Switched On

TVB Should Welcome Big Brother Beijing

Hong Kong’s main free-to-air broadcaster has a large fan base but would welcome some extra cash.
At Closing, April 25th
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With a vanishing billionaire adding to Hong Kong's already heightened paranoia about China's increasing grip on the former British colony, more media assets under mainland control are probably the last thing the city needs. But there are plenty of reasons, outside of the political, why such acquisitions make sense.

Television Broadcasts Ltd. is the latest, saying Wednesday it received an offer for 29.9 percent of the company from TLG Movie and Entertainment Group, part of Beijing-based Top Legend Group. The offer is conditional on the rejection of a planned buyback. Wharf Holdings Ltd., meanwhile, is near a deal to sell cable-TV operator I-Cable Communications Ltd. to a Chinese firm, and the South China Morning Post is already in Alibaba Group Holding Ltd.'s hands.

Just as Hollywood is turning to Chinese cash to keep churning out blockbusters, Hong Kong's media companies need money. Like newspapers the world over, the South China Morning Post is facing falling advertising revenue while TVB, the city's dominant free-to-air broadcaster, is a shadow of its former self, warning in December that profit for 2016 could tumble by as much as 65 percent.

Hardly a Smash Hit

TVB has underperformed the benchmark Hang Seng Index over the past 12 months

Source: Bloomberg

Although long-suffering shareholders may not believe it, TVB does have a lot going for it. Its 8.6 percent dividend yield compares very favorably to the Hang Seng Index's 3.5 percent and it raised $500 million via a bond sale in September, bolstering its finances. TVB's television shows also have a huge overseas Chinese fan base, as well as many viewers on the mainland.

Global Couch Potatoes

Countries from Singapore to the U.S. also contribute to TVB's revenue

Source: Bloomberg

Note: Revenue shares are based on 1H2016 data.

While it has been losing some local eyeballs to streaming services such as Netflix or Chinese-language offerings like iQiyi, TVB still dominates prime time in Hong Kong, particularly following the collapse last year of Asia Television. TVB's digital push is also showing signs of success, with its myTV Super product, a paid service that allows viewers to watch more than 19,000 hours of TVB's content library on demand including classic movies and Korean dramas via a set-top box or mobile app, garnering some 1 million users within six months.

New investors could breath fresh life into some of TVB's staler offerings and may also provide the impetus to upgrade infrastructure -- several of TVB's drama series are produced at its TV City studios and fans have come to realize that many productions use the same props and scenery. Plus it's not as if TVB was entirely free from mainland influence anyway, considering its largest shareholder is controlled by Li Ruigang's China Media Capital, the nation's first media-focused private equity firm.

Stock in TVB rallied as much as 5.9 percent in Hong Kong trade on Thursday, helping to bring gains for the year to 20 percent. Shareholders are right to be cautiously optimistic. This is one media deal that could be a hit.


This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

    To contact the author of this story:
    Nisha Gopalan in Hong Kong at ngopalan3@bloomberg.net

    To contact the editor responsible for this story:
    Katrina Nicholas at knicholas2@bloomberg.net

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