Hong Kong Tycoon Seeks Internet Success (Mark Landler, The New York Times)
For four years, people here have been asking Richard Li the question he is tired of hearing but knows he cannot escape: What will you do next? Hong Kong is an impatient place, and this lean, tightly wound 31-year- old has a reputation and a family pedigree to live up to.
The reputation was made in the early 1990s, when Li started Asia's first satellite-delivered cable television service, Star TV, and then sold a controlling stake to Rupert Murdoch's News Corp. for $525 million in 1993. His pedigree is even more formidable: He is the second son of Hong Kong's most prominent tycoon, Li Ka-shing, and heir to a fortune estimated at near $9 billion.
Li's rarefied background has made him the subject of endless gossip by rivals in Hong Kong business, who wonder what he might do for an encore. On March 12, they got an answer. Li announced plans to start a digital media company to provide Internet access and other information services to television sets and personal computers throughout Asia.
In a part of the world where firsthand experience with the Internet remains a rarity, Li's is an audacious undertaking -- all the more so because Asia is limping through the worst economic downturn since the end of World War II.
But Li's company, Pacific Century Group, has signed Intel as a partner to provide financing and technological expertise for the venture. And Li says the region's financial turmoil only dramatizes the need for better, faster information.
"What separated the countries that did OK from those that didn't was the availability of information," said Li over breakfast at his offices, which had a panoramic view of Victoria harbor until his father began building a 57-story office tower next door. "Which countries are still standing? Singapore, Hong Kong, Taiwan. Which ones aren't? Korea, Thailand, Indonesia."
The difference, he explained, was that when the turmoil began last summer as a currency run in Thailand, business people and policy-makers in Singapore, Hong Kong and Taiwan generally had access to real-time electronic news, while people in other parts of the region did not.
It Won't be All Serious: Quotes and Karaoke
Lest people think Li aspires to be the Michael Bloomberg of Asia, he still views this latest venture as being in the entertainment tradition of Star TV. So while he plans to distribute Bloomberg-like stock quotes and news in addition to Internet access, Li also plans to offer video games and a karaoke feature that will allow viewers to warble along with their TV sets.
"If you look at our offerings, they will be divided half between work, making money, and half fun," he said.
If the plan unfolds as Li envisions, about two years from now Pacific Century will begin beaming the service by satellite to cable operators throughout the region. They would then deliver it over upgraded cable wires to subscribers, whose homes would be outfitted with modems -- allowing them to receive the service over their TVs or personal computers.
Intel, which owns 40 percent of the venture, is developing the broad-band technology that will enable Li to deliver information at high speeds over a network of satellites and cable. Typically, satellite services are constrained by the lack of true, two-way communication; they generally require subscribers to send commands back to the Internet by a regular phone line.
But Pacific Century plans to beam data to cable operators, who would store it in computers attached to the cable network. Rather than interacting with a satellite, Li's subscribers would be sending and receiving data over the cable lines.
"Think of this as an Asian version of At Home," said Avram Miller, corporate vice president for business development at Intel, referring to the At Home Network, the high-speed Internet service owned by several U.S. cable operators.
At Home offers Internet access and an array of information and entertainment services to about 50,000 subscribers in the United States and Canada. But its growth has been slow so far, in part because cable operators have delayed upgrading their systems.
Intel holds a small stake in At Home and has a joint venture with Deutsche Telekom, SES Astra and Hughes Electronics to create a similar service in Europe. Intel's investment in Li's venture is part of its broader strategy of finding ways to stimulate sales of PCs that use its chips.
For the moment, the company has limited its investment to $10 million, according to executives familiar with the deal. It may increase that to $50 million -- still a modest wager for a company of its size -- if the market pans out.
Pitching to a Continent That's Largely Unwired
And that is a decidedly big "if." While Hong Kong and other Asian cities have no shortage of Internet service providers, cybertechnology has come to Asia more slowly than to the United States and Europe.
Fewer than 6 million people in Asia roam the World Wide Web, compared with 19.2 million in the United States, a study by Salomon Smith Barney found. Subtract Japan from the total, and Asia has an Internet population of 1.8 million -- in a region of nearly 3 billion people.
And Internet use here has been hobbled by language barriers, a scarcity of telephone lines and a paucity of personal computers. While 40 percent of households in the United States have a PC, only 15 percent of homes in Hong Kong have them, and in China, just 0.4 percent have them.
Even countries with relatively high PC penetration like South Korea have low Internet use because few people there speak English.
