S. shows is certainly tougher today than it was in AXN’s early days, but the company has its longstanding relationships with the Hollywood studios working in its favor.

“We see an explosion of new channels coming to the market,” Ang says. “We continue to be the leader because of our brand and the marketing efforts we put behind promoting our content. Many distributors continue to want to work with us. We’ve become their first stop because when they know that they have limited product coming out of their networks in the U.S., they want to ensure they have the best partner in the region to promote their shows. Everybody can pay the same price, but who can make that show the most popular?”

Ang says AXN and its female-skewing sister network Sony Channel also benefit from being part of Sony Pictures Television. “We have priority access as long as we pay the market rate,” Ang says. “Last year, everybody wanted The Blacklist. We got it. It doesn’t mean we got it for cheap, but we did get it.”

Christine Fellowes, the managing director for the Asia Pacific at Universal Networks International (UNI), also points to being affiliated with NBCUniversal’s content-distribution arm as a key benefit. “We are in the tremendous position of being part of one of the largest content producers in the world. We have access to great dramas and great theatrical product and great branded product. Those relationships are very important—they are, quite honestly, the foundation of our business.”

FAMILY RICHES
As an example of how UNI is tapping into the resources of its parent company, Fellowes cites the recently launched DIVA Presents Telemundo weekday block of telenovelas. “We know that in many, many markets in Asia, women love telenovelas,” Fellowes says. “Working with Telemundo [also owned by NBCUniversal] is a way for us to bring our audience contemporary, fresh, new novelas.”

RTL CBS Asia Entertainment Network is drawing heavily from the two content powerhouses that own it—RTL Group and CBS Studios International—as it builds two channels in Asia, RTL CBS Entertainment and RTL CBS Extreme.

“Having two of the world’s strongest content producers as shareholders obviously makes our lives much easier, and we naturally find a lot of content from them,” says Jonas Engwall, the CEO of RTL CBS Asia Entertainment Network, which has only been in operation in the region for the last year. The company is, however, also acquiring content from outside sources. “We’re committed to delivering new and unique entertainment options to our audiences,” says Jennifer Batty, executive VP of programming at RTL CBS. “We became the first channel in the region to bring in content from Netflix. We launched House of Cards in late May.”

Also new to the channel this year is The X Factor UK from RTL-owned FremantleMedia. The acquisition of The X Factor UK reflects the broader “first and exclusive” mandate among Asia’s biggest general-entertainment channels. RTL CBS is airing the show live from the U.K., with a repeat broadcast in prime time.

“We live in a connected world,” Engwall says. “News travels faster than ever, and entertainment options abound. It is with this understanding that we bring the latest and best programs to viewers with our channel so that they do not have to maneuver through the dizzying maze of illegal options to find content. We have numerous programs that air within 24 to 48 hours after the original broadcast from the U.S. or the U.K. We have people working in the U.S., Europe and in Asia to make sure that content can be delivered ASAP to our viewers.”

WATCHING WINDOWS
Shorter windows have indeed become commonplace among the region’s biggest pay-TV brands. FOX International Channels has been pioneering this approach across its portfolio, from Cosmos: A Spacetime Odyssey on National Geographic Channel to Sleepy Hollow on FOX to MasterChef Junior on STAR World. All will air within days, or hours, of the American premiere.

HBO Asia has also made it a priority to shorten the time subscribers have to wait to access buzz-generating shows like Game of Thrones. CEO Jonathan Spink admits it has been a challenging process. “We do have to censor, we do have to subtitle, we do dub. Our programming team has worked particularly hard to get over some of these issues. In the past, sometimes we might not get a show till the day or two days before [we wanted to air it], so it would be difficult to get these things in motion. Now, we’re more in alignment with the U.S.—we’re wholly owned by HBO in the U.S., so I think we’ll be working closer in some areas. It’s a natural progression. The issue of piracy has speeded it up, and the fact that people do want to see things very quickly after the U.S.”

This “express programming” approach has been a major priority at UNI, Fellowes says. E!, for example, simulcasts Keeping Up with the Kardashians in Australia, while viewers in the rest of the region see it within 48 hours of the American debut.

