AdManGo announced that ad spending in HK dropped 16% in May
May ad sales reached HK$3.3bn, marking the second worst month of yoydecline in 2016. Competition, especially in TV, is more and more intense. In2015, LeTV and Nexflix (NFLX.OQ) entered HK market. In mid 2016, ATV shutdown its operations, while ViuTV (PCCW,0008.HK) was launched in April.Meanwhile, i-Cable (1097.HK NR) received a domestic free TV license in Mayand will launch free TV channels under Fantastic Television in 12 months’ time.
The report also noted the increase in ad spending from TV operators as acategory. TVB started to promote MyTV Super in April and LeTV also promotedits European soccer games and TV dramas aggressively. As a result, adspending from TV operators increased 58%, but was bit able to offset theshortfall from other categories.
Another industry research firm, PWC, estimated that the online ads marketshare will surpass TV ad spending in 2017. In 2015, TV ad spending declined9.2% to USD732m, while it expects to resume growth in 2017 and grow at a2.4% CAGR to USD825m by 2020 (source: HK Economic Journal, 4 July 2016).
Deutsche Bank’s view
In our model, we expect TVB’s sales from free TV in HK to decline 9% in 2016.However, we expect 2HFY16 to gradually improve due to 1) a lower base in2H2015 and 2) a slight improvement in HK retail sales (ie less yoy decline),especially for mass market products (like cosmetics).
To recap, AdmanGo announced on 26 May that HK adex sales declined 12%yoy to HK$3.3bn (post 40% discount) in April, vs 13%/18% in March/Feb. TVaccounted for 30% of the pie. For 1Q16, TV adex declined 19% to HK$7bn, ofwhich TVB declined 6%, Now TV 82% and i-cable 16%, according to AdmanGo.
Meanwhile, TVB’s share price catalyst will also depend on the take-up rate formyTV SUPER (launched officially on 18 April 2016). With this new initiative,TVB aims to address the changing viewing habits of viewers. It has signed uptwo ISPs, namely Hutchison and Hong Kong Broadband. It targets 1.4msubscribers by November 2017 (its 50th anniversary).
Management will join our DB China/HK Consumer/Media Corporate Day on 4Jul 2016. We will have more updates afterwards