Netflix: the digital era is coming to Hong Kong television and the government needs to keep up
Competition is good for every sector of the economy, and that has to be especially so for Hong Kong's television broadcasting market. A lack of investment by some firms has led to mediocre productions and poor use of technology. Viewership of the two free-to-air stations, cable and online, has consequently slipped along with profits. The shakeup offered by the launch next year of US online streaming giant Netflix and increasing interest by mainland firms is long overdue.
Technology has changed viewing habits. Netflix, which streams films and TV shows to homes and mobile devices at any time for a low cost, has an aggressive global expansion strategy. The adding of Hong Kong seems to especially threaten Asia Television, also known as ATV, and fellow free-to-air broadcaster and market leader Television Broadcasters Limited, or TVB.
ATV has for years struggled with debt; the mainland company China Culture Media International's plan to buy a 41.66 per cent stake and its promised HK$5.1 billion rescue package over six years could not have been more timely. But little is known about the firm or where it will find the funding. Government regulators scrutinising the deal have to ensure rules are followed. TVB, while highly profitable, experienced a HK$300 million drop in net profit last year to HK$1.4 billion. The expansion of the lucrative mainland entertainment market has bled Hong Kong of many top actors, writers and production staff, leading to a decline in the standard of locally produced content. Cable and online channels are struggling to turn a profit or have seen falls in earnings.
Government regulations limit the number, and dictate the operations, of terrestrial broadcasters. There are no such restrictions online, though, which is why entrepreneur Ricky Wong Wai-kay's Hong Kong Television gravitated there after failing to get approval to buy ATV. It has since been joined by two mainland competitors; one, LeTV, last week foreshadowed major expansion plans. Netflix will join them online, offering tens of thousands of films and the latest US TV shows.
Hong Kong may be a small market, but the interest of mainland and American firms reveals its vitality. In so competitive an environment, companies have to invest, embrace new technologies and be creative. The government has to relax its regulations and look to the digital era. Firms that best meet public demands will thrive.