Japanese Pay TV Buoyant Despite Yen Drop

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Tokyo -- Japanese pay television operators are putting on a
happy face, despite the yen's 15 percent slide against the United States dollar in
the last three months and its 40 percent tumble against the greenback since 1995.

As financial crises have deepened in other Asian countries
-- such as Thailand, the Philippines and Indonesia -- operators in those countries have
struggled to maintain subscriber numbers and to renegotiate contracts written in U.S.
dollars. But some of Japan's most prominent pay TV distributors contended that they
are doing fairly well -- if not better than ever.

Two U.S.-backed MSOs -- Titus Communications Corp. and
Jupiter Telecommunications Co. Ltd. -- and direct-to-home platform SkyPerfecTV Corp.
admitted that they haven't been completely unscathed. But some foresaw the yen's
continued decline earlier this year, and they limited their dollar exposure. And some said
Japanese consumers' growing awareness of pay TV has actually resulted in greater
sales.

Titus has added about 3,000 new customers per month over
the past few months. That's up from about 2,500 per month during the previous six
months, according to Yoichi Hiraoka, who handles corporate planning and network
development at Titus. The company passes 700,000 households, and it counts among its
shareholders Time Warner Inc., U S West, Toshiba Corp. and Itochu.

"With 50,000 subscribers, Titus has a 7
percent-penetration rate now, but we look to boost that to 20 percent," Hiraoka said.

While he admitted that Titus' program costs have risen
as the yen has declined, he said the systems company still aims to meet its five-year
breakeven plan, which runs through the 2002-03 fiscal year.

Japan Cable TV Ltd. said the entire cable industry is
growing at a 20 percent clip.

Darryl Dorrington, representative director in Japan for
Tele-Communications International Inc. (TINTA), an investor in Jupiter, said the news
coverage received by the new DTH platforms in the country has actually built awareness of
pay TV in general, which has helped to boost cable sales.

While the yen-dollar problem looms, Jupiter hasn't
revised its year-end projection of 200,000 subscribers.

"We're looking at ways to minimize exposure,
including forex [foreign-exchange] contracts," Dorrington said. "There's
been a change in exposure, and that pushes time frames out for ROI [return on
investment]."

Program services have not been immune to the financial
situation. Among the networks within Jupiter's programming arm, its Shop Channel
joint venture with Home Shopping Network Inc. has been affected the most.

"HSN has been impacted by the exchange rate, as many
of the products are imported," Dorrington said. "Still, the tracking [subscriber
projections] is close to the U.S."

Adjustments in numbers are also in evidence at SkyPerfecTV.

"We import 30 percent of our content. The yen's
15 percent slide since April 1 led to a 4.5 percent production-cost increase," said
Masakazu Namiki, general manager of corporate communications at Sky. "That's not
a minor problem, but we try hard to reduce the impact by negotiating to reduce the
value."

Namiki said the platform currently has some 750,000
subscribers, and it's adding 45,000 per month. "But we need to boost that to
60,000," he added.

DirecTv Japan Inc. contended that the yen drop has not
affected it at all, because it used futures contracts to buy dollars at a fixed price at a
later date. "DirecTv concluded forward contracts with banks to cover
program-acquisition costs, so we have not been negatively impacted by the fall of the
yen," said DirecTv representative Miho Ida.

While Japanese corporations are known for putting pleasant
public spins on grim financial situations, the pay TV distributors aren't the only
ones registering optimism.

"With breakeven targets for cable TV in 2001 to 2003,
and [those for] DTH even earlier, program costs are not a big deal. It's an
inevitable cost to attract new subscribers," Merrill Lynch broadcasting analyst Kiyo
Ohta said.

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