The intense battle for the best new shows out of the U.S. has created a whole new set of opportunities for channel operators. Singapore-based Rewind Networks, for example, has also based its business model on the idea that consumers want to see top-quality American fare—but it is offering them enduring classics instead of new series.

“In Asia over the last four or five years, we saw a lot of general-entertainment brands coming in, all doing the same thing: focusing on first-run content, mostly from the U.S. studios,” says Rewind Networks’ CEO, Avi Himatsinghani. “We couldn’t play that game. Pay TV is growing aggressively in the developing markets. International entertainment is not really a mainstay for these local audiences. So we had to think about what would work. I had seen that great shows, even when repeated on the mainstay networks, rated well.”

That’s where HITS, a channel devoted to classic series, was born. “I believe HITS [fills] a latent need for a great destination where people can watch their favorite shows of all time, or see shows they’ve heard of but never seen.”

On HITS, which has secured carriage in Singapore, the Philippines and Indonesia, series like The Cosby Show, Seinfeld and The Golden Girls are striking a chord with audiences. “Addressing different demographics through decades of great television is our strategy,” says Himatsinghani.

GLOBAL SCALE
For the more established players that have sister channels in other regions, global co-productions have become an effective strategy for getting access to prominent imports—without having to engage in a regional bidding war.

FIC is the biggest proponent of this approach, with a portfolio that includes The Walking Dead, The Bridge and the upcoming Wayward Pines. All are exclusive to FIC in the first window across the globe. AXN has also started participating in global co-pros, first with Entertainment One’s The Firm and now with Hannibal, from Gaumont International Television, and Crossing Lines, from Tandem. Ang refers to these global events as a “key pillar” in AXN’s overall programming remit.

UNI has similarly begun embarking on joint initiatives with its sister channels in Europe and Latin America, with the TNT series The Librarians set for a global debut this year.

There are other ways that channels are working with sister outlets internationally. Cartoon Network Asia, for example, collaborates with its counterparts across the globe through an international shorts program. “This kind of initiative helps our content stay fresh and relevant to all our viewers wherever they are,” says Mark Eyers, chief content officer for kids at Turner International Asia Pacific. “The program links us with the very best animation talent, wherever they are.”

Food Network, meanwhile, has created a localized version of The Best Thing I Ever Ate, which was originated by its American counterpart. “The Asian edition features local talent from Singapore, Malaysia, Philippines and Thailand,” says Cheah Chee Kong (CheeK), the head of creative, content and marketing for the Asia Pacific at Scripps Networks International (SNI). “There are also plans to create an Asian version of the Food Network competition series Chopped.”

LET’S GET LOCAL
Localization is a mandate for most of Asia’s top channel brands across the genre spectrum. Beyond the requisite subtitling, dubbing and interstitials, channels are increasingly developing long-form content within the region.

HBO Asia is now on its second regional commission, Grace. The Singapore-set horror miniseries features an American lead in Russell Wong, an Australian director (Tony Tilse) and a cast of actors from across the Asia Pacific. It comes a year after HBO Asia premiered Serangoon Road, a Singapore-Australian co-production set in the 1960s. Spink said he and his team were certainly mindful of “the heritage of HBO’s productions,” when devising an original programming strategy for Asia. Serangoon Road, he notes, ticked a lot of boxes. “It was a good story, we had good partners, and it was a very Asia-focused series from an interesting time in history.” The effort paid off—the show was HBO’s highest-rated title in Singapore and Malaysia in 2013.

Going forward, the aim is to do one Asian original per year, possibly two. “It’s really about what can be produced for the kind of money you have available,” Spink says. “We’re talking to several companies around Asia about co-productions and other opportunities.”

SCM, meanwhile, has been investing heavily in original feature films from Taiwan, Hong Kong and Singapore to sit alongside its acquired movies.“We have a project called ‘Go Local!’ where we set aside a fund in each of those three countries to sponsor young, talented [filmmakers] to make locally relevant independent films,” FIC’s Lee says. It is also co-producing films with major Chinese studios, and has commissioned its first miniseries. Sister network STAR Chinese Channel (SCC) used to make some 2,000 hours of variety and talk shows a year. It will continue doing those kinds of shows, “but we will probably do less in quantity, more in quality,” Lee says. “And we have to get into original Mandarin-language scripted dramas.” As part of that effort, SCC recently scored the global rights outside of China to the book-based drama Tiger Mom.

