Hong Kong Television Network had a great start to the week Oct. 6, after its share price spiked up almost 18% on the news that its HKTV subsidiary will launch over-the-top (OTT) video services next month.
HKTV’s new dramas and programs will be distributed via online and mobile platforms as well as through Xiaomi set-top boxes.
The broadcaster will run six and a half hours of programming every day: two hours of its own dramas, half an hour of self-produced variety shows and four hours of acquired content. Programs will be available from 6am daily and last for 60 days.
HKTV is targeting the affluent 18-45 demographic, with 15-second ad slots for some of its top dramas running at HK$400-800,000 (~US$50-100,000).
Management estimate Hong Kong's mobile audience at 500,000 or more, while 400,000 Xiaomi set-top box users should also be able to view its programs.
At the same time, HKTV will also launch an online shopping service in November, leveraging product placement across some of its dramas. The company plans to expand this service to China and Southeast Asia longer-term.
HKTV is creating dramas featuring food and apparel as well as related products from clients on its shopping platform. Internet and mobile TV viewers can purchase the products through an online shopping link.
The shopping platform is expected to offer more than 100,000 items from 200-plus tenants from Hong Kong, Japan and Korea.
HKTV plans to expand the shopping service to target ethnic Chinese in Malaysia, Thailand and Singapore.
Hong Kong Television Network, with a current publicly traded market value of ~US$300 million, has already spent more than US$60 million in cash on production and content businesses. The company failed to win a free TV license in Hong Kong after a two-year wait.
The company had US$250 million net cash as of end-Feb. 2014, but building a significant revenue base will take time.
“Clients are interested in HKTV mainly, not as an OTT TV platform, but as a service with online shopping potential,” Melanie Lo, CEO of media buyer GroupM Hong Kong, tells Media Business Asia.
“There is a lot of interest from companies looking to sell goods, and transact with a younger audience with purchasing power.”
Lo is more cautious on HKTV's advertising potential.
“The dramas we’ve seen so far have passed the quality test, and a number of clients will commit to a test run and experiment, but the key is maintaing a sustained quality over a period of time to attract a significant audience base."
HKTV offers brands a very different proposition to existing linear channels, and will therefore require dedicated audience loyalty over a long period of time.
“With traditional TV, clients are buying into time-slots and programs," she says. "With HKTV, they’re essentially just buying into programs and the content, so you need a sustained loyalty from the audience and quality on the content."
Each episode of HKTV’s dramas will have four advertising sections integrated or embedded into content, lasting 1-1.5 minutes each.
According to industry analysts Media Partners Asia (MPA), total TV advertising revenues in Hong Kong will grow more than 5% in 2014 to reach a net base of more than US$590 million. Free TV will contribute ~90%, with incumbent broadcaster TVB representing almost 80%.
Digital advertising, including online and mobile, is expected to reach about US$130 million this year in net terms, according to MPA. TVB’s MyTV platform, which offers free catch-up services online, is set to have a 10-15% share of this pie by end-2014, says MPA.
In the TV space, i-Cable’s Fantastic TV and PCCW’s Hong Kong TV Entertainment have received in-principle approval for two new free TV licences but licensee concerns over spectrum and related issues will delay launch.
Meanwhile, free-to-air laggard ATV indicated this week that its shareholders were working on a change in material interests in order to solve significant cash-flow issues.
HKTV’s new services are leveraging a mobile TV license acquired from China Mobile Hong Kong in 2013.
However, Hong Kong's regulator has indicated that HKTV needs a separate domestic TV program license to offer commercial mobile TV services, if it goes ahead with its proposed use of Digital Terrestrial Multimedia Broadcasting (DTMB) transmission technology, also used by ATV and TVB.
HKTV chairman Ricky Wong pledged to seek a judicial review of this requirement, but there has been no update on the matter since 1H 2014.