TAIWAN OPERATIONS In the meantime, the construction of the Linkou headquarters continued during the year, with completion TVBS – Taiwan around 2018/2019. Taiwan registered a growth in GDP of 3.5% in 2014, representing a substantial increase from 2.2% in 2013. OVERSEAS PAY TV OPERATIONS Yet, it was a challenging year for the traditional media, The overall pay TV business environment remains including the satellite TV channels, because of intense unfavorable as rampant IP-based piracy continues to competition from the new media, which is growing at a plague the industry globally. Overall revenue recorded a double-digit percentage pace, and a lack of enthusiasm drop of 21% to HK$243 million. Together with other major for Taiwanese content beyond the home market. content owners, we support trade associations’ push for The results of TVBS, our Taiwan operations, however, overseas governments to legislate and use administrative stood out from its peers due to a surprise windfall in measures against IP piracy. These efforts have achieved advertising revenue. This was because TVBS picked up some progress during the year; for example, the Australian the exclusive broadcasting rights of the elimination round government demanded local Internet service providers of the World Cup following an unexpected contractual to work with content owners to disconnect websites and dispute between FIFA and the original broadcaster in IP addresses used to connect to copyright-infringing mid-tournament. TVBS finalised the contract with FIFA contents. within 48 hours and set up its operation to broadcast In view of the growing demand for OTT service, we the remaining matches on TVBS’ Channel 56 in full high launched “TVB Anywhere”, an IP-based pay TV service, in definition for the first time. In addition, TVBS also recorded Europe in May 2014. This new technology is much more a better-than-expected performance from the New Year competitive in terms of costs compared with satellites. Eve Countdown Special. However, the increase in the As we have to keep our business model cost-effective, overall net profit for the year was moderate due to a the OTT technology is considered our best viable option continued weakness in the advertising market. going forward. The World Cup coup went beyond giving TVBS a huge boost for the summer: the coverage of the final 16 North America (USA) matches on TVBS News (Channel 55) helped strengthen Content consumption on new media showed significant its leadership position among Taiwan’s news channels. growth, particularly in the young generation group. We Since the World Cup, the channel has maintained at least invested in this growing trend and worked closely with a 25% share of the audience, giving it a healthy lead over major new media platform operators, including Hulu, second-place ETTV News’s 20% share. Dramafever, Crunchyroll and Youtube, to offer the latest TVB contents. Viewership of TVB contents on new media On the in-house produced drama front, although The Way increased significantly during the period and we started We Were was the highest-rated teen idol drama series in receiving advertising revenue from these platforms. In the Taiwan, international demand, especially from Mainland direct-to-home (DTH) satellite TV business, we joined an China, for this type of content is weak. We are therefore alliance led by DISH Network to take legal actions against not optimistic that this kind of programming could fetch the IP-based pirates. good prices from content buyers going forward, especially when Korean and Mainland productions are all the rage these days. We are experimenting with the right mix of products that have broad appeal to both domestic and international markets.

Television Broadcasts Limited Annual Report 2014 31 Review of Operations

Australia To further extend our business opportunities from traditional TV to the Internet, we used different new Our investment in event marketing and grand shows, media platforms such as Wechat and Weibo to conduct such as Miss Australia Chinese Pageant, has created a new a variety of online promotional activities, attract more source of advertising income and contributed to revenue young Chinese followers, and expand our viewership in growth. Our locally produced contents helped reduce Mainland China. a loss of subscribers to piracy. We launched the “TVB Anywhere” service in Australia in the first quarter of 2015 to gradually replace the DTH satellite service. We shall COMBATING PIRACY adopt a low operating cost model to ensure our pay TV Protecting intellectual property rights is one of the business remains competitive in the market. important measures we have taken to protect our revenue. During the year, the Group’s internal anti-piracy Europe task force continued to place extensive surveillance on the The launch of the “TVB Anywhere” service in May 2014 Internet to detect infringing websites, infringing apps and led to a positive growth in the number of subscribers. illicit streaming boxes. Administrative or civil actions were We closed down the DTH satellite business by way of taken, resulting in the shutdown of more than 20 major liquidations of a number of subsidiaries and appointed infringing websites and the removal of around 113,000 service agents to help operate the new “TVB Anywhere” links leading to infringing contents. service in Europe. This arrangement has largely reduced operating costs and significantly improved our business We also worked with local and overseas law enforcement performance. agencies to explore the possibility of taking criminal actions on the suppliers and retailers of illicit streaming boxes. Investigations are ongoing. CHANNEL OPERATIONS We continued to lobby different governments, including TVB8 and Xing He Channels the USA and the UK, to improve copyright legislation TVB8 and Xing He channels are distributed through and provide effective protection to copyright owners satellite to Mainland China and as part of the channel against online piracy. We made submissions to Australia offerings to MEASAT, StarHub and Telekom Malaysia. Total and Singapore in response to their public consultations. revenue in 2014 recorded a drop of 6% to HK$125 million. Locally, we made submissions to the Government and provided deputations during the legislative process of Due to the rapid development of new media technology, the Copyright (Amendment) Bill 2014. To coordinate the audience’s viewing pattern has changed and become international efforts in tackling the streaming piracy more selective. In order to cater to their needs and to problem, the INTERPOL, in response to our request, further develop our business in overseas markets, we plan agreed to follow-up the matter with a strategy action to upgrade the TVB8 and Xing He channels to HD format plan. in 2015. The Group maintained close liaison with local and Co-operation projects with our partners in Mainland overseas governments, copyright associations, concern China and South East Asia, including Chinese New Year groups such as the Cable & Satellite Broadcasting Chinese Taste with Shanghai Media Group, City Walker Association of Asia (CASBAA) and the U.S. Coalition - Fujian with the Provincial Government of Fujian, and Against Online Video Piracy (CAOVP), and other industry StarHub TVB Awards Presentation 2014 with StarHub in players in the fight against piracy. Singapore, received positive feedback from both the audience and advertisers. This has once again proven that locally produced events with the involvement of our audience can help attract more viewers and increase our revenue.

32 Television Broadcasts Limited Annual Report 2014