The Web may be worldwide, Li noted, but its content is still overwhelmingly in English and focused mainly on the United States. "Most of the information on the Internet is of interest to Americans -- face it," he said.
But Li said his service would package and store information aimed at specific audiences in their own languages. It is a strategy he used successfully with entertainment programming at Star TV, when viewers who had subsisted on a diet of Western fare were suddenly offered films in Mandarin and music videos featuring Indian, Chinese and Korean performers.
In just three years, Star TV's five channels attracted 50 million households in 38 countries.
Two years from now, when Intel completes the development process, Li will take to the road to sell the service to cable operators from Taiwan to Thailand and from India to Indonesia. They will be mostly the same operators who signed up for Star TV in the early 1990s. He thinks his exuberant marketing will win them over again. "We want to cover at least as many countries as Star," he said.
In a study Intel prepared for potential technology suppliers, the company projects that the service could sign up 20 million subscribers four years after its beginning. Li conceded that this was probably unrealistic now, but he said the service would break even with fewer than 2 million customers.
Analysts who follow Pacific Century are skeptical that Li will have the same quick success as he did with Star TV. "It's easy to be bullish about Asia," said Chia Yew Boon, research director at Santander Investment Securities in Singapore. "But these days, you've got to temper your projections."
Then, too, selling a digital information service is a keener marketing challenge than a satellite television service. Although Star TV's culturally specific programming was a breakthrough, it was still plain old television. High-speed Internet access is an exotic concept to many Asians, who have not been weaned on the wonders of the digital age like people in the United States.
Kaushik Shridharani, an analyst with Salomon Smith Barney in Hong Kong, said Li might face an uphill battle gaining distribution -- particularly if he limits himself to cable, which does not have the ubiquitous network of telephone companies. "So far, the phone companies are still in the best position in each market."
And for all of Star TV's popularity, Murdoch continues to lose an estimated $40 million a year on the service. Despite its customized approach, Shridharani said Star TV still struggled to attract advertising -- often losing to local broadcasters that offer purely local programs.
Even against long odds, Li brims with the self-confidence of a young man who has tasted success and has a rich father's backing. The elder Li invested $125 million in Star TV and allowed his son to plow $400 million in profits from the Murdoch deal into Pacific Century. In addition to the media venture, Pacific owns a life-insurance company and has property investments in Tokyo and Beijing.
Despite the plunge in Asian property values, Li said Pacific Century's real- estate investments were relatively conservative bets that allowed him to dabble in the more speculative world of cyberspace.
"I want to make money in safe ways; that's the first step," he said. "The second step is doing what you really want to do. But that's not always the best thing for you to do."
To the Manor Born; To the Boardroom Bred
Fiscal responsibility is deeply ingrained in Li, who grew up with the privileges and burdens of Hong Kong's commercial elite. After graduating from Stanford in 1987 with a degree in computer engineering, Li threw himself into a career as an investment banker in Canada. After four years, his father summoned him home to join the family business.
Soon after his return, Li developed the idea of Star TV -- in large part as a way to carve out an independent role within the family empire. During the frenetic start-up, the 20-something tycoon developed a reputation as an imperious and abrasive boss. But people who know Li say he has become more relaxed.
"As a person, he's mellowed enormously," said Simon Murray, former managing director of the Li family's public company, Hutchison Whampoa Ltd. "He's good fun to be with," added Murray, who is also on the board of Pacific Century Group. "He appreciates a good glass of wine."
And Li can always turn to his father for advice. The elder Li, who came to Hong Kong as a refugee from mainland China in the '40s, rose from making plastic flowers to controlling an empire that spans real estate, telecommunications, shipping and petroleum. In 1980, his boundless ambition led him to seize control of Hutchison Whampoa, a fabled Hong Kong trading company, turning him into the city's most prominent Chinese tycoon.
While Richard Li's older brother, Victor, is widely expected to succeed his father at Hutchison Whampoa and the other family businesses, Li Ka-shing takes an interest in his younger son's ventures that goes beyond signing the checks. "Just last night he was asking me, 'What the hell is this thing?'" said Richard, referring to the Intel joint venture.
Richard is a deputy chairman of Hutchison Whampoa, which keeps his hand in the family business. But he has clung stubbornly to his independence. His father recently proposed that Richard move into the family's new headquarters, which just happens to be the tower rising outside his window. Richard was noncommittal, saying that the two would have to negotiate the rent. "Right now, he just blocks the view," Richard said with a sly grin.
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