0511.HK
TVB projecting positive profit after a six-year losing streak

Hong Kong’s leading broadcaster said it expects to return to profitability in the second half of this year with the success of its “Queen of News” drama series

Key Takeaways:

  • TVB forecast it would return to the black in the second half of this year, banking on a rebounding ad market and the recent success of its “Queen of News” drama series
  • Hong Kong’s leading broadcaster said its MY TV Super livestreaming business reported a 30% gain in digital advertising revenue in the first quarter

By Li Shih Ta

Sometimes it takes the news to make the news. That’s certainly the case for Television Broadcasts Ltd. (0511.HK), or TVB, Hong Kong’s leading broadcaster, which is basking in the spotlight of success for its series “The Queen of News,” centered on the news industry.

After taking both Hong Kong and Mainland China by storm last year, the company announced last week that it expected to achieve “significant positive earnings before interest, taxes, depreciation and amortization” (EBITDA) this year. As an encore, it added, it expects to report a profit in the second half of the year. 

The profit milestone would mark the first time TVB was in the black for a half-year period since the first half of 2019. The last time the company was profitable for a full year was even earlier in 2017. Investors applauded the announcement by lifting TVB shares more than 11% the next day.

TVB once captivated audiences both at home and regionally with its countless classic dramas aimed at Chinese viewers, and for years it was an agenda-setting cultural icon in Hong Kong. It produced a steady stream of popular family and martial arts dramas in the 1980s and 1990s, and helped to set the standards for TV production. It also churned out regional superstars such as Andy Lau, Stephen Chow, Tony Leung and Maggie Cheung, just to name a few.

Fall of the mighty 

But the rise of Mainland China’s film and television market has created a new generation of Mandarin-speaking entertainment talent, as well as higher-caliber productions, all to the detriment of Cantonese-speaking Hong Kong. That’s meant Hong Kong TV dramas are becoming less popular among Mainland audiences, who are becoming less familiar with the latest Hong Kong stars. TVB’s core Jade and Pearl channels, once hugely popular in nearby Guangdong province, are now far less trendy among a younger generation of Chinese.

While TVB has maintained a stranglehold over the Hong Kong market for decades, it has lost the far larger and more lucrative Mainland market.

The rise of social media platforms and streaming media has also changed the advertising ecosystem for broadcasters worldwide. Such new media have taken a growing share of advertising that was once TVB’s mainstay. As a result, its revenue has been on a downward trend since peaking at HK$5.7 billion ($728 million) in 2014. The company slipped into the red in 2018, and has piled up HK$3 billion in cumulative losses over the last six years.

The company has tried to bridge the gap by developing e-commerce and becoming more cost efficient, though without much success. In 2018, TVB sacked 150 people, and it laid off another 350 in 2019. In March last year, Chairman Xu Tao announced yet another 5% headcount reduction. And at the end of last year, it merged its J2 Channel and Finance, Sports & Information channels into TVB Plus, and consolidated its Ztore.com and Neigbuy.com platforms, cutting about 300 people in the process.

E-commerce livestreaming 

TVB began exploring e-commerce in 2017 when it set up its “big big channel” online social platform. A year later it launched its online shopping business where it earned commissions by featuring advertiser-sponsored products during prime time shows. It acquired Ztore.com and Neigbuy.com in a 2021 acquisition, and has seen its e-commerce business climb as a revenue contributor.

TVB began to operate two accounts on Douyin, the Chinese edition of TikTok, in 2022, and a year later it opened a livestreaming account on Alibaba’s Taobao platform and enlisted many of its artists to peddle goods via livestreaming. The first two live broadcasts attracted more than 10 million viewers and recorded transactions with gross merchandise volume (GMV) approaching 100 million yuan.

TVB made its name by creating good content, and its future also depends on whether it can recapture some of that former glory. Despite cultivating quite a few new businesses in recent years, producing high-quality content and monetizing the traffic it garners is still its main breadwinner.

Enter “Queen of News,” which generated buzz when it became a hit among both Mainland Chinese and Hong Kong audiences in its debut late last year. In Hong Kong it was the highest-rated drama of the year. On China’s popular Douban ratings site, it scored an 8.2 out of 10. On the Youku video site, which co-produced the drama with TVB, more than 1 million viewers subscribed to the drama in advance, a record for any Hong Kong drama on the platform.

Following the strong reception, TVB signed a new and expanded co-production agreement with Youku in this year’s first quarter, allowing the pair to co-produce a greater number of episodes through 2026. “Queen of News 2” is set to begin filming early next year.

Staying power? 

The huge traffic brought by “Queen of News,” combined with a recovery of the advertising market, are raising TVB’s hopes of returning to profitability.

In the first quarter of this year, combined viewership of TVB’s channels took 79% of the Hong Kong TV market, down slightly from 80% in the fourth quarter of last year. But more importantly, advertising revenue achieved double-digit growth year-on-year, as the company won back some major blue-chip corporate advertisers.

Direct streaming also posted steady growth, with the number of Premium My TV Gold subscribers holding steady in the first quarter sequentially, and up 11% year-over-year, as average monthly active users (MAUs) across all service levels remained at around 2 million. Revenue from digital advertising on the My TV Super platform grew by more than 30% year-on-year, and the company said it expects stronger growth in digital advertising revenue for the full year this year.

All those factors led to the upbeat forecasts both for EBITDA and profits this year.

TVB’s current price-to-sales (P/S) ratio stands at a meager 0.4 times, far lower than the 3.5 times for the much more internet-focused China Literature Group (0772.HK). The success of “Queen of News” and rebound for its broader business might help to regain some investor interest. But to really rebuild confidence over the longer term, TVB still needs to prove that it’s more than just a “one-hit wonder” that can continue to produce high-quality work that wins buzz in both Hong Kong and on the Chinese Mainland.

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