TVB surrenders pay-TV license in favor of OTT video future

TVB Network Vision

ITEM: Hong Kong broadcaster TVB is handing in its traditional pay-TV license after close to 13 years of trying to make it in the business – supposedly because of piracy but more likely because TVB has learned the hard way that the future of pay-TV is OTT.

According to local news reports, TVB Network Vision (TVBNV) has notified the regulator of its intention to surrender the license. Once the regulator accepts, TVBNV will be officially done, and existing monthly subscriptions will expire without renewal.

TVBNV actually lasted longer than most companies who tried to make it in Hong Kong’s pay-TV market. It was one of four firms who successfully applied for pay-TV licenses in 2000 when regulator OFTA (known as OFCA today) liberalized what was a duopoly market between incumbent CATV operator i-Cable and Hong Kong Telecom’s ITV (which eventually became NOW TV in 2003). Of the four pay-TV upstarts, Hong Kong Network TV bailed in 2001 without launching any service at all, while TV Plus and Yes Television were out of the game by 2004, the same year that TVBNV began commercial services. i-Cable and NOW TV survived them all, although NOW TV is now the dominant player, while Wharf Holdings is reportedly looking to sell off i-Cable.

TVB – who issued a profit warning [PDF] in December last year – blamed the shutdown on everything from the economic slowdown to the rise of OTT streaming services and online piracy, according to the South China Morning Post:

 “The deteriorating business and operating environment in recent years have rendered the pay TV business not commercially viable,” a TVB spokesman said on Tuesday.

“Regrettably, the government has done little to address the issues, particularly online piracy and some of the regulatory provisions which do not keep up with the times.”

A statement from TVB said: “Virtually all the contents provided by TVBNV have been pirated and made available on a large number of illicit websites, apps and set-top-boxes.”

Piracy – and the failure of the government to stop it – is often a tired old standby excuse for pay-TV players when their revenues and/or subscriber numbers are in decline, although TVBNV has a more convincing case for piracy impacting its business, as it produces and owns the majority of the content that runs (ran) on its system.

On the other hand, most of that same content is presumably running on TVB’s OTT video streaming service MyTV SUPER, which it offers in partnership with operators like broadband provider HKBN and mobile operator 3 Hong Kong, and which is not affected by the TVBNV shutdown. In fact, TVB is offering Network Vision subscribers “special packages” to switch over to MyTV SUPER. And MyTV SUPER has been a runaway success compared to TVBNV – at least in terms of customers.

TVBNV’s subscriber base maxed out at 200,000 in 2013, and has been slumping ever since. At the start of December last year [PDF], MyTV SUPER had racked up over 2 million users (via the service’s set-top box and mobile app) in just eight months, which is way above TVB’s initial target of 1.4 million users by November 2017. And while the service isn’t profitable yet, TVB says the start-up loss is “estimated to decrease from approximately HK$100 million [around $12.9 million] to approximately HK$50 million.”

To be sure, 2 million users doesn’t mean 2 million paying users. It means 2 million people have either downloaded the free app or have had the STB installed in their home. (Full disclosure: I’m one of the latter group, and that STB is only there because HKBN is my broadband supplier and it was impossible to get a service renewal package that didn’t include a MyTV SUPER box. I have yet to spend anything on the VOD content, although I don’t watch all that much TV to begin with, so I’m not exactly a typical customer.)

The point is that TVB has learned from experience (as well as by keeping an eye on services like Netflix, Hooq et al) that there’s more mileage in the OTT video streaming version of pay-TV than the traditional cable-TV model. HKT – which runs the successful IPTV-based pay-TV service NOW TV – has already adapted to that reality with Viu, an OTT video platform launched last year via PCCW Media.

So in that sense, TVB isn’t quitting the pay-TV business so much as adapting to the times by shifting its focus to OTT, which is where pay-TV is heading.

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