Is HKTV focus on local production a wrong strategy?

June 24, 2015 14:13
HKTV founder Ricky Wong publicly admitted that it's hard to run a TV business in Hong Kong. Photo: HKEJ

An advocate of local productions, Hong Kong Television Network (01137.HK) is quickly running out of cash to sustain its ambitious plans.

The group issued a profit warning on Monday, saying it expects to record "a very significant increase" in losses for the six months ending in June, compared with the six months ended Feb. 28, 2014. (Last year the firm changed its financial year to end in December.)

Its shares closed 3.6 percent lower on Tuesday.

In its announcement, HKTV said revenue from licensing of program rights and advertising income was not enough to cover program costs.

Meanwhile, the e-commerce business it launched in February is still too young to make any meaningful contribution to the bottom line anytime soon.

It has been reported that HKTV spends around HK$1 million to make each episode of its local drama series and shows.

Because of the prohibitive costs, founder Ricky Wong Wai-kay decided to suspend all production work.

In fact, HKTV hasn’t produced a single new drama program since March last year when its license application hit the wall.

Wong has been seen as a David who is brave enough to challenge the industry's Goliath, Television Broadcasts Ltd. (TVB, 00511.HK).

But last week, Wong publicly admitted that it was hard to run a TV business in Hong Kong.

HKTV is still waiting for the results of the judicial review on the government’s refusal to grant the company a free-to-air broadcasting license. During the waiting period, the group can only deliver its content through the internet.

But soon, its drama inventory will be exhausted. The last drama series, Night Shift, will be aired in September, according to HKTV.

The company's troubles cast doubts on its strategy of putting emphasis on local productions for Hong Kong audiences.

Unlike HKTV, competitors such as TVB and nowTV are shifting their focus to programs co-produced with mainland partners and aimed at gaining better access to the much bigger Chinese market.

Earlier this month, TVB reached a deal with Yu Le Bao, an investment fund under Alibaba Group Holding Ltd., which has been aggressively pushing into the media and entertainment sector.

TVB has already explicitly said that the storyline and the theme of future productions will be determined by both parties.

“TVB will only produce shows and dramas perfunctorily for its local viewers,” Stephen Chan Chi-wan, former general manager of TVB, admitted.

Clearly, profit is the company's major concern, not the local audiences’ viewing preferences.

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EJ Insight writer