A new regional channel programmed with movie and entertainment content from Hong Kong, cHK, is yet another key part in Celestial Tiger Entertainment’s (CTE) strategy to gain shelf space in the fast-growing but under-penetrated pay-TV market for Asian-made content. “There is no shortage of western content in Asia,” says Celestial Tiger Entertainment (CTE) CEO, Todd Miller. “There are far fewer regional channels specializing in Asian content, and that is the opportunity for us.”

It’s a critical opportunity as the current phase of pay-TV growth becomes increasingly anchored to vernacular tastes in countries such as Malaysia and Indonesia, or where local and Asian channels drive volume and value in saturated markets such as Hong Kong, Singapore and Taiwan, as well as more fragmented markets such as Thailand.

Outside of distribution platforms building their own local content portfolios, such as Astro in Malaysia, the market for Asian programming has only just started taking shape. CTE and Fox International Channels (FIC, which owns the Star Chinese Channels franchise) have something of a duopoly on output deals in the pay-TV window for Chinese content, while TVB continues to leverage its Hong Kong drama factory worldwide. Hong Kong IPTV operator PCCW has also teamed up with a few broadcasters in China, including Hunan, to distribute pay channels overseas.

UNDER-EXPLOITED MARKETS
Elsewhere, CTE offers two Asian-themed entertainment channels, Kix and Thrill, while Sony Pictures TV has also tasted success through an output deal with Korean broadcaster SBS, for entertainment channel One. Other countries also have potential as demand for Tamil and Hindi programming continues to grow while Japanese, Thai and Bahasa content generally remain under-exploited.

cHK will expand distribution, Miller says, especially in Southeast Asia, after launching  on SingTel’s 415,000-subscriber platform, Mio TV, in October. The channel aims to capitalize on the popularity of Hong Kong content in the region, where viewing options are scarce. While declining to offer specific figures, Miller describes the channel as an “expensive,” but worthwhile investment, especially as the offering scales long-term.

CTE has output deals with five Hong Kong producers, for its existing channels as well as for cHK, signing deals with Universe Entertainment and Mega-Vision Pictures this year. “Both are strong Hong Kong studios,” Miller says. “Both have ambitious plans for growth and are producing the kind of movies that not only play well in Hong Kong, but also travel well.”

Ramping up output deals forms part of a bigger investment in content and channels, designed to give CTE an edge in an emerging marketplace. “There are many sources of competitive advantage but having secure, long-term content supply deals is an important part of that,” Miller explains. For its Chinese channels, CTE has long-term output deals with suppliers in Hong Kong, Singapore and Malaysia, while cHK also aggregates content from Hong Kong players such as i-Cable, RTHK and ATV. Kix and Thrill content meanwhile is 70% pan-Asian, supplied by players such as CJ Entertainment & Media, Fremantle, Mark Burnett and Lionsgate.
CTE was formed in 2011 out of a merger between the successful Celestial Chinese channels franchise and Tiger Gate, an Asian entertainment start-up. Today, CTE manages six channels, including the popular Chinese-oriented Celestial Movies offering in SD and HD, as well as pan-Asian entertainment channel Kix, which has been improving its performance since 2011. CTE’s majority shareholders are media private equity firm, Saban Capital Group; Celestial Pictures, wholly-owned by Astro; and Lionsgate, the global independent movie studio.

Industry analysts Media Partners Asia (MPA), publisher of Asia Media Journal, estimate that CTE’s channels generate about US$30 million in subscription fees, with local advertising sales likely to provide valuable upside in the future.

EXCLUSIVE CONTENT, EARLIER WINDOWS
First-run Asian content, supplied through exclusive content deals, has driven value across Celestial Movies in particular, as well as on Kix and Thrill. “We sharpened the programming focus with Kix and Thrill,” Miller says. “On Kix, we sharpened the focus on action entertainment through four pillars: combat sports, action movies, action reality and action series. That tight positioning was part of the channel’s refinement. Once we had the four pillars, we began to develop competitive advantages through proprietary content supply relationships.”

More than 70% of programming on Kix is exclusive and first-run, according to Miller, while almost half of the content is Asian.
Celestial Movies meanwhile, now available on 28 platforms across Asia, is billed as a premium, first-run blockbuster Chinese channel. Key markets include Malaysia, Indonesia and Hong Kong. Sibling channel Celestial Classic Movies leverages the famed Shaw Library. Distribution has expanded in Chinese and non-Chinese communities. New markets include Thailand, Taiwan and Hong Kong, where the library service has had new traction.

“We have redefined the audience for Celestial Classic Movies, and we have recognized the audience goes well beyond Chinese viewers,” Miller says.

More exclusive content, one of CTE’s continued goals, will drive up programming costs. However, this should also help boost distribution for CTE’s younger channels and improve monetization for existing brands, including money from local and regional ad sales, a new revenue stream.

With a high proportion of Asian content, tight windowing  also presents a challenge, as programs must be localized with subtitles for each market. CTE’s English content, on the other hand, can often be made available within a week of its original airing. All CTE brands have been given digital extensions through VOD or OTT, in the hope that digital investment will create stickiness around the subscription. Additionally, CTE increased its marketing budget this year, with talent tours and above-the-line campaigns for its existing channels.

Miller foresees continued growth in Asian content across genres, as a result of larger media markets, increased production budgets and improved production techniques. He has witnessed multiple cultural waves in Asia, first from Japan and more recently, Korea. The trend continues, he suggests, singling out China as the next cultural phenomenon. CTE’s CEO remains cautious however, as the conditions for a content bubble may be forming. The Chinese media industry must “ensure quality and standards are not eroded when the economics are so encouraging,” he says.

Nevertheless, Hong Kong movies and stars continue to perform well. While Celestial Movies also features films from Japan and Korea, Hong Kong movies are the ratings winners, Miller points out. “The movies are story-driven and have Hong Kong star power,” he says. “The quality of filmmaking here can be world-class. Just based on recent productions that have come through Hong Kong, I have never been more optimistic about the role of Hong Kong as a center for Asian entertainment than I am now.”