TNAG-1556-FCO40-2120-Broadcasting-in-Hong-Kong-1986 — Page 3

the

service. Given the present practice of TV stations awarding prime time

time advertising slots to advertisers who offer highest bids, TVB has also argued, that the decrease in aggregate demand for advertising airtime, caused by a ban, would result in lesser competition for prime time advertising slots. In consequence, there would be an across-the-board drop in advertising rates, resulting in another 30% loss in

advertising revenue.

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It is difficult to establish with certainty the precise impact of a ban on the overall revenues of the two stations. The Broadcasting Review Board argued that

that because the demand for better

better advertising times on television far exceeds supply, on the introduction of а ban the prime-time slots currently taken over by tobacco advertising would be taken over by other advertisements. At its public hearings the BRB was told by proponents of a ban

ban that this had been the pattern in other countries following the introduction of a ban on tobacco advertising.

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advertising

While

The BRB's conclusion that demand for space far exceeds supply needs some qualification. While it is true that demand is high for the prime time advertising slots between 6.30

6.30 pm and 8.30 pm, and the value

of bids from advertisers is correspondingly high, demand is far lower at other times. TVB has stated that even on its Jade channel there were only 5 days in 1985 with fully booked advertising time, in view of which it could

could not be assumed that space vacated by tobacco advertising would be filled entirely. TVB's claim that a ban could lead to an overall loss of 30% of revenue should be treated with some reservation,

some reservation, it is almost certain that a ban would lead to a drop in revenue,

a drop in revenue, which could not be recouped in the short term. While a highly profitable company like TVB could absorb the blow of a a ban on tobacco advertising, a drop in revenue of as

of as little as 5%

10% may have damaging

to consequences

the financially weaker ATV. After sustaining heavy losses for several years ATV has only just started to make a modest profit through investing heavily a number of major programmes. A ban on tobacco advertising under the new licence period commencing December 1988 is likely to affect ATV's profitability

profitability should ATV agree to accept a

renewal of its licence.

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It should be noted too that after several years of rapid growth, the advertising revenues of the television industry have over the last three years levelled off considerably and were growing at about 10% per annum in the last two years. A ban on tobacco advertising would hinder

further. even

growth

A ban is also likely to reduce the profits of Hong Kong's advertising industry in the short term.

CONFIDENTIAL