M&A’s predicted for Hong Kong media industry

In Hong Kong’s thriving media industry, everything seems to be going up. Broadcast TV and on-line advertising revenues are showing healthy gains. So are pay-TV subscriptions. And mobile TV is tipped to start generating significant coin in 2008.

Moreover, some experts expect there will be more mergers and acquisitions in the next two years, driven by convergence and by private equity’s growing appetite for the media sector. These deals, probably strategic alliances and partnerships rather than outright acquisitions, are likely to involve “both new and old media, content players with new enabling technologies and of course delivery platforms with content,” said Marcel Fenez, Asia Pacific Leader - Entertainment & Media Practice, PricewaterhouseCoopers. Fenez is confident overall advertising will continue to be robust in Hong Kong throughout 2007 and in anticipationn of the Beijing Olympics. He projects the total TV ad-spend, which was US$747 million in 2006, will rise by 6% this year and by 10% in 2008. The online ad market shot up by 15.8% to $22 million last year, and PwC expects it will maintain double digit growth rates for each of the next three years.

“An element of on line media spend is now a permanent feature of most large campaigns and will grow as both confidence with measures of return and how to effectively engage and use the medium increases,” Fenez said. Pauline Chu, Carat Media Services Hong Kong Vice President, believes TV will continue to enjoy the biggest share, 39%-40% of advertisers’ media budgets. But she anticipates only a slight increase in the ad budget allocation for TV this year, mainly from rate card inflation. Terrestrial FTA networks continued to dominate the TV market, despite pay-TV gains. The weekday prime time (7-11pm) audience share for FTA was 90% and other TV platforms, including satellite, cable, broadband/IPTV channels, accounted for 10%, according to Nancy Lai, Manager, TVB Pearl Purchasing & Scheduling Programme Division. Similarly for weekend primetime (7-10:30 pm), FTA was 85%, others 15%. There was a slight increase of 2% (weekday prime time) to 5% (weekend prime time) for other platforms compared with last year. “ However, there was a change in research service provider from Nielsen Media Research to CSM Media Research in February 2006, thus an entirely new PeopleMeter panel for measurement,” points out Lai. “The slight increase might have been an artefact resulting from the change. It would be more appropriate to compare 2007 figures with 2006’s at the end of the year to assess the impact of Pay TV/Broadband TV on FTA in Hong Kong.” Both TVB channels Jade and Pearl performed well in audience shares in 2006. TVB Jade’s weekday prime time (7-11pm) average audience share was 85% (2005: 83%) among Chinese terrestrial channels. TVB Pearl’s weekly prime time (7pm to midnight) average was 75% (same as 2005) among English terrestrial channels. (Audience Measurement Data Source: CSM Media Research) PwC’s Fenez forecasts the overall subscription market will grow at a compound annual rate of 9.6% over the next five years. He added, “There will be additional growth due to revenue streams from mobile TV which we believe will start to be significant in 2008 and beyond, driven by the very high level of mobile penetration in the market as well as the enhanced handset capability and availability of tailored content.” Carat’s Chu sees competition between PCCW’s now Broadband TV and Wharf Cable TV intensifying after now grabbed the rights to the English Premier League and UEFA Euro 2008 soccer. Both operators are expected to use “aggressive promotion to jet up / maintain their subscriptions,” she said. At the end of 2006, Cable TV had 786,000 subscribers, up 7% from 2005’s 738,000. Its share of viewing among subscribers went up to 40% from 37% in 2005; and it said TVB Jade’s share dropped from 48% to 45%. Now TV last reported its installed customer base at more than 700,000; subscribers can choose from more than 120 channels, including exclusives such as HBO, Cinemax, STAR Movies, STAR Chinese Movies, STAR World and soon – ESPN and STAR Sports. Cable TV’s parent i-Cable took a swipe at its rival when it announced its 2006 results, stating, “Instead of engaging in endless bidding wars for overpriced acquired contents, the Group has chosen to develop further its production and its already well established news and entertainment platforms as well as to pursue more balanced development of its sports platform to maintain its leading position.” Cable TV added a second Hollywood Movie Channel on March 28 2007. It will launch a new channel this summer intended to have mass appeal and featuring a lot of self produced programs; the news platform is being revamped this month; and its Finance Information Channel will morph into a 24-hour finance service channel on trading days, and a documentaries and public affairs channel during weekends and public holidays. There will also be new documentary and public affairs programmes.