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of a new third station would have a highly disruptive effect on the industry: it would lead to a renewed spiralling in operational costs and would thereby jeopardise the ability of one or both of the stations to survive.
8
Little has occurred in the interim to change the Commissioner's views. Although RTV has over the past few months been able to secure a significantly larger share of audiences, there does not appear to have been a corresponding increase in the overall amount of advertising placed with the station. To some extent, this may reflect the inevitable time-lag which occurs between the appearance of more attractive programming and enhanced audience figures and the response of advertisers in placing their advertising. However, it is more likely that advertisers are waiting to see whether RTV can sustain its improvement in view of its erratic performance history. In short, TVB continues to dominate the scene and RTV's ability to move into profitability in the present year must be in some doubt. Even if and when this condition is achieved, RTV's business is likely to be marginal for some considerable time and susceptible to sudden reversal by a major TV B programme effort.
9
At the same time, although both stations have recently increased their revenue by raising advertising rates, there have been indications during recent months - which both stations have acknowledged
of a flattening in the rate of growth of new television advertising. The reasons for this can only be guessed at but one factor will certainly be the increase in television advertising rates. This will have had the effect of pricing out some advertisers completely and causing the advertising industry to re-examine the other advertising options available. There has also been a suggestion that advertisers" reservations about the state of Hong Kong's economy generally are staying their hands in budget commitments. On the other hand, operational costs for the stations have continued to rise, albeit not at the same dramatic rate experienced in 1978 and, if the stations continue to pursue their competitive strategies, it is highly probable that cost growth will outstrip revenue growth for the foreseeable future.
10
In the se circumstances, the Commissioner for Television and Entertainment Licensing strongly advises against any consideration being given to the introduction of a further television licensee, not only until there are clear indications that the present two-station situation has achieved satisfactory stability but until it is quite clear that the margin of profitability in the industry can comfortably support the introduction of another competitor. However, he would at the same time caution against taking any decision now to remove the possibility of a third licence for all time. The situation may well arise in the future where minority viewer needs require to be better served and it may be that this could be achieved by a third licensee operating a subscription service without advertising.
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