TNAG-1987-FCO40-2820-Presentation-of-UK-policy-on-Hong-Kong-to-the-media-1989 — Page 12

a

Royalty should also be charged on the CTV broadcasting licensee to ensure public share in the benefits accruing

the licensee

from limited competition. On 6 September 1988,

considering

memorandum

to

after

XCC (88) 127, the Council ADVISED and the Governor ORDERED that bidders should be invited to submit their own proposals on the payment of royalty based on gross receipts (ie income derived from the subscription fee and advertising revenue).

Both HKCC and HCV have submitted detailed proposals for royalty payment.

15-year

HKCC has proposed to pay a royalty of 10% of gross receipts comprising advertising and subscription revenue throughout the

licence period. If discounted in net present value terms the royalty proposal remains at 10% of gross receipts.

revenue

into

is

to

the latter

11

and

HCV has proposed a more complex formula which divides the royalty package

advertising subscription royalties. Royalty on advertising revenue will be charged on the same basis as wireless TV broadcasters.

However

advertising be split into advertising" and sponsorship", with not generating royalty. Royalty on subscription revenue will not be paid until the ninth year of operation and several sources will be excluded. HCV's approach is based on the rationale that they wish to limit the financial burden in the years of heavy financial commitment and risk, but that they are willing to contribute once the project generates cash flow

flow for the shareholders. The consultants have calculated that HCV' s proposals amount to an overall average of 4.7% of gross receipts.

If discounted in net present value terms this amounts to 3.7% of gross receipts.

The royalty clearly more HCV.

Given

prepared to

}

proposal by HKCC is generous than that by what HKCC has been offer, the royalty