Review of Operations
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REVIEW OF OPERATIONS OTHER HONG KONG OPERATIONS Group’s total interest in TVBPVH stood at HK$646 million as of 31 December 2014 (2013: HK$628 million). INVESTMENT IN HONG KONG PAY TV With the new OTT business model which the Group PLATFORM believes will transform the pay TV service, it has For the year ended 31 December 2014, TVB’s share of the confidence in the future business prospects of TVBPVH. net loss of TVB Pay Vision Holdings Limited8 (“TVBPVH”) amounted to approximately HK$72 million (2013: HK$53 MAGAZINE BUSINESS million). Despite a highly challenging business environment for As stated in the interim report for the period ended print including magazines in 2014, TVB Publications 30 June 2014, online piracy using Internet Protocol-based controlled costs effectively and launched new revenue- devices had exploded. Despite significant investment in generating initiatives. Free on-pack premiums (gifts improving the infrastructure for distribution of the pay TV attached to magazines) helped boost circulation. channels, and efforts made to migrate subscribers from satellite to optical fibre during the year, residential pay In June, we launched a new upmarket weekly magazine, TV subscribers failed to increase and its related revenue “Live”, which is distributed free of charge alongside TVB recorded a drop of 5% from last year. The Group’s pay Weekly and to high-end readers on a controlled circulation TV operation was severely affected by piracy, which basis. The magazine aims to develop advertising revenue principally used unlicensed broadcast of the World Cup in the luxury goods categories. as the content driver to attract consumers in the sale of TVB Zone, a free mobile app, was revamped in June to many kinds of IP based TV boxes. The proliferation of these allow readers to view selected stories of TVB Weekly boxes is causing great damages. TVB had no choice, but and to provide an in-app video function to enhance the to quickly step in to take strong legal and enforcement magazine’s feature stories. The exclusive online videos actions against these pirates. helped generate nearly 290,000 downloads of the app in As stated in the Chairman’s Statement for the year, a the second half of 2014. major effort by the Group to revamp the pay TV service is at an advanced stage of development. The roll out of MOVIE PRODUCTION a new service encompassing the vast resources of TVB is During the year, TVB partnered with Media Asia Film planned for the early part of 2016. This planned service Production Limited, One Cool Film Production Limited will use the OTT technology to deliver a multitude of TVB and Dongyang Enlight Pictures Co. Ltd. completed the (free and pay TV channels) and acquired channels, and production of a major movie Triumph in The Skies. The programmes, as well as to offer viewers video-on-demand movie, which leveraged on the successful TVB drama capability using their own devices, including TVs, personal serial Triumph In The Skies II, starred Louis Koo, Sammi computers, mobile phones and tablets. We believe that, Cheng, Francis Ng, Julian Cheung, Charmaine Sheh, and with this completely new service covering what we Kuo Tsai Chieh. TVB also invested in the production of name as the second platform, the Group will be able the movie From Vegas to Macau II, which was directed by to capture the audience group seeking a wide range of Wong Jing and starred Chow Yun Fat, Nick Cheung, Carina entertainment programmes from TVB and other content Lau, Shawn Yue and Angela Wang. providers. Also, this service will be competitive in gaining subscribers in the pay TV market as it has a much lower Both movies would be released in Hong Kong, Mainland cost to consumers when compared with the traditional China and in the international markets in February 2015 pay TV model. to coincide with the Chinese New Year. The total interest in TVBPVH as of 31 December 2014 Movie production will be another core business of before any impairment losses was HK$1,156 million the Group. Shaw Brothers Pictures Limited, wholly- (2013: HK$1,138 million), which represented the owned by TVB, was officially launched at the Hong Kong total cost of investment, a long-term loan and trade International Film & TV Market (FILMART) in March 2015. receivable balances, less the accumulated share of losses. Management had undertaken a vigorous review 8 of the amounts due from TVBPVH and concluded that The Group’s economic interest in the Hong Kong pay TV platform through TVBPVH stands at 90%, and the Group’s no further provision for impairment was required to be voting interest in TVBPVH remains at 15% for the year 2014. As made in the Group accounts as of 31 December 2014. the Group does not exercise control over TVBPVH, the income Accordingly, after deducting the accumulated provision statement and the statement of financial position of TVBPVH for impairment loss of HK$510 million, the balance of the are equity accounted for as an associate in the accounts of the Group. Television Broadcasts Limited Annual Report 2014 25.