This is the main reason for TVB's loss
TVB, a Hong Kong-listed company Television Broadcasting (00511.HK), has just announced its 2023 results, showing that its revenue during the period fell by 7% year-on-year to HK$3.323 billion, and its EBITDA loss narrowed significantly to HK$140 million, but the net loss still reached HK$763 million, and there is still no hope of turning around.
Based on this, on the trading day after the results were announced, the share price of TV Broadcasting fell 9.94% to close at HK$3.08, with a market capitalization of HK$1.350 billion.
Reminiscent of the beginning of last year, TVB began to let its artists bring goods on Taobao, and once harvested a wave of traffic, at this time, everyone may speculate that TVB will not be able to bring goods.
However, Finet found that what TVB can't move seems to be not Taobao's goods, but Hong Kong's local consumer sentiment.
The sharp decline in revenue from Hong Kong's local e-commerce business was the main reason
At present, TV broadcasting is divided into five business segments: 1) Hong Kong TV broadcasting, 2) OTT streaming, 3) e-commerce business, 4) Chinese mainland business, and 5) international business.
The Hong Kong Television Broadcasts segment, which is mainly engaged in broadcasting, digital media and music businesses, saw revenue increase of 8% year-on-year to HK$1,397 million during the period, mainly due to a 9% year-on-year increase in revenue from advertisers to HK$1,280 million, coupled with cost savings, an 8% reduction in cash operating costs and a 13% reduction in content costs, and a 47% year-on-year improvement in segment loss (EBITDA) to HK$272 million.
OTT streaming, which primarily provides streaming services and earns advertising and subscription revenue, segment revenue increased by 2% year-on-year to HK$356 million in 2023, mainly due to a 35% increase in advertising revenue, offsetting a slight decline in subscription revenue, while segment EBITDA increased by 27% year-on-year to HK$84 million, mainly due to lower content and overhead costs.
When it comes to the e-commerce business, it should be noted that this segment is not a delivery business in cooperation with Taobao, but a local e-commerce platform mainly for local consumers in Hong Kong, and the company's e-commerce business has also been affected due to the trend of Hong Kong people going north to spend during the period, and the segment revenue in 2023 has plummeted by 44% year-on-year to HK$486 million, while the segment loss has shrunk by 51% to HK$49 million.
The Chinese mainland business mainly includes co-production of drama series and content services on streaming platforms (i.e. "burying piles"), as well as live streaming business in cooperation with Taobao from 2023. In 2023, segment revenue from its Mainland business increased by 4% year-on-year to HK$729 million, mainly due to the increase in revenue from co-productions following the signing of multi-year content supply agreements with Youku and Tencent (00700.HK) in March and August 2023, respectively. Segment EBITDA, however, declined 61% year-on-year to HK$63 million, mainly due to a decrease in revenue from the content distribution business, which resulted in a decrease in simultaneous distribution.
The International Business segment, which is mainly engaged in business activities outside Greater China, decreased segment revenue by 7% year-on-year to HK$355 million during the period, while segment EBITDA decreased by 32% year-on-year to HK$34 million due to a decrease in traditional copyright income.
As can be seen from the chart above, the e-commerce business revenue has declined most significantly, but the scale of loss has not been narrowed, on the other hand, the loss of the Hong Kong Television and Broadcasting division is also very significant, mainly due to the huge content production and operating costs. In Chinese mainland, on the other hand, revenue remained stable and continued to remain profitable.
The performance improved in the second half of the year
In fact, Finet noticed that the performance of TV broadcasting in the second half of 2023 has improved, with the half-year revenue decline shrinking to -0.18% to HK$1.763 billion, the gross profit margin improving to 35.40% from 25.83% in the same period last year, and achieving EBITDA (EBITDA before depreciation, amortisation, interest and tax) turning into a profit, recording EBITDA of about HK$46 million, and the net loss attributable to the parent company decreased to HK$356 million from HK$583 million in the same period last year.
From the perspective of segment revenue in the second half of the year, the decline in e-commerce business revenue, which reflects Hong Kong's consumer sentiment, further expanded, with revenue falling by 79.08% year-on-year to HK$84 million.
It is worth noting that the Chinese mainland business, including the joint drama with the mainland such as "News Queen" launched in the second half of the year and Taobao Delivery, achieved a revenue growth of 47% to HK$434 million in the second half of 2023, and segment EBITDA increased by 70.26% year-on-year to HK$76 million, becoming the largest revenue segment of TV broadcasting. This was the main factor driving the growth of its performance in the second half of the year.
As shown in the chart below, revenue from the Mainland business increased significantly.
As can be seen from the EBITDA distribution in the chart above, the EBITDA of the Mainland business segment has also expanded significantly.
It is worth noting that on 27 November 2023, TVB announced the restructuring of its TV broadcasting and e-commerce business, including the consolidation of the original five terrestrial free-to-air TV channels into four to reallocate production resources, which is expected to save HK$100 million in content costs and lay off more than 200 staff in 2024, as well as the restructuring of Hong Kong's online e-commerce platforms "Zto" and "Neighbour Buy" to improve capital efficiency, reduce annual fixed costs and operating expenses by about HK$50 million to HK$60 million, and reduce the number of employees by about 100.
At the same time, it will increase the number of categories to be sold on e-commerce platforms, and closely integrate Hong Kong's e-commerce platforms with those of its Mainland subsidiaries to promote Hong Kong goods and services to mainland consumers through live-streaming e-commerce projects in the Mainland.
As can be seen from the above results, the company's big problems lie in the high operating costs and content production costs of the TV broadcasting business, and the Hong Kong e-commerce business is easily affected by local consumer sentiment, so its restructuring is mainly aimed at the TV broadcasting business and the local e-commerce business, and proposes a linkage with the mainland e-commerce business to optimize the business structure and improve operational efficiency, and the cost-saving impact of this restructuring will be reflected in the 2024 results of TV broadcasting, not its 2023 results.
On the other hand, in March of this year, the TV broadcast announced a partnership with Alibaba (09988. Youku, a subsidiary of Youku, has signed another in-depth cooperation framework agreement to add co-produced dramas, and more importantly, the two sides will also cooperate in depth on IP commercial monetization to open up advertising and commercial monetization opportunities in the mainland and Hong Kong. In addition, it will gradually increase the number of its artists to enter Taobao and Douyin live broadcasts to build brand competitiveness and promote the revenue growth of its mainland business.
In addition, TVB has recently negotiated new terms with signal broadcasting partners in Guangdong to jointly market advertising slots on Jade and Pearl channels and to sell TV advertisements across borders to advertisers. At present, TV broadcasting has opened free channels of Jade and Pearl in the Greater Bay Area, but the advertising time is the local advertising in the Greater Bay Area, and if TV broadcasting can negotiate with the Greater Bay Area for advertising sharing, it is expected to bring more advertising revenue to it.
TVB has also set up a subsidiary in Macau to explore business opportunities to expand its entertainment services at the resort.
As can be seen from these measures to reduce costs, TV broadcasting is trying to reverse the disadvantage, and the results of these changes will be reflected in the results of 2024, so although the performance in 2023 is not satisfactory (but the performance has improved in the second half of the year), the good show of TV broadcasting may be about to begin.
Author: Mao Ting