HONG KONG — When Hong Kong’s government threw open the doors to new pay TV players two years ago, incumbent i-Cable Communications knew it would have to give up some of the territory it monopolized.
But the threat of competition has turned out to be surprisingly small. U.K.-based Yes TV was the first of the new entrants to launch a commercial trial last month, charging HK$328 ($42) a month for six channels and two video-on-demand services.
Around the same time, Taiwan’s Pacific Digital Media began offering two channels at a monthly subscription of 25¢, having delayed its official launch until next year.
“If we all tried to order right now, not more than a couple of us could actually get these services,” says Stephen Ng, chairman and CEO of i-Cable, controlled by conglomerate Wharf Holdings.
Launch plans for Galaxy Satellite Broadcasting, the pay TV arm of dominant terrestrial station TVB, are still in the works. Star TV and Hong Kong Network TV scrapped their plans early on, citing bad market conditions.
Ng is not optimistic for the new entrants. “The new pay TV service providers are launching into a weak economic environment and poor consumer sentiment,” he says.
These are good times for i-Cable overall, whose fortunes are spurred by the success of its broadband service. Last week, it announced its second year of profitability and even recommended its first dividend for shareholders.
In its pay TV division, operating profit rose 66% to $44.79 million. Penetration of the market is at 30%.
However, i-Cable, which carries homegrown programs like popular talkshow “Entertainment Hot Stuff” hosted by Maria Cordeiro on Cable Entertainment Channel, has its own challenges in the pay TV market.
The new pay TV players are accusing it of predatory pricing — it is introducing special promotions just as the rest are rolling out their services.
Piracy also has been one of its biggest revenue drags since early last year and has slowed subscriber growth to 8%, reaching 560,000 users. The average revenue per user fell 7% to $30 a month.
But the battle against piracy is showing slow signs of success. I-Cable is rolling out digital encryption and is making regular software changes on analog encryption technology. It has already seen results: its revenue stabilized in the fourth quarter of the year.
To generate more subscription revenue, it plans to launch 17 new channels by May, on top of the 31 available. These include six pay-per-view adult channels, four pay-per-view World Cup soccer-related channels and seven foreign-lingo channels included in the basic service.