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recommended, however, that the present 15 year licence period be reduced to 8 years to allow for more effective control the licensees. The Administration has in turn considered what length of licence period is most appropriate for either a full term renewal of the existing licences or for entirely new licences offered in open competition.
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An analysis has been carried out to establish the length of licence that a new broadcasting company would need in order to enter the Hong Kong market, compete effectively against an established broadcaster and make a profit within a reasonable time (see Annex B). The assumptions used in this analysis were that a new licensee would :-
(a) purchase land, build and equip new studios
(an initial investment of $400 m);
(b)
expect to achieve a 45% audience share within either 3 or 5 years; and
expect to earn a minimum net profit on investment of 15% per annum.
(c)
A further assumption was that available advertising revenues would rise at an average of 10% per annum.
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The analysis indicates that
if a licensee were able to obtain 45% of the audience (and hence advertising revenue) within three years, the licensee would only recover its initial capital investment and obtain a 15% rate of return by year 15 of the licence. In practice of course it may be difficult for a new licensee to obtain a 45% market share SO quickly given TVB's long established domination of the market. If however the licensee needed 5 years to achieve a 45% market share, he would then take 18 years to recover investment and earn a 15% rate of return. If a licensee were aiming for a higher rate of return such as 25% - as would probably be the case this could not be achieved in less than 20 years.
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The analysis clearly indicates that a 15 year licence period would be the minimum to enable a new licence applicant to compete on an equal footing with the existing licensees, and to make a profit. If there is to be an open competition for licences, it is recommended that the television licence period should remain at the present 15 years.
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If the proposal to renew the existing television licences is approved, it remains to be considered what should be the length of this licence renewal. Given that the two stations are already firmly established there is
is clearly no economic justification for granting a further 15 year licence.
No comments yet.
Private notes are available after approval.