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Review of Operations REVIEW OF OPERATIONS INTERNATIONAL OPERATIONS AFRICA ASIA SOUTH AFRICA OCEANIA BRUNEI MACAU SOUTH KOREA CAMBODIA MALAYSIA TAIWAN CHINA MYANMAR THAILAND EUROPE AUSTRALIA NEW ZEALAND INDONESIA SINGAPORE VIETNAM NORTH AND LAOS CENTRAL AMERICA AUSTRIA HUNGARY REPUBLIC OF IRELAND BELGIUM ITALY SPAIN CANADA USA PANAMA CZECH REPUBLIC KAZAKHSTAN SWEDEN DENMARK LUXEMBOURG SWITZERLAND FINLAND NORWAY THE NETHERLANDS FRANCE POLAND TURKEY GERMANY PORTUGAL UK GREECE TVB8 Xing He TVB Jade Jade Channel TVB - V TVBS TVBS - News TVBS - G TVBJ Australia, China, HK, Australia, China, Australia, USA Australia, USA Indonesia, Macau, Malaysia, Indonesia, Macau, Taiwan, USA Australia, HK, Indonesia, Taiwan Indonesia, Singapore Europe, HK Singapore, Taiwan , USA Malaysia, New Zealand, Macau, Singapore, Taiwan Singapore, Thailand 26 Television Broadcasts Limited Annual Report 2014 AFRICA ASIA SOUTH AFRICA OCEANIA BRUNEI MACAU SOUTH KOREA CAMBODIA MALAYSIA TAIWAN CHINA MYANMAR THAILAND EUROPE AUSTRALIA NEW ZEALAND INDONESIA SINGAPORE VIETNAM NORTH AND LAOS CENTRAL AMERICA AUSTRIA HUNGARY REPUBLIC OF IRELAND BELGIUM ITALY SPAIN CANADA USA PANAMA CZECH REPUBLIC KAZAKHSTAN SWEDEN DENMARK LUXEMBOURG SWITZERLAND FINLAND NORWAY THE NETHERLANDS FRANCE POLAND TURKEY GERMANY PORTUGAL UK GREECE TVB8 Xing He TVB Jade Jade Channel TVB - V TVBS TVBS - News TVBS - G TVBJ Australia, China, HK, Australia, China, Australia, USA Australia, USA Indonesia, Macau, Malaysia, Indonesia, Macau, Taiwan, USA Australia, HK, Indonesia, Taiwan Indonesia, Singapore Europe, HK Singapore, Taiwan , USA Malaysia, New Zealand, Macau, Singapore, Taiwan Singapore, Thailand Television Broadcasts Limited Annual Report 2014 27 StarHub TVB Awards 2014 The Way We Were A Time Of Love TVB Star Awards Malaysia 2014 28 Television Broadcasts Limited Annual Report 2014 REVIEW OF OPERATIONS INTERNATIONAL OPERATIONS StarHub’s basic packages in the hope that this would stop such subscribers from downloading TVB contents illegally. PROGRAMME LICENSING AND DISTRIBUTION The strategy successfully retained subscribers, but the subscription revenue of premium or video-on-demand Total revenue from programme licensing and distribution, services was inevitably affected. which comprised income from the distribution of TVB’s programmes outside of Hong Kong through telecast, Meanwhile, our strategy of producing original contents video and new media licensing, increased by 1% from in Malaysia and Singapore to attract different audience HK$1,072 million to HK$1,085 million. groups received tremendous support from subscribers and sponsors and helped stimulate new business The two key traditional markets, Malaysia and Singapore, opportunities in the two markets. Two leading projects contributed total revenue of HK$455 million. Entering during the year were the music movie A Time Of Love – a into the second year of our master agreements with collaboration among Hong Kong, Singapore, Malaysia, MEASAT Broadcast Network Systems Sdn Bhd (“MEASAT”) South Korea and Japan – and Wellness On-The-Go, a co- in Malaysia and StarHub Cable Vision Limited (“StarHub”) operative venture with MEASAT. in Singapore, licensing revenue from these two markets reported increments of between 3% and 5%. However, During the year, we continued to expand our presence in the fluctuations of Malaysian Ringgits against the US non-traditional markets. In South Korea, we successfully dollar negatively impacted on revenue. renewed our contract with Central Multi Broadcasting for another two years until 2016. In Indonesia, PT. Link The subscription business of our licensees was seriously Net (trading as “First Media”), which launched a digital affected by the rapid development of new media platform to distribute TVB’s channels in 2013, planned technology in Malaysia and Singapore. The younger to increase its capacity for our HD channels. In Vietnam, generation turned away from conventional pay TV as our increased investment in marketing has started to pay many contents could be accessed free of charge through off: We renewed a multi-year licence with the country’s the Internet, albeit illegally. In addition, the proliferation largest cable TV network, which carries the TVB Drama of