25 October 2006

Cable-Television Piracy Rises in Asia
By Geoffrey A. Fowler
The Wall Street Journal Asia
(c) 2006 Dow Jones & Company, Inc.

HONG KONG — Television piracy in Asia is costing pay-TV broadcasters $1.13 billion this year in lost potential revenue, an industry survey warns.

The total is 6.6% higher than losses in 2005 for broadcasters and operators outside of Japan and mainland China. At the same time, the Cable and Satellite Broadcasting Association of Asia, which conducted its annual survey for the fourth time, says that some of its strategies to combat the problem are beginning to work.

“This is still a relatively small industry which cannot sustain such losses,” says Simon Twiston Davies, chief executive officer of Casbaa, an advocacy group representing 110 corporations in Asian broadcasting. Estimates put 2006 revenue for the Asian industry as a whole at $17 billion, including Japan and mainland China, where pay-TV piracy is less prevalent.

“Loss of opportunity to reinvest in our business is going to potentially hold back the development of converged media and the development of content,” Mr. Twiston Davies says.

Casbaa estimates that the total number of illegal subscriptions across the Asian-Pacific region is increasing even more quickly than the revenue losses. Illegal connections grew 20% in 2006, the survey estimates, to 5.2 million. For the first time, the survey this year included Australia and Macau in its estimates, although they didn’t significantly increase the figure for total losses.

The biggest losses were in India, where piracy will cost the industry $685 million in 2006, the survey estimates.

The cable industry doesn’t always treat pirated signals entirely as a problem. The industry uses the same data on unpaid subscribers that might spur governments to crack down on pirates to also sell media buyers on pay-TV’s vast reach. Theft because of underreporting by “last mile&8221; cable operators — the companies that bring the signal into the home — is so rampant in India that advertisers often use unofficial figures to make choices about their media buys.

Yet, despite the growth of advertising in the region, Asia’s TV industry is under increasing pressure to convert its revenue base from advertising to subscription fees anyway, to capitalize on the scale of some large Asian markets. Earlier this month, Viacom Inc.’s MTV Networks fired 84 employees at its MTV Asia Pacific headquarters as part of a restructuring effort. Advertising, which analysts Media Partners Asia says accounts for 75% to 80% of MTV Asia's revenue, hasn’t been strong enough to make the Asian operation profitable after a decade of operation.

While he describes the battle against piracy as a “stalemate,” Mr. Twiston Davies says some strategies are beginning to show promise. In Singapore, efforts to digitalize the cable network, to make it harder for pirates to crack, have helped generate a 16% decline in the cost of pay-TV piracy there. In Hong Kong, Casbaa has filed several high-profile lawsuits against sports bars that publicly showed World Cup games without paying for the appropriate commercial broadcast licenses for the soccer event.

The organization has also lobbied governments to argue that TV piracy equates to lost tax revenue. It says Thailand has invited industry officials to conduct training for judges and enforcement agencies later this year. Similar efforts are under way in the Philippines. “Officials are beginning to see that there is a net cost to tolerating intellectual-property theft,” Mr. Twiston Davies says.

After conducting the piracy survey for four years, he says, “we now understand the sophisticated issues which underlie some of the problems in the market.”