When Rupert Murdoch’s News Corp. bought into Star TV in 1993, paying $525 million for 63.6% of the fledgling pan-Asian satellite network, he forecast it would break even in this fiscal year. It hasn’t.

After widening his overall investment to $825 million for the entire network last July, Murdoch told News Corp. shareholders at the Oct.10 annual meeting in Adelaide, Australia, that “someone would have to come around with a magic wand” for Star TV to break even by this year’s fourth quarter.

Unprofitable Star TV is four years old and now faces even larger losses this year: $80 million, widening to a possible $100 million in the next fiscal year. So the question on most analysts’ lips is, “When can we expect to see that magic wand?”

Overseas trackers of News Corp. last week expressed dismay at Murdoch’s figures, even though market sentiment always has been pessimistic on Star’s prospects, short-term or long-term.

“It’s way above what we expected,” said David Kelly of Oz-based McIntosh Baring. And London-based analyst Terry Povey, of James Capel, said: “I don’t expect any positive contribution (to News Corp.) until the year 2000. Star is not on a trajectory that would take it into profit. The revenue line is simply not rising.”

Murdoch has acknowledged that the station’s losses last year ran to $30 million, without providing any data on where the money is going. “We need to know why the losses are so much bigger,” said Kelly. “If he’s developing the market, that’s OK – Murdoch’s renowned for doing gutsy things like that and getting it right. But if it’s simply costing more than they thought, then that’s bad news.”

Said Povey: “I agree that Star TV has a huge future, but in the next century, not this one.

“They’re spending a huge amount of money on positioning,” Povey continued. “In terms of the market, their investor relations people may not have done the best service to the company by insisting in the face of these figures that Star would turn good.”

Where are the losses being incurred? AsiaSat 2 lifts off at the end of November with 10 Star TV transponders (at a cost of $1.5 million-$2 million per year) which Murdoch said would deliver about 15 channels to Indonesia (although last month Star CEO Gary Davey was talking about eight). Star also has just spent $40 million on decoders, largely to push into Indonesia.

“They will lose more than half the money they have spent on decoders,” said Povey. “Star feels it has to distribute itself, wants to keep control – that’s admirable, but it’s also expensive. Spending $500 per set-top box is high if you’re only collecting $1 per month back.”

Star has a grand pan-Asian vision, but the move to localize its programming is proving expensive. It’s obvious to viewers that the network is not selling all the available advertising slots, and rates haven’t risen much. Pay revenues are proving small, and hard to collect.

Davey, in a recent interview with Variety, compared Star to Sky TV’s notorious set-up costs. A former Sky executive, Davey said: “We were four-and-a-half years into the Sky life cycle before we gave a set of figures to the financial world. At this stage of the game, the numbers don’t tell you much.”

But, argues Povey, although Star is similar to Sky (BSkyB’s predecessor) in the amount of speculation regarding figures, “BSkyB, when it merged, was a success because it was a monopoly provider of alternative TV. When it turned the corner, Sky could pile up the profits pretty fast. This will not be the case with Star as they will have to go through the same process in every market.”

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