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SCMP Reporter

NEWS Corp's newly-acquired STAR TV network could be forced to move into subscription television sooner than expected due to advertising returns far worse than formerly believed.

  ''A digitally compressed system would admittedly give STAR TV an enormous channel capacity in the long run,'' said a former network executive, who asked not to be named.

  ''But it would also cost them a fortune and take longer to put in place. If they go for a simpler analogue system, the savings would be significant in both time and money.''   Certainly, a plan to launch an analogue-based pay-TV satellite network as soon as possible, maybe as early as next February, would immediately raise much-needed revenues at the station, 63.6 per cent of which was purchased by News Corp three months ago for US$525 million.

  A recent statement made by News Corp chief executive Rupert Murdoch put the network in a new perspective.

 According to Mr Murdoch, the network will lose between ''US$50 and US$100 million'' per annum for the next two or three years.

  A move to subscription television instead of a state-of-the-art digital system would also make sense in view of advertising revenues, which have been reported to account for less than 20 per cent of available advertising air time.

  Over the first six months of 1993, according to one report, they totalled just US$31.4 million, admittedly better than the US$12.7 million for all of 1992, but far below what News Corp had apparently estimated.

  And now serious competition has emerged in the form of TVB's Putonghua-language Super Channel, targeted at Taiwan and a network bound to eat seriously into the viewership of STAR TV's most successful service, the Chinese Channel.

  In the first six months of 1993, the Chinese Channel reportedly generated US$8.2 million.

  ''By going into subscription TV you may immediately shrink your viewership but can also, at last, validate those numbers while producing a real income. This is a very serious option that they have to consider,'' said the former STAR TV executive.

  If the non-digital plan is finalised and presented to Mr Murdoch when he is slated to arrive in Hong Kong tomorrow, the Star Plus general entertainment service could become an English-language movie channel based on 20th Century Fox movies, said a STAR TV executive.

  An encrypted mostly Chinese-language, Asian movie channel, based on the local Golden Harvest library, would also be launched as soon as possible to provide competition for the TVB Super Channel.

  Despite denials by a Golden Harvest spokesman that a deal had been made, Mr Murdoch announced the agreement in Australia this week.

  STAR TV is supposed to deliver the English movie channel, the Asian movie service and a children's channel along with a business channel or a documentary channel via a land line to Wharf Cable at the end of this month.

  Meanwhile, by using some of STAR TV's 11 transponders on the AsiaSat1 satellite as separate services rather than transmitting each channel on the satellite's northern and southern beams, the Hong Kong network could increase its channel capacity and undertake programming directly aimed at specific countries in a variety of languages.

  It is also believed that two transponders could become available on AsiaSat1 when an unnamed telecommunications provider rationalises its operations.

      And if the immensely successful Zee TV were to move to a new satellite covering India, the new News Corp management would have even more room to manoeuvre.

  Zee TV currently transmits a Hindi service to India using a transponder subcontracted from STAR TV at a cost of US$5 million per annum.

  Zee TV's viewership figures represent about half STAR TV's claimed homes able to view the network across its entire 38-country footprint on AsiaSat1.

  Certainly, the analogue subscription television plan would be a great deal cheaper to institute than a highly complex and expensive digital transmission system using still unproven compression techniques that could take up to a year to install. An analogue system could be in place early next year.

  A rundown of the cost of producing and financing the estimated 750,000 digital decoders (at about US$650 each) needed to cover the STAR TV footprint comes in at about US$560 million, more than the amount spent by News Corp to gain control of the STAR TV network. The price of an analogue system would be one third of that.

  Another indication that STAR TV could be moving towards an analogue solution is persistent market talk that while the network would launch its new pay-TV channels on AsiaSat1, it also intends to take an option to fill all 24 C-band transponders on the AsiaSat2 satellite which will be launched in early 1995.

  On the assumption that an analogue solution is chosen, the system used for encoding the pay-TV channels would presumably be much the same as the Videocrypt scrambler used by News Corp's BSkyB satellite network in Europe.

  A STAR TV spokesman declined to comment on the company's plans for future satellite capacity.



STAR faces pay-TV decision