TVB executive says no room for new players
In the first of a two-part series, TVB executive Mark Lee Po-on discusses the threat and 'unfeasibility' of new stations in the free-to-air TV industry
If the battle over new free-to-air television licences is as much about public opinion as it is about the government's long-delayed decision, then TVB executive director Mark Lee Po-on is coming out swinging.
While a recent poll by the University of Hong Kong found that 85 per cent of the city's viewers want more choices, the two existing terrestrial stations, Television Broadcasts (TVB) and Asia Television (ATV), have been the most vocal critics, arguing that there is simply not enough advertising revenue to support more players.
"We are not against having more [fishermen] join us to catch fish, but you have to create more fish in the sea first," Lee said.
TVB is fighting the new licence applications by City Telecom (CTI) and subsidiaries of iCable and PCCW on three levels: on government procedure, public opinion and in the political sphere.
Lee has questioned the government's right to award new licences before TVB and ATV's latest licences (which were secured with the promise of vast investment) will expire in 2015. He is prepared to go to court to press the claim, and has written to all lawmakers, Executive Council members and board members of the Office of the Communications Authority for support.
"If others are escalating this [dispute] to this level, we have to follow," Lee said, perhaps referring to City Telecom chairman Ricky Wong Wai-kay's high-profile "please" for an answer on the licence applications, which the government has been considering for more than 1,000 days.
TVB planned to offer better benefits to its staff. From next year, they would work five days a week like many office workers in Hong Kong, and would get pay rises according to the inflation rate. But if anything goes wrong, the company would have to take the opposite direction.
"The bottom line is, if there's no money, we will have to cut costs. And there's no way we can improve the quality of our productions."
Would this be Plan B if more competitors emerge? "It would be inevitable," he says.
"The government must be clear about its logic and rationale [about granting more free TV licences]. It owes society an explanation on how many licences Hong Kong can accommodate. The government has never been clear," Lee said.
Commerce Secretary Greg So Kam-leung, he says, has been reluctant to even discuss the issue. "Greg told me: 'Mark, let's not talk about free-TV licences today.' What else can we talk about?"
Lee wants the government to clarify three things: how many licences it will issue in the long run, how it arrived at that number and when it will issue them.
According to Lee, the government's consultants never contacted TVB or ATV when they assessed the television market, raising concerns about the accuracy of their studies. Maintaining a tight grip on advertising and content, while introducing competition would kill the industry, the executive argued.
"There is no government around the world, which would bring in a few more stations, knowing they would fail in the end. Such behaviour is not responsible," he says.
But it seems the viability of stations is not the main concern of the city's viewers. While millions of eyes are glued to TVB's shows, audiences are quick to complain about programme quality and illogical plots.
Actor Raymond Lam Fung appears invincible to bullets or explosives in his role as a police narcotics officer in the action drama Highs and Lows. A bottle of oolong tea appears on Qing dynasty emperor Daoguang's desk in Curse of the Royal Harem. The same faces appear repeatedly in various shows: actor Law Lok-lam "dies" five times in different dramas aired on a single day.
Dramas tend to be restricted to a handful of genres featuring either an upper-class family's dispute, or the wives of an ancient emperor fighting for his love - the kind of tear-jerkers housewives enjoy after washing the dishes. It is in stark contrast to shows, such as Seven Women, that TVB produced in the 1970s, challenging viewers' minds and tastes.
And worst of all, some online users have nicknamed the station "CCTVB", accusing the broadcaster's news arm of taking its lead from the mainland's official broadcaster.
However, Lee rejects the criticism. He says TVB respects editorial independence and gives enough freedom to its creative team, allowing it to produce dramas like last year's hit When Heaven Burns, which won the hearts of young viewers (who usually reject free-to-air channels) with its subject matter - cannibalism - and political undertones.
But amid that creative freedom, ratings remain king, Lee says. "Why would [TVB] have to produce programmes that have low ratings? They can't generate revenue. No commercial operator would create products that have no market. We won't go against the market."
So, while ATV's major investor, Wong Ching, chooses to dance Gangnam Style outside the government headquarters during a protest against the licences, Lee, nicknamed "the maths man", centres his argument on the figures.
While licence applicants cite TVB's billion-dollar profits to support their argument that the market is big enough for more, Lee thinks otherwise. "It would be harsh for me to put it this way, but TVB is earning more at the expense of ATV," he says.
In 1996, TVB earned HK$2 billion from advertisements, while ATV earned HK$855 million. By last year, Lee's station was earning HK$2.8 billion, while ATV only had HK$100 million, he said.
