It's NOW or Never
By Bruce Gilley
Issue cover-dated September 28, 2000
The problem with claiming to be the category-killer of interactive television in Asia is that so far the category itself doesn't exist and would-be killer services have yet to be launched. That makes life particularly difficult for Pacific Century CyberWorks since so much of its pitch to investors focuses on the potential of its interactive TV service, the planned Network of the World, or NOW.
The company has told analysts that NOW will account for a third of its total profits by 2005 and around half by 2010. But with uncertainty surrounding the future of both interactive TV and the NOW service, investors have been quick to sell PCCW on any hint that the network might be in trouble.
To be sure, the opportunity appears huge. Asia can expect to have more than 10 million users of broadband--super-fast Internet connections--by around 2002, according to predictions by several consultancies. Currently, there are about 3.5 million users. South Korea leads the pack with 2.2 million, followed by Japan with 330,000 and Taiwan and Singapore with 250,000 each, according to official tallies. Hong Kong boasts about 200,000 users.
These fast connections--provided either through phone lines or cables--are needed for interactive TV. But it has yet to be seen whether consumers will want to use them for anything other than standard TV or Internet content. Like the videophone and the household robot, interactive television may be an idea whose time will never come.
In the United States, AOL-Time Warner plans to launch AOL TV later this year to compete with Microsoft's WebTV, which is developing content in a deal with broadcaster CBS. But other content providers like Yahoo! and Lycos have pulled back from ambitious broadband content plans recently, citing the slow take-up of broadband.
Even if there's latent demand for interactive television in Asia, becoming the company that strikes the right chords in any of the region's diverse markets is a mighty challenge. PCCW's plans to be the main provider in several major markets, including China, India, Japan, Taiwan and Hong Kong, are wildly ambitious.
With studios in London and Hong Kong and more planned for Tokyo and Australia, the company hopes to create a NOW that will wow audiences across the region in their own languages.
Its planned offerings of sports, films, music, shopping, nature programming and games seem obvious enough. But if the experience of Internet portals (a kind of low-tech interactive TV) in Asia is any indication, NOW will face strong competition from local content providers. Investment bank Dresdner Kleinwort Benson says rivals are likely to include companies like GigaMedia in Taiwan, Phoenix Satellite Television in China and Yahoo! in Japan and South Korea. "The acceptance of its business plan remains to be seen," Dresdner said of PCCW recently.
While NOW is a free service, it aims to make money by offering some pay services like movies or specialized channels, by taking a cut from merchants selling goods and services through the network, and by selling ads.
Analysts note, however, that with only promises of an audience, NOW has had trouble getting companies to sign on. "We've had to demonstrate it to advertisers and merchants first in order to attract them to the service," says PCCW Deputy Chairman Alex Arena.
PCCW Chairman Richard Li, who made his reputation by building Star TV and selling it to media baron Rupert Murdoch, is again investing heavily in an unproven concept. PCCW insists it has no plans to sell NOW. But Li has also said he plans to model PCCW on his father's conglomerate Hutchison Whampoa, which has developed a reputation for selling core assets to anyone who comes along with a reasonable offer.
That raises the possibility that NOW could be sold before it eats too big a hole in PCCW's balance sheet.
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