Source: Hong Kong Economic Journal
TVB CEO Mark Lee did an interview with the Hong Kong Economic Journal yesterday where he talks about additional changes that will be happening at the station in the coming months. In the interests of time, I'm not going to translate the entire article (there is a summarized version on HKEJ's website, which I've linked to above), however here are some main points from the article that are important to know.
Before I list out the main points though, need to preface with this -- several months ago, TVB already announced their intention to switch to becoming a multimedia digital platform, as they recognize that the way audiences consume their entertainment nowadays has changed significantly due to all the advancements in technology. TVB feels that their previous business model is no longer viable in today's world and so they need to adapt to the changing times. Of course, this is not something that will happen overnight, so TVB has been taking gradual steps over the past year with the goal of transitioning completely in the near future. To this point, Mark Lee had actually done an interview several months prior where he had hinted at some of their plans, but at that time, he wasn't very specific on what exactly those plans would entail….with this interview, he lays it all out…
- Currently, TVB is about two-thirds of the way done with their "digital transformation" plan and estimate that they will need another year or so to finish the remaining one-third. They are estimating that they should be 100% up and running by the year 2020.
- In restructuring the company, there are 4 main areas of focus that will drive TVB's new direction: increase revenue from advertising, control expenses through proper utilization of investments, increase the number of co-productions with other companies, expand Big Big Channel and other internet-related revenue streams (more detail on each of these aspects below).
- Staffing – by the end of the year, the plan is to reduce 5% of current staff.
- Total staffing right now is 3900 employees, so reducing by 5% means that approximately 200 staff will lose their jobs by the end of the year.
- This reduction is in addition to the changes they already made earlier in the year. Here's how the numbers break down:
- Looking at TVB's past annual reports, the number of full-time staff they employ is usually around 4000 or so – this includes all contracted staff in HK as well as overseas (meaning outside of HK – basically wherever TVB has a presence).
- As of June 2018, total staff count was 4333 – however after closing down the sports/athletic department and laying off staff from the international arm (TVBI) last month, total staff count as of right now is approximately 3900 people.
- If we take the reduction in staff that was made previously (reduction from 4333 to 3900), that's approximately 10% reduction in staff (rough estimate about 430 people)….couple that with the 5% reduction (estimate 200 people) by the end of the year, that would mean that this year alone, TVB would've laid off / fired 15% of their staff, which is obviously A LOT! I hope those 630 people will be able to find work elsewhere!
- As part of re-evaluating which areas they will be spending their money, it was determined that they are going to invest more resources (financial and otherwise) into their OTT platform, which includes expanding myTV Super and also increasing their footprint in other markets.
- The money that was previously spent on their "traditional TV channels" (HK free-to-air channels such as Jade, Pearl, etc.) will be significantly reduced.
- As announced earlier, there will be a gradual increase in co-produced series (Mark Lee didn't specify "who" they would be co-producing with but given TVB's recent direction in shifting to the Mainland market, the assumption is that the co-productions will be with Mainland production companies or streaming platforms). In 2019, they plan on having 4 co-produced series and in 2020, they will increase that number to 6 series.
- The co-productions will utilize more on-location filming (meaning outside of HK) as well as real location filming (no longer limited to filming only inside TVB City).
- Since majority of filming will be done on location, there will be less need for filming inside their massive Tseung Kwan O facility, so they will be shutting down some of the studios within TVB City and in turn, either transferring the staff from those studios to different positions or getting rid of the positions altogether.
- In terms of myTV Super, they will be switching to an On Demand format. So instead of what they have now, where programming is arranged to air at a certain time, all channels will be replaced by On Demand service whereby the user can pick and choose what to watch and when to watch it. This will help them further reduce their expenses by not needing to have their staff arrange programming, decide on scheduling and content, etc.