Local television advertising revenue remains at about HK$3 billion, Lee says, much lower than advertising monitor admanGO.com's estimate of HK$18.2 billion last year.
And with ATV and TVB spending HK$2.5 billion between them, the money would soon run out if CTI lived up to its pledge to spend HK$1 million per hour on its proposed drama series.
There is a big difference between the two stations' revenue and admanGO's figures because they offer hefty discounts to major advertisers and frequenters, Lee, a member of the Hong Kong Institute of Certified Public Accountants, says. He worked for accounting firm KPMG from 1977 to 1987 prior to his television career that spans both TVB and ATV. "If there is indeed HK$18 billion worth of advertising, I won't really care how many stations there are," he says.
Advertising revenue has fluctuated in recent years, slumping after the severe acute respiratory syndrome (Sars) scare in 2003 and dipping again in 2009 after the economic crisis. When the economy goes down, advertising is the first thing many firms cut.
The amount that companies devote to television advertising has not increased as more channels have been added.
"Before 2007, there were four analogue channels in the city. The number went up to more than 10 after the introduction of digital channels, including our three [channels] and ATV's four," Lee said. "But having more channels doesn't mean more advertising revenue."
With more stations to choose from, he says: "Total advertising revenue could increase a little, but that definitely won't be a large increase."
And there are other challenges for the industry. Hongkongers work ever longer hours and are likely to become more selective about which channels - if there are more available - they should devote their time to.
"People need to work and to sleep. It's a global trend that they are watching less TV," Lee said.
There is also increasing competition in the ad market - internet ad revenues grew 27 per cent last year while magazine advertising was up, according to admanGo. "You can see all the outdoor ads in MTR stations. Video ads appear in buses' TV sets and even in lifts," Lee said.
He draws on his own experience at the helm of ATV between 1992 and 1996 to explain the likely consequences of too many stations competing for too little revenue. "You cut the costly local productions and buy overseas dramas," he says. Dramas produced elsewhere are available at a fraction of the cost of locally produced series.
"I cut the hours of drama production from 600 to 260 [at ATV]," he recalls. The struggling station, which ran two dramas of its own every day during the 1990s, has since purchased more dramas from the mainland and the rest of Asia for dubbing. ATV still produces variety shows, but local dramas have been completely wiped out.
Lee says the situation is aggravated by the government's reluctance to allow the stations to expand beyond Hong Kong's small market. While their signals spill over into the heavily populated Pearl River Delta, ATV and TVB are not allowed to air their own ads. Instead, they have to hand over the rights to the mainland authorities for a paltry annual fee of less than HK$100 million.
TVB has made overtures during discussions on the mainland-Hong Kong Closer Economic Partnership Arrangement, but there has been no sign of a breakthrough.
The uncertainty over the new licences has also stymied TVB's plans for overseas expansion, which might be risky. To step up its presence in the West, over the last six months it was planning an international version of the English-language Pearl channel to be broadcast on satellite stations. News would be its focus, mixed with travel shows and programmes about Chinese culture.
But Lee had to turn his attention to finding ways to fend off rivals, and he has harsh words for Ricky Wong. "I don't like the aggressive way he does things."
He says Wong's CTI plotted to poach half of TVB's 80-strong drama team in one weekend last year. "[CTI] wants to paralyse our operations. In the end, 25 of our staff quit. … If it is working for the well-being of the whole industry, it should train its own people instead of doing something this hostile.
"He keeps bashing our station's quality, but at the same time recruits our people and highlights what TVB dramas they worked on in the past."
But Lee strikes a more optimistic note when he talks of reforming the station's operations - regardless of the competition
"People are craving openness, and we are heading in that direction," the TVB executive says.
For the first time ever this year, for instance, TVB invited members of the public to choose the winner of the Miss Hong Kong beauty pageant. But the experiment backfired, with the system crashing as millions of people tried to cast their votes. The winner was eventually chosen, as in previous years, by a panel of judges.
This has not deterred Lee. Viewers will be able to vote for their favourite actor, actress and drama in TVB's annual awards show at the end of this year.
It is also going to scrap its three-decade-old Jade Solid Gold Best Ten Music Awards Presentation in favour of a more authoritative show jointly organised by TVB and three radio stations. The show - which other stations say has yet to be finalised - will also feature public voting.
"TVB does not have hegemony. We want to give the power back to the people," he says.
Lee emphasises that his station is an institution. "Victoria Harbour, Ocean Park and TVB come to people's minds when they talk about Hong Kong. The wrong policy could crush the 45 years of achievements that TVB has attained."
In tomorrow's edition, City Telecom boss Ricky Wong Wai-kay shares why new free-to-air licences are a must