Why TVB needs to think beyond staff cuts

Television Broadcasts (TVB), Hong Kong’s top free-to-air broadcaster, has signaled publicly that it has suffered due to the months-long social unrest that has pulled Hong Kong into an economic recession.

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On Monday, the media firm’s CEO Mark Lee sent an email to staff informing them of job cuts that would affect about 350 people or roughly a tenth of the group’s total workforce.

The retrenchment, which could take place as soon as the end of this month, was blamed on an uncertain economic environment in the wake of the social disturbances, which have prompted many advertisers to rein in their spending.

Citing the need to improve the financials and boost operational efficiency, TVB said it has to cut costs to ensure business sustainability.

As uncertainties persist in relation to the Hong Kong market, TVB will step up focus on the Greater Bay Area in mainland China, Lee said.

TVB, like many other media entities in the city, has been affected by the unprecedented events in Hong Kong over the past half year, which dealt a severe blow to industries such as retail and tourism and prompted advertisers to cut back.

Moreover, the broadcaster also suffered as some brands pulled ads after people complained that the TV station was failing to provide impartial coverage of the anti-government protests in its news bulletins.

TVB has often faced accusations of bowing to pressure from Beijing and offering an establishment perspective while handling sensitive stories, rather than presenting an unbiased picture.

The company denies bias, but suspicions remain among opposition activists and observers, some of whom derisively refer to the station as “CCTVB”, a play on the name of China’s state broadcaster.

An unfavorable macro environment may be a good excuse for TVB’s management to implement cost-cutting measures to scale down its business operation. However, the core issue for the media group won’t be resolved simply through cost-cutting.

The business model needs a revamp to reduce the firm’s reliance on a single market, and there is also the issue of a high-cost structure in self-produced drama series and other entertainment offerings.

TVB had been a monopoly in Hong Kong’s entertainment sector as it operated a full supply chain, from content creation and production to artiste management to program distribution.

Such model helped the firm cement its market share before the internet era when people relied on broadcast TV for entertainment. The free TV business generated hundreds of millions of Hong Kong dollars a year from advertisers, which propelled TVB into the blue-chip firm league in the 1990s.

However, things began changing with rise of the internet and new online media and entertainment options. Viewers no longer see TVB as their main source of entertainment and are now spending much more time on other kinds of entertainment like online videos, games and streaming services.

In Hong Kong, YouTube and Netflix have emerged as key competitors to TVB in the battle for viewers. Recognizing the challenge, TVB has launched its myTV SUPER online service, a service pack that offers TVB current and archival programs along with some acquired content from overseas.

The aim is to lock in a loyal audience through bundling with mobile phone plans. The service has found many takers, but that doesn’t mean TVB has found a new formula for growth.

The free TV business, once the group’s cash cow, has now become a burden. As a broadcast licensee, TVB needs to fulfill several requirements, for example, news programs and kids programs, and also needs to follow other program guidelines. The operation is not easy to achieve break-even if the programs or viewer numbers are unable to draw advertisers’ attention in a big way.

For the first half of this year, TVB reported a HK$58 million segment profit from its free television operation but the figure marked a big slide from the more than HK$100 million reaped in the same period in 2018. The program licensing and distribution business, which is responsible for selling TVB programs to other firms, reported a profit of more than HK$200 million for the period.

That means TVB earned much more money from its content library rather than operating free channels in Hong Kong.

A free television operation could yet prove to be a bonus for TVB in the near term, but the fact is that a linear program TV channel is no longer a must-have thing for families in Hong Kong.

TVB, of course, can use the free channels to promote its online subscription service myTV SUPER, but overall the outlook for the free offerings doesn’t seem too bright, especially as many people are complaining about the content.

As TVB has started to broadcast acquired content from the mainland, it does not fit the taste of local Hong Kong people.

Currently, TVB operates a total of five free channels under the current license agreement. Apart from its news channel which is serving the public as a kind of broadcaster responsibility, four channels could be too much for TVB in the current market environment.

Keeping the flagship Jade channel to serve Hong Kong and Greater Bay Area audiences and tapping into the southern China advertising market could be a possible option for TVB to maintain a profitable free channel operation. Other channels could perhaps be shut down and the spectrum returned to the government for mobile communications use.

Some observers have suggested that TVB can sell its free channel business to mainland media partners to make those channels easily available in China. But such move will present its own problems and raise questions, including the very survival of the Hong Kong-based Cantonese language channel.

As the broadcaster seeks to shore up its finances and ensure long-term sustainability of its business, it will clearly have a lot on its plate in the next few years.

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A columnist in political development in Greater China region, technology and gadgets, media industry, parenting and other interesting topics.

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