Market Insight

Hong Kong satellite pay TV service to close

February 27, 2017  | Subscribers Only

David Scott David Scott Associate Director – Research and Analysis, Service Providers & Platforms

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  • Piracy, OTT services and economic conditions drive TVBNV to closure
  • Hong Kong pay TV market will return to a duopoly led by Now TV
  • Pay TV operators adapt to find a wider audience and new revenue streams 

Hong Kong DTH satellite operator TVB Network Vision (TVBNV) will surrender its domestic pay TV programme service licence. TVBNV informed the Hong Kong Government and the Communications Authority in January 2017 of its decision to discontinue the pay TV business citing rampant online piracy, proliferation of OTT services and a downturn of Hong Kong’s economy in recent years.

Our analysis

TVBNV has struggled to make a profit since launch on 18 February 2004. The company provides subscribers with a bouquet of local and international channels in addition to its 14 self-produced channels. The TVBNV subscriber base peaked at nearly 200,000 in 2013 but was never commercially viable accumulating losses of more than HK$2.2bn ($283m). Once the Office of the Communications Authority accepts, TVBNV will officially close and existing monthly subscriptions will expire without renewal.

The closure follows a string of failures from the group of four operators granted pay TV licences by the Hong Kong Government in 2000. In a bid to open up the pay TV market, the Hong Kong Government granted a pay TV licence to Galaxy Satellite Broadcasting Limited on 5 December 2000. Galaxy renamed to TVBNV in March 2013, one month after securing a renewal of its pay TV licence for a further 12-year period. However, the renewal will be short lived and suffer a similar demise as the three other operators granted licences in 2000. Hong Kong Network TV, TV Plus and Yes TV surrendered their licences in April 2001, April 2004 and July 2004 respectively. TVBNV is now offering special packages to existing subscribers to migrate them to the company’s subscription-based over-the-top (OTT) service branded myTV Super.

IHS Markit believes TVB still has cause for optimism in Hong Kong broadcasting. Unaffected by the TVBNV closure, myTV Super continues to find success amid a constantly disruptive environment since its launch on 18 April 2016. MyTV Super home and mobile users reached the one million milestone in October 2016 and exceeded two million users in December 2016, which includes OTT TV set-top boxes and mobile app users. The MyTV Super service complements TVB’s existing terrestrial broadcasting and extends the company’s online distribution operations in Hong Kong. However, the OTT service is not yet profitable and faces a similar challenge to its pay TV predecessor – that is piracy of its content. Should MyTV Super find success in its home market, it does have the potential to expand to other parts of Southeast Asia, where there is a large Chinese-speaking community.

TVBNV’s closure will return Hong Kong’s traditional pay TV business back to a duopoly. Market leader Now TV, owned by PCCW and i-Cable Communications, owned by property giant Wharf Holdings, control the market whilst HKBN continues to scale down its IPTV service. Now TV maintains its market leadership in Hong Kong on the back of a compelling live sport offering. Now TV provides over 1,000 live football matches a year from Premier League, La Liga and Bundesliga as well as comprehensive coverage on Tennis (Grand Slams and the ATP Tour) and Golf (All majors and PGA Tour).

Now TV and i-Cable continue to operate in a challenging environment, adversely affected by a slowdown in advertising spend, rampant content piracy, and fierce competition from online entertainment alternatives. As such, these traditional pay TV operators are fine-tuning their products and services in a bid to find a wider audience and new revenue streams. Now TV’s parent PCCW entered the Hong Kong free-to-air TV market on April 2016 and has achieved four million users in its first year of launch. ViuTV replaced the perennially struggling Asia Television (ATV) service, which lost its broadcast licence with effect from April 2016. Similarly, i-Cable’s affiliate Fantastic Television plans to launch a free-to-air Chinese-language TV service by May 2017. Fantastic TV brings the number of free-to-air TV services in Hong Kong to three, joining TVB and PCCW’s ViuTV.

Meanwhile, digital terrestrial television (DTT) penetration continues to rise in Hong Kong, reaching 94% of total TV homes at the end of Q4 2016. Hong Kong’s leading free-to-air broadcaster TVB operates five DTT channels, including its flagship Jade (Chinese-language) and Pearl (English-language) channels as well as J2, iNews and J5, which reach nearly 2.5 million homes in Hong Kong. Analogue TV broadcasts will switch off in Hong Kong by 2020.

The battle for viewers in Hong Kong remains fierce. Operators must continuously enhance their content and multi-platform experience to drive growth and increase customer loyalty. Although the market trend is a shift to internet-based delivery modes and free TV services, a compelling content and service offering will ultimately command viewer attention.

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