- For overseas viewers, current format will be gradually replaced by TVB Anywhere (their OTT service outside of HK), which also means that whatever events were associated with overseas platform will also be reduced. [It's a bit vague but the "events" they are referring to are things such as award ceremonies – hence their announcement earlier this year that they're cancelling this year's Astro Awards (in Malaysia) and Starhub Awards (in Singapore) – for those who were wondering, it sounds like based on the above, these cancellations will be permanent!].
- The print edition of TVB Weekly Magazine will be discontinued. Instead, they will switch to an on-line version, though no guarantees that the content will be the same. This will help them save on printing and distribution costs.
- Mark Lee emphasized that TVB is merely "changing with the times" and that these changes aren't being done haphazardly. He said that their mantra is basically – "reduce where necessary, increase where necessary." He said that despite the reduction in staff this year, they have actually hired more staff over the past years in areas that count, such as in the scriptwriting department, sales and finance, etc.
- Increase revenue from ads
- TVB's main source of revenue is (and always has been) advertising – which currently accounts for approximately 57% of their revenue.
- Mark Lee claims that the ad market for the first half of the year was "dismal" as there was only a minor increase of 2% revenue. He said that many businesses were hesitant to place ads due to the retail market in HK not doing too well (most of their ad revenue the first half of the year came from businesses mostly specializing in beauty products, medicine, health and wellness options, etc.)
- Mark Lee said that he is confident they will see more of an uptick in advertising in the second half of the year, since that is traditionally the "peak period" for advertisers to get their products out there due to all the holidays and such. Also, TVB will be increasing the number of anniversary series this year from 2 series to 3 series, which means there will be additional opportunities for businesses to buy advertising during those "prime" timeslots.
- Many companies are placing more emphasis on "new media" (i.e. web series, online streaming, etc.) nowadays due to the ease of getting content out to a wider audience in a quicker manner, plus there are fewer restrictions than with traditional media. To this point, Mark Lee said that the advertising ratio of "new media" versus "traditional television" has reached 1:9 for the first time (meaning for every 1 ad placed on their internet platform, they would need 9 ads placed on traditional TV platform in order to make the same amount of money). To this point, their goal is to increase the number by 2% by 2020.
- The first half of the year, advertising on myTV Super increased by a whopping 76%, which allowed them to turn a profit (where they were "in the red" previously), bringing in $85 million additional revenue for them.
- In terms of OTT format, there is a huge difference between using the app and using set-top boxes to watch their content – the former (the app) is based on how long audiences watch the content for while the latter (set top box) is based on balancing advertising with subscription fees. Mark Lee cited the following statistics: starting first week in July, there was an average of 1.26 million audiences streaming their content each week, with each audience member watching on average for 16 hours – if they are able to increase this by 3% each year, those are more than solid numbers to attract advertising.
- In terms of Big Big Channel, there are plans to expand it beyond a platform where audiences can interact with TVB artists. Earlier this year, TVB already launched Big Big Shop, which is their e-commerce platform for consumers to buy regular products as well as TVB-related stuff (similar concept to what HKTV did with HKTVmall). In the near future, they are thinking of expanding to include online games and competitions as well as other "value-added" services.
** Note: In case you guys are wondering why there are so many "numbers" and "calculations" in this article – well, Mark Lee used to be (and I think still is now) an Accountant – and supposedly a mighty good one at that – so it's no surprise that he's always bringing up numbers and bottom line and revenue, etc. Based on my personal experience (20+ years working with accountants at the companies I've been a part of), I find most of them are rigid and don't usually consider any circumstances outside of the numbers at hand (they are basically the anti-thesis of customer service). When customers are late in paying their bills for instance, the accounting people I've worked with our pretty relentless in chasing down the money regardless of the circumstances, even if it means foregoing the relationship with the customer (in other words, they don't care if you offend the customer or if that customer will no longer be a customer because you you're unwilling to work with them or at least give them a little more time to pay or whatnot, they want the money regardless of the outcome). In that light, not sure if TVB having an Accountant at its helm calling all the shots is a good thing or not….