[Congressional Record Volume 142, Number 96 (Wednesday, June 26, 1996)]
[Extensions of Remarks]
[Pages E1174-E1175]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                 PITFALLS OF THE MEDIA BUSINESS IN ASIA

                                 ______
                                 

                          HON. JULIAN C. DIXON

                             of california

                    in the house of representatives

                        Wednesday, June 26, 1996

  Mr. DIXON. Mr. Speaker, I rise to share with my colleagues the recent 
remarks of Marc Nathanson of Los Angeles, who was confirmed in August 
1995 as a member of the Broadcasting Board of Governors of the United 
States Information Agency. Mr. Nathanson spoke on June 4 at the 1996 
Business in Asia Media and Entertainment Conference in Los Angeles. The 
conference was sponsored by the Asia Society, the national nonprofit 
educational organization dedicated to increasing

[[Page E1175]]

American understanding of the culture, history and contemporary affairs 
of Asia.
  As a pioneer in cable ventures in several Asian countries, Mr. 
Nathanson is well versed in the obstacles facing American media 
investments in Asia. With our continued emphasis on ensuring American 
global competitiveness, I commend to my colleagues the points he makes 
on the subject.

                 Pitfalls of the Media Business in Asia

 (By Marc B. Nathanson, Chairman, Falcon International Communications)