GAME DAY
FIC’s biggest localization effort this year, though, is in sports. Lee is leading the charge to shore up the rights to regional and local-market sporting events for the FOX Sports portfolio. These will complement global acquisitions like Bundesliga.

“We now have four sports hubs,” Lee says, in Singapore, Hong Kong, Taiwan and the Philippines, with more to come for Indonesia, Thailand and Vietnam. “When we just had one feed that covered every country in Asia, we didn’t have the luxury of selecting customized content for each market. Now [that] we have local feeds, we can afford to go for that content that is relevant to the local market. We recently acquired Badminton World Federation events in Indonesia. Badminton may not be a relevant sport for other parts of Asia, but it’s huge in Indonesia. In Taiwan we acquired the rights to some Chinese Professional Baseball League games. In the Philippines we’ll go after local basketball. We’ll provide local commentary, local sports experts, to maximize the relevancy factor of our products.”

On the entertainment front, meanwhile, FIC has been doing the occasional original series at STAR World, which has historically been an imported-content channel. Regional fare on the female-skewing network includes the competition series Asia’s Next Top Model and The Apartment.

AXN, too, has been finding room on its grid for the occasional Asian original. Following the success of The Amazing Race Asia, AXN made its own version of The Apprentice and now is gearing up for Asia’s Got Talent, set to air in early 2015. UNI’s DIVA, meanwhile, has a regional version of the Supermodelme format.

GET REAL
The fact that general-entertainment channels largely built on U.S. dramas and comedies are making unscripted originals in Asia speaks to the many localization opportunities presented by the lifestyle and reality genres. Indeed, the region’s factual channels, including Discovery, National Geographic and HISTORY, have been commissioning original series in Asia for years.

“We have been working on local productions in this region since our second year in operation—we launched in 2007,” says Michele Schofield, the senior VP of programming and marketing at A+E Networks Asia.

HISTORY began its original programming strategy with specials in Asia, but that has since evolved to include more series, Schofield says. “We have produced country-specific stories for our key markets—one-offs like 10 Things You Don’t Know About Malaysia or series like Ride N’ Seek: Borneo—and we have made bigger commissions on pan-regional series.” These include Hidden Cities, Hidden Cities Extreme and Special Forces,where individual episodes focus on specific Asian markets.

Referencing the character-driven reality series that have been huge for HISTORY in the U.S. and successfully exported to the Asian feed, Schofield notes, “We would love to have made Pawn Stars Asia or an Asian Pickers, but the challenge is casting fluent English-speaking characters who have easily understood accents and who make great characters on TV and who do something authentic in their lives that lends itself to the HISTORY brand. The English-speaking qualification already narrows the pool of potential cast significantly. We’re still hopeful that we will find some great characters from within Asia, but until then, we’re focused on the stories and places of Asia that have the widest appeal and offer potential attractiveness to advertisers.”

Discovery Channel and TLC have also been investing heavily in local stories to tell across Asia. “Localization has led to our channels being increasingly relevant and appealing to audiences, particularly among affluent viewers,” says Kevin Dickie, senior VP of the content group at Discovery Networks Asia-Pacific. “We have been involved in local and original productions since we were first established in Asia 20 years ago.”

In 2000, to boost its access to local talent, Discovery launched the First Time Filmmakers (FTFM) initiative. “It’s designed to help develop the documentary storytelling skills of local filmmakers while providing them an international platform for their talent,” Dickie explains.

A TASTE OF ASIA
Between Food Network and Asian Food Channel (AFC), SNI is a significant commissioner of local content across the region. The Amazing Food Challenge: Fun in the Philippines has been among AFC’s successes, with a second season in the works, alongside How to Make It, which focused on Malaysian restaurateur Awal Ashaari.

“For AFC, we aim to create a balanced mix of Asian content with a touch of global flavor,” says SNI’s CheeK. “In the next year, we are also looking at creating more localized content through commissioning, co-productions with affiliate partners and partnerships with key clients.”

