Sony's Korean Opportunity

Sony’s English entertainment channels are operating in an increasingly crowded segment in Asia, where competition is intensifying for carriage, affiliate fees and eyeball as pay-TV platforms seek to rebalance their channel portfolios in favor of more home-grown content.

With nine feeds in the region already, AXN, the lead entertainment channel for Sony Pictures Television (SPT), has less scope for further expansion, while other regional channels, such as fantasy horror spin-off AXN Beyond and female-oriented regional entertainment brand Sony Entertainment Television (SET), struggle to grow distribution and, in some cases, get on the digital dial.

Todd Miller, SPT’s Asia-Pacific EVP of networks, remains upbeat. Following a restructure last year, Miller has taken charge of the majority share of revenues for SPT Asia-Pacific in the form of 25 channels across the region, from branded regional entertainment networks to channel JVs in Japan and Australia, to subscription video-on-demand services.

Growth portfolio
“With 25 channels, there’s always a lot of inherent growth potential,” he says. “These channels are at different cycles of maturity. A channel like AXN is somewhat mature, but we still see some upside with AXN. I think there’s tremendous upside for Animax.”

Male-oriented channel AXN and anime offering Animax, Sony’s most popular regional channels, will likely drive steady growth into the medium term. Such progress is far from transformational however, looking somewhat insignificant beside the US$450 million juggernaut that is SET India, where Sony has a JV.

Similar joint ventures, in markets where Sony already generates decent returns, could spur a new round of growth. Korea might make sense, a market where pay-TV platforms regard entertainment as a particularly strong driver to grow and retain subscriptions. Sony became the first Hollywood studio to develop a TV series in Korea with a local production company at the end of last year, teaming up with Sunjin Entertainment to develop a Korean version of scripted comedy series, The Nanny.

Closer ties in Korea
Disney recently announced a tie-up of its own to launch localized Disney-branded channels with Korean telco SK Telecom, while Fox International Channels already has two JVs in Korea: an entertainment-based partnership with Korea’s largest cable MSO Tbroad, jointly running three channels including the now-profitable Fox Korea, as well as a separate JV with local entertainment conglomerate CJ Media for National Geographic. Sony meanwhile is thought to be discussing a potential tie-up with Korean cable operator C&M.

If the company opts for a partnership in Korea, it will do so knowing that FDI caps will restrict it to a 49% share – ultimately less appealing from a business perspective than the 65% stake it holds in India. Korea is a strong market for AXN and Animax, even though neither channel is carried on cable, reaching around 2.9 million and 4 million homes respectively from just 1 million each two years ago.

Carriage on digital cable is a near-term focus, with 2.7 million digital cable subs in Korea at the end of 2009, according to Media Partners Asia, publisher of The Asia Media Journal.

Korean MSOs are migrating analog subs to digital, a process which should complete by the end of this decade.

“We’re taking a digital strategy in Korea,” Miller says. “It’s a long-term strategy, but if you believe that any market is going to be successful, Korea is a safe place to make such a bet.”

This is an edited extract from a feature published in the Q2 2010 edition of The Asia Media Journal. The latest issue of The Asia Media Journal is available in full here.