Three lock horns in battle of the TV titans

MEDIA: A trio of big, brash spenders is vying for global dominance. Mathew Horsman looks at their strategies

The news that Rupert Murdoch's News Corporation is unlikely, after all, to be forced to lower its stake in the lucrative Fox TV network in the US is further proof that he lives a charmed life with regulators.

It also puts him, once again, well ahead of most of his competitors in building a truly global television empire.

The global communications revolution has spawned only a few global players so far - all big, brash and ready to spend to stay ahead of the competitive pack. The battlefield is non-terrestrial television - satellite, cable and, eventually, even microwave - and the weapons are secure sources of programming, giant budgets and even that much-derided quality, vision.

The three candidates for the mantle of TV titan make a decidedly odd trio.

Mr Murdoch, the undisputed king of the UK pay-TV industry, owns five national newspaper titles in Britain and another handful in the US and did what most competitors thought could not be done: create a fourth US national TV network, Fox. His company, News Corp, also owns a Hollywood movie studio, stakes in Australian broadcasting and a majority interest in Star TV, the rapidly growing Asian satellite network, bought for $575m in 1993.

A measure of his reach came when he offered to take global rights to the 2000 Olympic Games, arguing that he could cover virtually every key market. The International Olympic Committee said no, preferring to sell the rights to "free" terrestrial networks able to reach large markets within each country. But Mr Murdoch's interest was real, and his ability to deliver indisputable.

Two other media giants nip at Mr Murdoch's heels. Ted Turner, the US communications magnate, built ownership of a television station in Atlanta, Georgia, into the worldwide Turner Entertainment conglomerate, whose reach extends from CNN (the Cable News Network) to the MGM film library to television interests in Asia.

Sumner Redstone took his family's tired chain of movie theatres, grouped under National Amusements Inc, and built a media empire that is the envy even of the large US networks, CBS, NBC and ABC.

His main operating subsidiary, Viacom, owns Paramount, the Hollywood studio, Blockbuster Video, the huge US chain of video rental outlets, and MTV Networks, the hugely successful producer of music video network MTV, the more staid VH-1, a kind of MTV for the baby-boomer generation, and Nickelodeon, the children's network.

The Big Three have made similar bets about the direction of the global television revolution. Each has built a serious distribution network, owning or using cable and satellite vehicles; each has secured programming, either by buying it in or making it from scratch.

The market they are targeting is immense and growing. There are about a billion television sets in the world, up from 350 million 15 years ago. Advertisers spent $86bn on television in 1994, and that is poised to grow further.

At the same time, regulations are changing the world over. Rules limiting foreign programming are increasingly untenable, as satellite broadcasting has extended its reach. Country after country is bowing to the inevitable, allowing in more broadcasters.

The deregulation of the European market over the past 10 years has seen an explosion in the number of additional channels and - in some cases - the commercialisation of formerly state-owned television. A similar process is in train in the developing world, where growth rates for television advertising and viewing are mouth-watering.

Economic development and technological change have combined to ignite the global television market. The next stage will see the introduction of digital television, with as many as 500 channels available through direct-to-home satellite.

Cable companies in large markets are introducing broadband connections to households, allowing not only multi-channel streams but even interactive television: two-way information flow that opens the door to video-on-demand, truly interactive home shopping and access to the Internet, the global information highway.

Coming from behind, even telephone companies are prepared to offer video programming, as the link announced last month among large US phone companies and Disney attests.

British companies are also getting in on video. BT is to run trials in East Anglia to hone its technology, while Logica, the publicly-quoted computer services company, is working with three US "Baby Bells", offspring of the giant AT&T following its court-ordered breakup 10 years ago, to develop "user-friendly" interfaces for video-on-demand in the home.

All this makes the regulator's job virtually impossible. Carefully crafted ownership limits have yielded to the commercial demands of well heeled corporations, none richer than News Corporation. Mr Murdoch's hold on the UK newspaper market was established despite, not because of, cross- ownership rules. His huge satellite empire also emerged in a regulatory vacuum, via signals sent from Luxembourg into the UK.

Last week, even the mighty Federal Communications Commission apparently threw in the towel. While it ruled that News Corp was a "foreign-controlled" corporation and therefore limited it to 25 per cent of Fox television, it went on to concede that Mr Murdoch never misled the commission in buying his stakes and therefore granted him time to file for a waiver of the limits. The consensus in Washington is that he will be successful.

Holding on to Fox is crucial for Mr Murdoch. For, despite talk of superhighways and technological convergence between cable and telephony, broadcasting remains the key sector for all serious global players.

Here, the market is beginning to undergo subtle changes, as exemplified by the strategies of the Big Three. Mr Turner continues to produce an identifiable global product: his programming is heavily American, and very little local content is produced.

He is of the view that volume selling of his news and entertainment software is the best way to make good returns. He may be right, in some instances. The OJ Simpson trial, broadcast live throughout the world on CNN, is watched by millions. But in some markets, there is growing dissatisfication with global brand television.

As a consequence, Messrs Redstone and Murdoch are beginning to fine-tune their offerings for local markets. Mr Redstone was the first to decide that "localisation" made good commercial sense. His MTV Europe, nearly from its launch in 1987, had a European feel. Many presenters spoke in accented English, and the playlist of videos reflected the sometimes big differences between US and European tastes.

MTV has taken localisation a step further, producing VH-1 in German for the German market. It has been prodded to do so in part because of the popularity of Viva, the indigenous competition to the MTV style of programming. Similar plans for Sweden are in place. Last week, MTV launched the second of two Singapore-based channels, in league with music and film company PolyGram.

It features English and Hindi programming, mixed with US and other music videos. Late last month, a Mandarin-language MTV channel was launched, with a total reach of 3 million homes.

Mr Murdoch took a little longer to decide in favour of local programming. His first venture into India, via the Star network, was all-English, and modelled on his existing Sky services in the UK and Continental Europe. Competition from a Hindi-language service produced by Zee soon overwhelmed Star, and Mr Murdoch was obliged to regroup.

He did what deep-pocketed moguls can afford to do: he joined the competition, buying a stake in Zee, and started to produce local-language product.

The lessons of India are likely to be translated elsewhere in Asia, where television is a fast-growing business. Fully 30 per cent of the world's television sets are in Asian countries, many of whose economies are growing at a rapid rate. The Little Tigers of South-east Asia, along with India, have growing middle-class populations eager for new product. The Big Three are only too happy to oblige.

So are some of their smaller competitors. Pearson, the media and information company that is also a partner in a Channel 5 consortium, recently bought Grundy Worldwide, the Australian programme-maker that produces Neighbours. Its clear strategy is to develop cheap and lucrative "template" television, taking simple concepts for soap operas and game shows and "localising" them for broadcast in several countries. Pearson also has a stake in TVB, the Hong Kong-based broadcaster.

Pearson, and its new TV chairman, Greg Dyke, have explicitly targeted the Far East, arguing the Grundy model allows them to make cheap, attractive programming with a local hue, thereby attracting viewers and, more importantly, advertisers.

Even the venerable BBC has started to branch out, launching two new European channels and taking an interest in UK Gold, a cable channel that shows repeats from the BBC's programming library.

But so far at least, only the Big Three have truly taken on the world. Regulators apparently cannot stop them; perhaps only keen competition from the likes of Pearson can.