OTT boxes, which allow users to access our contents Channel, to take advantage of the channel’s fast-growing without authorisation, also affected the licensing advertising revenue, which we share with the network. business. Apart from liaising with government authorities Meanwhile, a time-belt contract, which we secured with to curb illegal downloading and the influx of OTT boxes, the same operator in 2013, has produced good ratings we also adopted a more flexible marketing strategy by and generated higher advertising revenue. releasing new TVB dramas to subscribers of MEASAT and Television Broadcasts Limited Annual Report 2014 29 REVIEW OF OPERATIONS CHINA OPERATIONS During the year, TVBC entered into a cooperation TVB advanced the Group’s strategies for Mainland China agreement with Dongfang Satellite TV, which introduced TVB’s classic dramas in its afternoon-drama time slot. The under 上海翡翠東方傳播有限公司 (“TVBC”), its joint venture with China Media Capital and Shanghai Media dramas received satisfactory TV ratings and ranked top 10 Group. In accordance with the agreed capital contribution among national satellite TV programmes for this time slot. between the JV partners, the registered capital of TVBC, TVBC continued to invest in Mainland-produced dramas, which is in its third year of operation, increased from which will qualify for prime time release on national RMB100 million to RMB200 million during 2014. satellite TV channels and on digital new media platforms. Total revenue for the year ended 31 December 2014 from During the year, TVBC invested in two non-drama Mainland China reported a decline from HK$402 million titles and a number of drama titles. The first one, Work to HK$383 million. This reflected a more difficult market Experience, comprised eight episodes and reached a total for licensing of content from Hong Kong to the Mainland’s of 90 million viewers when it was broadcast through national channels as more regulatory restrictions on Tencent video. The other production, Bride Wannabes, imports of foreign programme content came into play. was the Mainland Chinese version of TVB’s programme Bride Wannabes; it attracted a viewership of more than 70 Contrary to this, we have had encouraging results from million people on Weibo and became the talk of the town the new media licensing business as we entered into a when it was released on the Iqiyi website and Shanghai TV number of contracts with new media partners, namely Channel. IPTV, Internet portal, and VOD operators, during the year. TVBC also joined forces with China Mobile, the nation’s However, drama production involves inherent risks partly largest mobile network, to release an app named iTVB associated with SAPPRFT’s policy to regulate the market. in mid-2014 to distribute TVB’s dramas to subscribers. Since 2012, the regulator has imposed more restrictions To date, the number of subscribers to iTVB has grown to on advertising time and duration. Historically, out of more than 500,000. an annual output of around 18,000 hours of Mainland- produced dramas, about 40% of them are never broadcast The licensing of TVB content on Youku and Tudou to any audience. This wastage is a reflection of the websites continued, contributing the highest of all market’s competitiveness and the range of production licensing revenue from digital new media. However, the quality. To mitigate this risk, TVBC will be very selective State Administration of Press, Publication, Radio, Film when making investment decisions on programme and Television (“SAPPRFT”) in the PRC issued some new production. measures – which would take effect from 1 April 2015 – to tighten control over imported programmes. The general rules stipulate that pre-censorship and formal approval have to be obtained from SAPPRFT for all imported, foreign-produced dramas before their release to the public, and that the total number of hours of imported foreign contents cannot exceed that of national-produced contents of the previous year for a specific new media platform. TVBC will closely monitor the implementation of these measures and will adjust our strategies accordingly to minimise any negative impact to the Group. 30 Television Broadcasts Limited Annual Report 2014.
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