TVB's profit plummeted by 40% in the first half of the year bet on new media business to save itself.

before ATV was wound up and delisted, and then viuTV was in hot pursuit, the benchmarking position of TVB was in jeopardy. In order to cope with the changes in the new environment, TVB carried out drastic reforms, introducing mainland capital and cooperating with mainland Internet companies. At the same time, it also created new Hong Kong dramas and made up for variety shows at home, and did not hesitate to invest a lot of money to build OTT platform myTVSUPER and social platform BigBigchannel. Although the radio and television business is still the main source of income for TVB, the new media business has become a new engine for TVB's performance growth. Can TVB, which has been filming online dramas, doing live broadcasts and socializing for 50 years, save itself by getting younger?

< strong > performance has fallen to a freezing point. How can TVB save itself? < / strong >

in recent years, the persistent downturn of Hong Kong's TVB has become a clich é topic. For traditional television media that rely on advertising, TVB's advertising revenue continues to decline due to Hong Kong's weak economy, especially the downturn in the retail and consumer goods industries, which are major advertisers.

judging from TVB's 2016 results, the net profit of TVB belonging to listed companies dropped from 1.331 billion Hong Kong dollars in 2015 to 500 million Hong Kong dollars, a drop of 60%. A broadcast of the Olympic Games in Rio de Janeiro made TVB lose 150 million yuan, while the new business myTV SUPER led to an increase in operating costs, which made the already declining TVB even worse. You know, as early as ten years ago, the half-year net profit of Hong Kong TVB has reached 497 million Hong Kong dollars.

in the first half of 2017, TVB still showed no sign of stopping its decline. Its net profit was only HK $170 million, down 44% from the same period last year. TVB attributed the decline in performance in part to the pending share buyback plan, and the company needed to set aside 4.209 billion yuan to prepare for repurchase and failed to make proper use of it to earn high interest rates.

although the overall profit was lower than expected, the Hong Kong economy recovered slightly in the first half of 2017, with GDP growing by 4%, which means that the advertising industry is good, and the television broadcasting industry, which depends on advertising revenue, is also picking up. TVB's radio and television business accounts for 65 per cent of the total business, with a net growth of 9 per cent in revenue from advertising and film and television production.

however, it is worth noting that this year coincides with the 20th anniversary of Hong Kong's return to the motherland, and a large part of the increase in advertising is due to advertising by the government and semi-official organizations. Therefore, judging from the development of various businesses of TVB, the development and growth of the local radio and television business, which depends on its survival, is still weak, and the radio and television business is closely related to the economic environment of Hong Kong, so it is impossible for TVB to reverse the decline in advertising revenue in the short term. TVB urgently needs to find the next profit growth point.

the overseas business that TVB once pinned its hopes on-- including Chinese markets such as Singapore and Malaysia, and overseas markets such as the United States, Canada and Australia, but the overseas paid viewing model has been hit by illegal OTT set-top boxes and other pirated joint sales. The actual effect is not good. Overseas business revenue continued to decline after 2012, and overseas market revenue fell by 11% in the first half of 2017. As a result, TVB stopped the traditional pay TV services in Europe and Australia and developed a new media TVBAnywhere platform instead.

in addition, the newcomers viuTV and wonderful TV station "newborn calves are not afraid of tigers" have developed vigorously, providing viewers with larger-scale and more fresh TV dramas and program content, which has further led to the diversion of TVB customers. In order to comply with the new trend of the media environment, TVB continues to add new media services.

< strong > New media business has become a new engine of growth. < / strong >

at present, although the new media business of TVB is not yet profitable, it is growing rapidly. The revenue of this part of the business in the first half of 2017 was 122 million Hong Kong dollars, an increase of 46% over the same period last year, and it was the only growing business module of TVB in the past two years. In addition to TVB's BigBigChannel social platform mentioned above, TVB's OTT platform myTVSUPER also bought popular TV series such as Japan, South Korea and the mainland at high prices to cooperate with mainland video websites.

in his 2015 performance report, Chen Guoqiang, chairman of TVB, put forward a plan to build a myTVSUPER platform for OTT (Internet TV) service for the first time, with the aim of catching lost customers. In April 2016, myTVSUPER, which cost HK $100m to build, was launched as the second largest content distribution platform for TVB. By the first half of 2017, the service had accumulated more than 4.4 million users in Hong Kong, far exceeding the expected 1.4 million users. The data growth of the OTT service exceeded expectations and led to an average increase of 1.07 in the ratings of TVB TV stations.

as another measure to lay out new media in TVB, BigBig Channel, a social media platform launched in July this year, is the third largest platform for TVB content distribution. TVB artists and online celebrities can share short videos, live broadcasts, and interact with fans on the platform. To coincide with the 50th anniversary of Taiwan's anniversary, BigBigChannel will also launch homemade online dramas "Foreign stories of Demons surrender" and "Journey to the West and Sha Wujing."

next, TVB will continue to spend a lot of money on building these two new media platforms, and the interaction and cooperation between the three platforms cannot be achieved without financial support. Zheng Shanqiang, executive director of TVB, once told the media that TVB has invested hundreds of millions of Hong Kong dollars in myTVSUPER's project and expects to break even within two to three years.

however, judging from past experience, new media is not a cash cow. At first, it used to burn money to accumulate users. Youku Tudou experienced eight years of "money-burning" until his first quarterly profit in 2014. Even when the largest video sharing site, YouTube, was founded 11 years ago in 2016, it still failed to make a profit. For TVB, which is already in trouble, it is still doubtful whether it can support the long-term "money-burning" model.

in September last year, TVB issued $500m of bonds in the name of expanding its new media business and other corporate investments. however, in January this year, TVB announced a share buyback plan, and major shareholders proposed to use the money just borrowed to complete the buyback plan, which was criticized as "zero cost to increase their voice in TVB". The buyback plan was also opposed by the two shareholders. As a result of the delayed buyback opportunities, HK $4.2 billion on the book can neither be put into operation nor be used to add value in the capital markets.

the equity dispute within TVB has been going on for nearly a year, and it is still inconclusive, which is not good news for the new media business, which is still in its infancy and is in urgent need of money.

under the strong demand for funds, Li Ruigang bought shares in YoungLion, the largest shareholder of TVB. After mainland capital intervened in TVB, it did bring a lot of new tricks.

tied up by Chinese culture in 2016, TVB announced that it had reached a strategic cooperation with iqiyi to remake three major IP dramas, including Genesis, into super online dramas. Currently, Infernal Affairs 2 and Genesis have been broadcast, while the local TV series "Blind Man lawyers" produced by TVB has also been exclusively distributed to iqiyi. In the financial results for the first half of 2017, TVB mentioned that two dramas had been produced in cooperation with mainland Tencent and iqiyi and had been delivered.

Edit: mary