Television Broadcasts Ltd

Television Broadcasts Ltd - SWOT Analysis

Television Broadcasts Ltd (TVB) holds investments in television business. An established
market position, revenue growth, and higher TV ratings are its strengths, even as profitability,
and liabilities could be a cause for concern. Acquisition of Ztore Investment Ltd, global media
industry, and relaxation of regulations are likely to provide growth opportunities for the
company. However, viewer preference, competition, and industry consolidations could affect
its operations.

Television Broadcasts Ltd- Strengths

Strengths - TV Ratings
Higher TV ratings enable the company to secure higher advertisement revenue from
advertisers and more views on digital platforms and sell its content in digital platforms. TVB’s
Jade is the most popular channel in Hong Kong in terms of an average audience share of
77% and strengthened its programming line to serve local tastes and preferences. This
channel also secured an average prime time TV rating of 24.

Strengths - Market Position

An established market position enables the company to meet growing customer demand and
secure opportunities from market transition trends. With an audience share of 83% in young
audience group and 85% in high income viewership of Hong Kong TV broadcasting. TVB's
Jade channel is the most-watched TV channel in Hong-Kong and co-produces programs with
Chinese online platforms. The company is one of the few broadcasters in the world operating
an integrated business model covering production, broadcasting, and distribution,
supplemented by a potent artiste pool. As of December 2021, the company had 9.9 million
myTV SUPER’s registered users, over one million myTV SUPER’s paying subscribers, and
1.9 million myTV SUPER MAU registered users. In China, the company had 76 million
followers of TVB-related accounts on Chinese social media platforms, 34 million Mai Dui Dui
downloads, and 5.6 million Mai Dui Dui users. In other markets, the company had 20.5 million
TVB YouTube Channels MAU, 9 million TVB Anywhere aggregated users, and 7.5 million
TVB YouTube subscribers.

Strengths - Revenue Growth

Growth in revenue improves investors’ confidence in the company and enables it to pursue
expansion plans. In FY2021, the company generated revenue of HKD2,898.6 million as
compared to HKD2,724 million in FY2020, with an annual growth of 6.4%. such growth in
revenue was due to the increase in Hong Kong TV Broadcasting, and E-commerce business
segment revenues.

Strengths - Profitability
Though the company’s revenue increased in FY2021 over that in the previous fiscal, its
profitability declined. Declining profitability decreases the company’s ability to provide higher
returns to its shareholders. In FY2021, the company reported an operating loss of HKD654.3
million as compared to an operating loss of HKD243.4 million in FY2020. A decline in
operating performance indicates lack of efficiency in cost management. The net loss of the
company was HKD646.7 million in FY2021, compared to a net loss of HKD280.9 million in
FY2020.

Television Broadcasts Ltd - Weaknesses

Weaknesses - Liabilities
Increasing liabilities might prevent the company from meeting its short-term obligations. In
FY2021, the company reported current liabilities of HKD2,955.8 million as compared to

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Television Broadcasts Ltd

HKD2,533.8 million in FY2020, which shows an increase of 16.6%. The current ratio was 1.4
in FY2021 as compared to 2.5 in FY2020. Such significant increase in liabilities could affect
the company’s credibility in the market and pose operational risk when it strives to raise
money for investment.

Television Broadcasts Ltd- Opportunities

Opportunities - Global Media Industry

The company stands to benefit from the growing global media industry. According to in-house
research, the industry is expected to reach US$1,234 billion in 2024. Advertising is the
largest segment of the global advertising industry, accounting for 52.7% of the industry's total
value, followed by Broadcasting and Cable Tv (21.2%), Publishing (19.1%), and Movies and
Entertainment (7%). The US accounted for 35.1% of the global advertising industry value,
followed by Asia-Pacific (34.1%), Europe (23.5%), the Middle East (1.2%), and Rest of the
World (6.1%). The company, being a provider of media services, stands to benefit from the
growing outlook for global media industry.

Opportunities - Acquisition of Ztore Investment Limited

TVB continues to view strategic acquisitions as a major part of its growth strategy. In August
2021, the company acquired Ztore Investment Ltd, an operator of online supermarkets. This
acquisition could help the company strengthen strategic potentials of TVB e-commerce
business and operations of Big Big Shop and Neigbuy. It would also help TVB to become a
new landscape of Hong Kong’s e-commerce and fulfill the needs of consumers and
merchants, making the entire online retail market thriving and maximizing benefits for
shareholders, merchants and customers.

Opportunities - Relaxation of Regulations

Favorable regulations could benefit the company’s operations. The Communications Authority
relaxed the regulation of indirect advertising in television program services and lifted the ban
on broadcast of advertisements for undertaking and associated services. This diversifies
advertising sources and provides a balance between providing a contributory business
environment to licensees in strict competition environment in the broadcasting industry and
protecting viewer interests. Indirect advertising would be permitted in TV programs except for
news, current affairs, children programs, educational programs, religious services and other
devotional programs. Relief from restrictive broadcasting regulations helped myTV SUPER to
allow advertisers market their products and thus, manage to lift conversion rate through
interactive ad procedures. It enhanced the efficiency of advertising solutions and
strengthened digital and data-driven proficiencies through targeting technology and big data
analytics.

Television Broadcasts Ltd - Threats

Threats - Industry Consolidation

Industry consolidation could affect the company’s ability to maximize its content value through
distribution platforms. Many of the territories in which TVB distributes its networks also have a
small number of dominant distributors. Continued consolidation within industry could reduce
the number of distributors to carry the company’s programming, subject its affiliate fee
revenue to greater discount volume, and increase the negotiating leverage of the cable and
satellite television system operators.

Threats - Intense Competition

The company operates in a highly competitive media and entertainment market. The factors
that determine competition in the industry include service performance, price, and sales and

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distribution capabilities. TVB faces competition from Asia Television Limited, APT Satellite TV
Development Limited, HK Television Entertainment Co Ltd, and Network 18 Media &
Investments Ltd among others. Apart from the established players in developed countries,
players from emerging countries are also competing hard to garner greater market share.
Many of its competitors have a longer operating history, greater brand recognition,
established customer and supplier relationships, and greater financial resources, which could
lead to the creation of innovative products and business expansion through acquisitions.

Threats - Viewer Preference

The company is subject to change in viewer preference due to advancements in the
technology, which allow users to access content avoiding advertisements, and could affect
TVB's advertising revenue. Multiplying uses of technological advancements on such user-
generated content sites, Internet and mobile distribution of video content, streaming and
downloading from the Internet and digital outdoor displays also affect the company’s
business. Advanced technological devices allow customers to view or listen to television or
radio programs, forwarding or skipping advertisements. High-churn rates to TVB's overseas
pay TV partners because of change in viewership preferences and media consumption
affected its revenue flows in Programme Licensing and Distribution.

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