In its efforts to find new talent, SNI this year launched Food Hero, an initiative aimed at securing local hosts for AFC and Food Network. Plus, CheeK says, “We are working with various production companies in our key markets, building capabilities and introducing them to the AFC and Food Network program style.”

E! is also recruiting some local faces to complement its slate of U.S. programming. “I don’t see E! ever becoming a Chinese entertainment channel or a Thai entertainment channel, but it does need to dive into what matters in pop culture in local markets,” Fellowes says.

That is particularly important when spinning off local feeds, as UNI did with E! in the Philippines. The move prompted the launch of the local reality series It Takes GUTZ to be a Gutierrez, focused on a famous Filipino family. It did so well, a second season was ordered for launch this October. E! is also making episodes of E! True Hollywood Story about Asian celebrities.

The prospect of cultivating loyalty and brand recognition among viewers with culturally relevant content is not the only driver behind the trend towards more local productions. Advertisers love them too. “There is only so much you can do to promote your advertisers’ brands with acquired shows,” Sony’s Ang says. “Local productions really allow you to integrate [the marketer’s] ideas in a seamless and natural manner.”

Adds A+E’s Schofield: “Branded content and advertiser integration is a key part of the ad-sales business for pan-regional pay-TV channels in Asia.”

MAKING CONNECTIONS
“The exciting thing when you start to do the localization is you’ve got lots of new ways to bring brands into a production,” agrees UNI’s Fellowes. “When you have a Supermodelme, you can tie [a sponsor] in to a glamorous, fashion-forward event, and there’s a product-placement opportunity and a bigger on-air opportunity. Those broader touch points and experiential campaigns have become important to marketers.”

Local productions can also be hugely valuable for newer brands in the region. A+E has already unveiled its first original for Lifetime Asia, called Mom’s Time Out, in which stressed-out moms from the Philippines, Malaysia and Singapore are sent off to a luxury resort—without hubby and kids.

“I’ve been very pleased watching this program during post-production because it’s really satisfying to see everyday people from Asia make for good TV viewing!” Schofield says. “We worry about whether Asians will be too shy or too worried about ‘losing face’ on camera, but we’ve caught some funny and heartwarming moments, and I think our audience should like seeing such a relatable show. We’re bullish on our plans to grow our original production output on Lifetime in 2015, so we are starting that internal development process now.”

RTL CBS, which has made quick progress in the last year, landing on platforms in Singapore, Malaysia, Thailand, the Philippines and Indonesia, is also eyeing opportunities in Asian content. “We are the new kids on the block in a very competitive market,” Engwall says. “We need to continue to offer two very strong channels to our affiliates.”

“Our existing content is extremely strong, but local productions add an Asian flavor to the mix, and it is certainly an area we are looking at,” Batty adds.

Given the popularity of Chinese and Korean dramas in many territories, the landscape of channels focused exclusively on Asian content is also seen as a growth area. Sony has found platforms to be highly receptive to its Korean entertainment channel ONE, and it is rolling out the Chinese-language channel GEM. Celestial Tiger Entertainment (CTE) is betting on both Asian and international content on its services KIX, Thrill and Celestial Movies. Todd Miller, the CEO of CTE, refers to the offering as “the largest bouquet of pan-Asian channels dedicated to Asian entertainment. We have output deals with the top Hong Kong movie studios as well as the top Asian content distributors,” relationships that are central to the group’s plans to begin commissioning original programming. “We are currently in development mode and look to go into production with our first original production next year,” Miller says.

The value of local content on pay-TV channels is expected to rise as OTT providers begin to take a bigger and bigger share of American imports. “OTT poses a significant threat and yet a great opportunity,” says Sony’s Ang. “The Asian content in our portfolio will put us in a better position. We are [also] working with various affiliates to ensure that we extend the existing rights beyond the linear window.”

Finding that right mix of local and international, linear and OTT, is crucial given the size of the potential revenue pie. Media Partners Asia projects that Asian pay-TV channels will rake in $23.5 billion in revenues by 2023, up from $18.7 billion last year. Says the MPA’s Couto: “Evolving strategies and improved execution are important if the pay-TV industry wants to build a business that thrives in the long term.”