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News Corp. spins the world

BSkyB, DirecTV, Star TV, Foxtel, Sky Italia = 110 mil viewers

LONDON — Rupert Murdoch is at last on the verge of realizing his dream of becoming satellite king of the world, after his acquisition of DirecTV in the U.S. and the launch of paybox Sky Italia.

But getting there has taken every ounce of his ability to play the political system and manipulate media laws in various countries.

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Every country Rupe enters regards him as an alien who is both admired and feared. However, he has worked around prejudices to fly his birds: News Corp.’s satcasters now broadcast to 110 million pay TV viewers globally including BSkyB in the U.K., Foxtel in Australia, and Star TV in India and China.

But Murdoch hasn’t stopped looking for new conquests.

News Corp. is buying into Thomson-owned Canal Plus Technologies, which will give the media mogul total control of encryption know-how. Murdoch already owns NDS, the only other company to provide pay TV technology.

There are also reports that Murdoch is interested in Sogecable in Spain, which launched its freshly merged platform, Digital Plus, last month.

However, the jewel in News Corp.’s international crown — regarded by many investment analysts as an ideal pay TV model — is Blighty’s BSkyB, which Digital Plus is already trying to emulate.

It dominates pay TV in the territory and, after commercial channel ITV, is the only serious competitor to pubcaster the BBC.

The paybox, in which News Corp. has a 35.4% stake, was the first satcaster in the world to switch off its analog signal. It is forecasting 7 million digital subs by year’s end and is expecting to report substantial profits next year, which News Corp. hopes will soothe investor fears about the acquisitions of Sky Italia and DirecTV.

It is renegotiating its movie and sports rights and plans to make major savings by cherry-picking premium deals.

“We’ll try to get better terms — if not, we’ll drop a studio,” BSkyB chief exec Tony Ball says bluntly. “We have too many titles and too many straight-to-video films that would be gathering dust on Blockbusters shelves. It’s not just a question of getting costs down but a question of better value.”

Beyond its staple of movies and sport, BSkyB has struggled to create local content and local channels that resonate with viewers.

Its entertainment web Sky One is still reliant on U.S. shows such as “The Simpsons” and “Buffy the Vampire Slayer.”

Murdoch’s daughter Elisabeth tried and failed, and now Dawn Airey, managing director of Sky Networks, has been handed that almighty challenge.

Despite his achievements with BSkyB in the U.K., Murdoch has yet to really get a hold on continental Europe.

He failed to secure a footing in Germany, the second largest TV market after the U.S. He partnered with the Kirch Group to run paybox Premier but got his fingers burned and subsequently withdrew. He now denies any interest in the territory.

Sky Italia is a significant beachhead. If it reaches its target of 10 million subscribers, it will break up the TV duopoly of Italo Prime Minister Silvio Berlusconi’s Mediaset and the state broadcaster RAI, which accounts for 90% of the country’s TV audience.

In order to achieve that goal, Murdoch aims to adapt the successful BSkyB model, which offers more than 100 channels on the basic tier but is driven by its premium movie and sports channels.

The U.K. and Australia are where Murdoch has laid his deepest roots and where he has established his unique empire.

But strict cross-media ownership rules have hindered expansion into terrestrial TV in both territories — until now.

A pragmatic supporter of British prime minister Tony Blair, Murdoch has watched the British government cave in and open up the media to foreign investment, allowing him to buy up commercial web Five if he so wishes. He now claims to have no interest in the network.

However, opponents still fear his involvement with BSkyB and News Intl., which controls 40% of the daily press, gives him too much control over the country’s media.

The Australian government also wants to relax its media laws but can’t get the Senate to approve the reforms. His opponents, such as the Fairfax publishing company, fear that he will then make a play for a TV network, probably Ten.

News Corp. has a 25% stake in dominant Oz paybox Foxtel, which is investing more than $400 million to upgrade to digital in the first quarter of 2004. It’s betting that will drive pay TV penetration from a lowly 23% and make Foxtel profitable after nearly eight years of red ink.

But Murdoch’s son Lachlan has acknowledged Foxtel will be handicapped unless it can persuade the Oz government to scrap laws mandating that terrestrial webs be offered sporting rights. Buying up key sports events helped BSkyB establish itself in the U.K.

News Corp.’s Asian satcaster Star TV, run by Murdoch’s youngest son James, turned a small profit for the first time last year. Star could have made money earlier, but the Murdoch strategy was to keep adding local-lingo channels, entailing costly commitments to local programming in its major markets.

Star led the charge by Western broadcasters into China. Last January, its 35%-owned Phoenix InfoNews Channel became the first foreign-owned Chinese-lingo, 24-hour news channel to broadcast in China. And Star’s Starry Sky entertainment web secured carriage in the prosperous Guangdong province.

In India, Murdoch is viewed with a mixture of awe and suspicion by the authorities, but few dispute he has struck the right formula in a traditionally conservative and mainly Hindu society.

Some 30 to 35 programs on Murdoch’s Star Plus entertainment channel constantly make it into the weekly Top 50, and Star Movies is the most popular pic channel. However, Star’s masterstroke came in 2000 when it signed up legendary Bollywood star Amitabh Bachchan to host a Hindi version of “Who Wants to Be a Millionaire?” (Kaun Banega Crorepati?)

Until then, Star had only managed one or two programs a week in the Top 50, but the runaway success of “Crorepati” drew the attention of audiences to the fledgling channel.

To counter accusations of being a foreign broadcaster, Star cited that the Hindi version of “Millionaire” has led to the revival of pure Hindi and that the company employs over 700 people in India.

Star, however, has had less success in its efforts to launch a 24-hour news service, constantly running foul of India’s strict media ownership laws.

Don Groves in Australia and Bryan Pearson in India contributed to this report.