Broadcaster TVB warns of sharp fall in profit this year
Television Broadcasts (TVB) expects to post a sharp decline in net profit for this year, after its earnings were hit by the lingering economic slowdown in Hong Kong, the costs of covering the Rio Olympic Games and start-up losses at its over-the-top video service.
The city’s premiere free-to-air terrestrial television broadcaster said in a filing to the Hong Kong stock exchange on Wednesday that it estimated this year’s net earnings to be down by between 55 and 65 per cent, based on the company’s preliminary assessment of its unaudited management accounts for the 10 months to October 31.
Last year, TVB recorded a 6 per cent decrease in net profit to HK$1.33 billion from HK$1.41 billion in 2014.
The company blamed “a prolonged economic downturn in Hong Kong since the last quarter of 2014”, which has resulted in a weak advertising market.
Its Hong Kong broadcasting and advertising business is expected to see close to a HK$400 million decrease in revenue, a 13 per cent year-on-year drop, that would directly impact overall profit for the year.
The broadcast of the Rio Olympic Games in the summer contributed to what TVB described as “an under-recovery of costs” of HK$150 million, which was in line with its previous estimates in March and August.
According to TVB, the start-up losses from its myTV Super over-the-top video service - from its launch on April 18 to December 31 - is estimated to reach HK$50 million, lower than the previous estimate of HK$100 milion, because of better-than-expected demand.
The myTV Super is a paid service that allows viewers to watch more than 19,000 hours of TVB’s content library on demand, via a set-top box or its mobile app. The service also supports various third-party channels from overseas, such as Disney, AXN and Sony.
As of December 4, the number of myTV Super service users via set-top boxes and mobile apps has exceeded two million, well above the target of 1.4 million users by end-November.
Daiwa Capital Markets analyst Carlton Lai said in a report that the strong reception prompted major launch partner Hong Kong Broadband Network to order an additional 450,000 set-top boxes from TVB, “more than doubling the number of set-top boxes to which it originally committed”.
“Management’s goal in the near term is to maximise the number of users, which would allow it to become a top distribution platform for digital media in Hong Kong,” Lai said.
TVB is scheduled to report its financial results for this year in March.