Progress of China initiative with Alibaba (BABA.N, Buy) on co-production of TVseries and movies is the most frequently questioned issue
To recap, on 15 June 2015, Alibaba (BABA.N, US$82, Buy) announced astrategic partnership with TVB to celebrate the first anniversary of Yulebao,Ali’s online investment platform for digital entertainment products. Accordingto TVB’s management, the platform will reach a wider audience on theChinese mainland as well as in Hong Kong and Taiwan. Further details of thedeal will be disclosed over the next three months.
Investors are also interested in how Mr. Li will help its China operation.
Also it was announced on 23 April that Mr. Li Ruigang had became anadditional shareholder of Yong Lion, TVB’s major shareholder. Managementbelieves that Mr. Li’s connections will help operations in the mainland as wellas overseas. Sales from China accounted for only 6.6% of TVB’s sales in 2014,which management believes is too small.
Free Hong Kong TV market remains tough on the back of weak HK retail sales.
For reference, HK retail sales declined by 1.8% in value over the first fivemonths of 2015, according to government data. With revenue from adex beingthe key contributor to its free HK TV operation, management saw a tough1H15. To recap, during its AGM on 15 May, SK Cheong, GM of TVB,commented that, according to industry research, advertising revenues declinedduring the first five months of 2015; this was mainly due to the weak macroenvironment and political uncertainty. However, management believes that,based on its experience with SARS and the financial crisis, these are just shorttermissues and adex should recover next year.
The company plans to launch OTT box in HK in 2016.
With this new technology, management believes that it can tap the pay-TVmarket and the online market with a more cost effective mean of reaching outto its audience. With Xiaomi Box having been in the HK market for a while andrecently Le TV launching a TV service in HK, TVB believes that it needs tolaunch such a service soon.