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Savoring Slices Of Airtime Success
By Ngoc Lan
Wednesday,  Aug 11, 2010,13:50 (GMT+7)

Savoring Slices Of Airtime Success

By Ngoc Lan

Filming "Vuot qua chinh minh" game show, aprogram to help the poor of HTV. "Horizontal sale" helps broadcasters select competent producers, including such big media companies as BHD, Lasta,Cat Tien Sa, FPT Media and Dong Tay Promotion
The television sector at present is far more complex than it was 10 years ago, when public participation was first encouraged through the sale of airtime to advertisers. Television channels are and will be a fertile ground for business opportunities to flourish, as evinced by the proliferation of increasingly diverse, complicated and lucrative cooperation deals.

Vietnam has a population of some 86 million, and there are 67 broadcasters on both central and local levels and nearly 100 television channels based upon vastly different technologies. However, there are less than 10 major players in the market. The remaining broadcasters, mainly on local levels (with the exception of those in HCM City, Hanoi and Binh Duong), have to shoulder the additional burden of producing radio shows and rely financially on the State’s budget and advertising revenue.

Notably, advertising sales are only one of the various revenue channels which major broadcasters cash in on. Since the State’s budget is aimed mainly at infrastructure development, these broadcasters have to resort to mutually beneficial cooperation deals to reap profits and produce eclectic programs that cater to increasingly demanding viewers. This approach is known as public participation.

The process started over a decade ago with the launch of what insiders call “horizontal sale” (cooperation in show production and sale of airtime). Later, another form of cooperation called “vertical sale” emerged, in which broadcasters transfer to partners the rights to produce shows and do business on a particular channel in exchange for a large sum, payable annually or in several years).

Pursuant to regulations on cooperation deals in the television and radio sectors, issued by the Ministry of Information and Communications more than a year ago, broadcasters are responsible for the content of the shows on air.

Both of the aforementioned forms of cooperation have mushroomed over the past few years. “Horizontal sale” helps broadcasters select competent producers, including such big media companies as BHD, Lasta, Cat Tien Sa, FPT Media and Dong Tay Promotion. These firms have produced popular drama series or reality TV shows such as the Vietnamese versions of Ugly Betty and Dancing with the Stars. Thanks to this approach, broadcasters are now spoilt for choice.

Years ago, only one made-in-Vietnam drama series or episode was broadcast per week on Vietnam Television (VTV). In contrast, since the advent of horizontal sale, 1-2 made-in-Vietnam drama series episodes are on air every day, on both national and local television channels. Leaving aside the quality of these series, the fact remains that this form of cooperation benefits both parties. Broadcasters gain access to myriad shows that can satiate the diverse demand of viewers. Meanwhile, media firms can sell their products at prices which exceed production costs and receive payments in terms of advertising spots (often with a length of 30 seconds each), which can be sold to enterprises for a profit.

For instance, suppose VTV agrees to purchase each episode of “Co gai xau xi,” the Vietnamese remake of Ugly Betty, at VND300 million, which translates into 30 advertising spots on VTV3 from 9 p.m. to 10 p.m. Suppose the cost of producing each episode is VND100 million. If BHD can sell all the advertising spots per day, the profit attained is VND200 million. If the series gains popularity and advertisements flood in during airtime, the deal allows VTV, instead of BHD, to collect advertising revenue from the 31st slot onward. Even then, BHD still has an incentive to turn out high-quality episodes to make a drama series more economically viable. If the episodes fall short of expectation, losses will loom and production may stall.

“Vertical sale,” meanwhile, requires investors to be financially capable and has been on the rise, capturing the interest of many banks and businesses which prosper in realty trading, industrial production or mining. This approach enables a media firm to invest in and operate a television channel based on a broadcaster’s existing infrastructure. This form of cooperation abounds on cable television channels launched by VTV, HTV and SCTV (a joint venture between VTV and Saigontourist), including O2 TV, InfoTV, TV Shopping and so on. VTC also has such channels as Today TV, VBC, VITTV and so on.

“Vertical sale” helps pick out the best channel operator but entails excellent financial capabilities on the part of investors, which have to pour in VND30-40 billion per annum regardless of the number and length of shows on air. Of this amount, broadcast right fees account for a significant share. It also takes a few years or so to prepare the necessary resources.

An industry expert says that most investors have not reaped profits from “vertical sale” or have even plunged into the red because this approach is extremely costly. In general, if an investor promises to pay major broadcasters a broadcast right fee of some VND10 billion per annum, it can sell advertising slots worth up to VND10 billion. Any excess amount will be divided equally between broadcasters and media firms. However, in reality, few investors can reach this advertising revenue threshold.

Profits or losses?

Broadcasters benefit abundantly from each cooperation deal because, despite their resource constraints, they can profit handsomely and offer diverse programs, free or otherwise, to viewers. Giant broadcasters such as VTV or HTV have earned almost VND2 trillion per annum recently, over one third of which comes from horizontal sale and the remainder from increased numbers of subscribers, advertising turnover and external investment. Meanwhile, consumers also stand to gain from diversity.

It is investors, who mostly channel money into cable or digital television channels, that face the bleakest prospects given the long duration and huge amount of investment required. Ferocious competition and limited program quality have caused revenue, mainly from advertising slots, to flow mainly into promotion channels under VTV and HTV.

It is flawed to contend that big investors such as Techcombank (a former investor in O2 TV, which has been transferred to the North Asia Bank), Ocean Bank (which invests in InfoTV and Shopping TV), Tan Tao Group (which pours money into VBC), VTV and Canal Plus (which invest in K Plus) are inexperienced or lack a good business strategy.

In August 2007, when Techcombank planned to launch a channel on health matters, it actually eyed the pharmaceutical market, whose revenue reached some VND120 trillion per annum and posted growth of about 20% a year. Capturing just a small slice of this lucrative pie will indubitably ensure survival and even profit. However, it had to transfer O2 TV to the North Asia Bank after merely one year. This is arguably the first transfer deal in the television sector and O2 TV is among those few channels which generate cash flows and do not depend entirely on their developers’ investment.

“Investment in the television sector generates huge impacts on society and is considered a possible expansion choice for many conglomerates around the world, Vietnam included. However, investors must be committed over a long period and do not reap enormous profits, especially in comparison with earnings from other sectors. We should therefore carefully consider whether to continue investing or leave the sector,” an investor tells the Saigon Times.

It is possible that Vietnam’s market for television products is still in its nascent stage and fraught with resource constraints. To complicate matters, there have not been clearly established standards and learning by doing remains widespread. Consequently, despite the sector’s quantity-led growth, controversy continues to simmer over the competition based on quality and the optimal form of cooperation.

One thing is for sure, though. The sector has ample room for development in the future and many enterprises will continue to penetrate this industry in search of a chance to blossom.

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