       Many of you at this conference are interested in developing 
     software produced here in California for the Asian 
     marketplace. In my opinion, without the rapid development of 
     multimedia distribution systems in Asia, there will not be 
     long term economic gain to the providers of music, TV shows, 
     and motion pictures and their allied fields. The growth of 
     the media infrastructure through viable joint international 
     ventures in Asia is critical to the growth of the 
     entertainment industry in Los Angeles. If these 
     infrastructure projects are successful, this will mean jobs, 
     co-production deals, greater residuals and an increase in 
     economic payments to the holders of copyrights. This assumes 
     that the Governments of Asia including China rigorously 
     enforce the international laws of property.
       When I entered the American cable industry 27 years ago, 5 
     percent of US residents subscribed to cable TV for more 
     entertainment, information, and education. Today, almost 70 
     percent of all TV homes are cable customers and shortly 8 
     million Americans will have direct broadcast satellite 
     dishes.
       The world is behind us in multi-national viewing options. 
     95 percent of all global citizens receive less than 5 TV 
     channels. In Asia, the number is only slightly higher. This 
     will all change.
       There is an insatiable appetite for more entertainment 
     choices among young and old in Cebu, Calcutta, Auckland, 
     Phuket, Singapore and Kathmandu.
       In my opinion, the growth and dissemination of California 
     produced programming in Asia will have much more important 
     benefits to the world than just to our pocketbooks.
       The reach of MTV to young people in Russia had a tremendous 
     effect on the collapse of the Soviet Union. The Voice of 
     America and Radio Free Europe hastened the demise of 
     communism in the Czech Republic, Poland, Hungary and Central 
     Europe.
       The Future programming of USIA sponsored Pacific Asia 
     Network will give the people of Cambodia, Myanmar, Vietnam 
     and China their only source of factual news in their mother 
     tongues.
       But, in spite of the efforts of great statesmen like 
     Senator Jun Magsaysay and others, there are many more 
     problems with the orderly growth and distribution of 
     multiculturally produced channels than just copyright 
     violations.
       I say this to you as a man that has and is experiencing the 
     problems of entrepreneurial entertainment joint ventures in 
     Asia.
       Today, Falcon International Communications has over 2.5 
     million customers worldwide. 1.5 million are located off our 
     shores in England, Mexico, France, and Brazil through 
     partnerships and investments. In Asia, we are operating in 
     India and the Philippines and actively engaged in exploring 
     joint ventures in Thailand, Malaysia, Taiwan and Indonesia.
       But, the obstacles that prevent the future growth of 
     American media investments should not be taken lightly or 
     overlooked. Let me focus on them:
       1. Infrastructure--there is a lack of Infrastructure in 
     Asia. While many American companies have a focus on 
     programming and satellite distribution systems, there has not 
     been enough concentration, investment or expertise directed 
     toward improving the basic communications infrastructure.
       Let me give an example: The engineering talent and 
     educational levels are very high in India and the 
     Philippines. They just have a lack of expertise in dealing 
     with fiber and need hands on training by their American 
     partners. However, this cannot solve the slow development of 
     the telephone and transportation systems in these countries.
       2. Corruption--corruption, bribery and bureaucracy are 
     still rampant in many places in Asia. A European friend of 
     mine who is in the power plant business told me that he could 
     not even meet with a provisional governor in China unless he 
     agreed to deposit $150,000 in his Swiss account. Our Foreign 
     Corrupt Practices Act--right or wrong is the law of the land. 
     It does not matter whether or not other corporations based in 
     other countries follow it. The American Government must face 
     the age old problem of dealing with corruption overseas if we 
     want to be competitive and we must work with local 
     authorities to clean up their act. I'm optimistic about this 
     happening.
       3. Right Partner--You must have the right partner in your 
     media joint venture * * * one who shares your common goals. 
     Each must respect each other's strengths in order for your 
     project to be successful. You must learn how to communicate 
     with each other in Asia. I believe it is foolish for American 
     companies to invest a lot of money in a country like India 
     with the wrong local partner. Let me say that this obvious 
     statement is much more complex. Often, local partners who 
     have funds are looking for rapid returns and do business at a 
     pace (using a methodology) that are totally alien to American 
     business. They often talk the same language and enter into 
     MOU's or contracts that say the right things but the 
     reality of their actions is totally different. In a joint 
     venture outside of Asia, we found a partner who wanted our 
     money but would not listen to our expertise--our 
     considerable expertise in the orderly and efficient 
     development of a cable television business over the last 
     twenty years. We were the first to admit that we did not 
     have expertise of their market or culture, yet this local 
     partner with incompetent management would constantly 
     reverse our second cable management decisions. This type 
     of reform, especially when we are the minority partner, 
     will cause a rapid deterioration in the venture and hurt 
     the joint venture's ability to buy programming and expand.
       4. The Old Management--The biggest problem to getting cable 
     TV systems built in Asia and bringing training and American 
     expertise is the ``old guard.'' These companies and often 
     family dynasties talk a good game but don't really want 
     American joint ventures in their nation where they have 
     dominated the media business for so many years. They only 
     want the new technology to come to their fellow countrymen 
     when they and only they bring it at their own pace. These old 
     but truly powerful media barons who often dominate several 
     media empires do not want competition. They want to own it 
     all. They only want American investment dollars to flow to 
     them . . . not to go to a local entrepreneur who has teamed 
     up with a minority American partner. The level playing field 
     does not exist in many parts of Asia. Foreign ownership laws 
     sponsored by the local media monopolist prevent true 
     competition and members of the old guard disguise their greed 
     in the forum of the nationalism and information control. Yet 
     it is ironic that in Asia in particular, in all the ventures 
     that I can think of, the foreigner is a clear minority 
     partner who brings capital, expertise and training to the 
     project. The cultural sensitivities are and should continue 
     to be dominated by the local majority partner. However, 
     international joint ventures hasten the development of 
     American programming in those countries.
       In my opinion, the Clinton Administration must demand a 
     level playing field in Asia. New laws need to be introduced 
     by Congress to prevent monopolistic enterprises who lobby 
     against American investments in their country but continue to 
     gain access to our financial markets. These media moguls must 
     be prevented from blocking minority foreign investment in the 
     media in order for them to selfishly perpetuate their local 
     domination and justify the slowness of their upgrading the 
     infrastructure. This old guard is limiting the choice of 
     people of their nation to experience and view the abundance 
     of globally produced diverse programming.
       Our government needs to work with the nations of Asia not 
     to exclude other countries from forming local joint ventures 
     but to ensure that there is an open and level playing field 
     to satisfy the insatiable demand of Asian consumers for more 
     information, education, and yes, good old fashion Hollywood 
     entertainment.

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