Too many cooks

Disgruntled: Li Ruigang

Rupert Murdoch turned 90 last month. After 68 years as boss of News Corp, he is one of the world’s longest-serving CEOs. Li Ruigang, chairman of state-owned media investment firm CMC Capital, is sometimes dubbed as Murdoch’s equivalent in China, because of his influence across the media sector (see WiC218). But Li has struggled to improve the performance of one of CMC’s portfolio firms – as he made clear in a rare media interview of his own this month.

The firm is Television Broadcast (TVB), the leading free-to-air TV operator in Hong Kong. Founded by movie mogul Run Run Shaw in 1967 (see WiC222), TVB was the preferred choice for Cantonese speakers around the world for much of the 1980s and early 1990s and it owns one of the largest catalogues of Chinese-language entertainment and news content.

TVB was once deemed a worthwhile pick for investors as well. In 2011 when Shaw sold his 26% stake to a consortium led by CMC, the Hong Kong-listed firm was valued at about HK$38.5 billion ($5 billion). But a decade on, its market value has dwindled to a tenth of it level when CMC took over. “I am very, very dissatisfied with TVB’s performance,” Li fumed in an interview with Singtao Daily and the South China Morning Post (SCMP) last week, warning repeatedly that “radical reform” is required.

Many of the leading producers in the mainland Chinese TV industry grew up watching TVB’s programmes, Li noted, but the Hong Kong broadcaster now trails its mainland peers by a huge distance. “From people’s mindset, the business system, its development strategy, content creation to facilities… from hardware to software, TVB is far behind the industry’s standards,” he explained. “You can’t show people how to cook day in day out,” he added, referring to the repeats of cooking shows during prime time.

So what has happened to TVB, which has cultivated many of the biggest names in Chinese cinema (such as directors Wong Kar-wai and John Woo, and actors Stephen Chow and Tony Leung)?

The free-to-air market in Hong Kong was opened up to accommodate two new operators in 2014 (the year Run Run Shaw died, aged 106). But like most of the traditional broadcasters, TVB has been hit harder by losing advertising revenues to social media platforms such as YouTube and Facebook (as well as viewers to Netflix). It reported its first annual loss in the 2018 financial year and has been lossmaking in every year since.

As attitudes among parts of Hong Kong’s population to mainland China have darkened, people have also been calling for boycotts of TVB because of its affiliation with CMC across the border. “Our advertisers are being threatened by online comments,” Li acknowledged. “Some local or multinational advertisers used to give us more than HK$10 million in advertising fees a year. Now it is down to zero.”

Li insisted he wouldn’t parachute in executives from CMC to take over TVB’s daily management, although he said he would take a more “proactive role” personally in forcing through changes. Clearly there is going to be an attempt to push the channel’s bosses to show more of the kind of content that appeals to younger audiences now being lost to streaming services. Li also suggested that TVB should ride on the potential of the Greater Bay Area (a strategy being espoused by many business leaders), with plans to reposition the channel for a much larger market, including the setting up of a new production centre in nearby Guangdong province.

TVB is still one of the most high- profile assets in the portfolio of CMC Inc, a unit spun off from CMC Capital in 2015. A Rmb10 billion funding round led by Alibaba, Tencent and Vanke valued CMC Inc at about Rmb40 billion in 2018 and Li held out the possibility of floating some of its assets, which include Pearl Studio, which was formerly a joint venture with DreamWorks before it was taken over in 2018.

The other priority is to stem the decline of Hong Kong’s once-celebrated broadcaster. “TVB is far from the point where it is struggling to stay afloat, instead, it is already sinking into the ocean. If we do nothing, there is no other way to save it,” Li warned.

© ChinTell Ltd. All rights reserved.

Sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.