Present Situation

iTV (an interactive television service) was commercially launched by the former Cable & Wireless Hong Kong Telecom (HKT) in march 1998. Its performance in the first two years of operation had not lived up to the company’s expectations. The company reported a net loss of US$335 million for the six months to 30 September, 1999. When the takeover offer was initially valued US$36 billion in February 2000, it was based on PCCW’s share price of US$2.84 at the time. On 4 July, 2000, the Hong Kong Government offered the new pay television program the service license to new five new operators. Then on 17 August, 2000 Pacific Century Cyber Works (PCCW) takeover HKT. On 24 September 2000, a local newspaper reported the investors who took up PCCW’s from the replacement had experienced a paper loss of US$110.67 million in just two days. The stock price of PCCW had fallen from its peak of US$3.65 in February, 2000 to around US$0.77 in early November 2000. The company’s share price continued to drop amidst the uncertainties about the fate of PCCW’s alliance with Australia’s Telstra Crop. in early October. The agreement was eventually signed on 13 October, 2000, with Telstra’s cash injection into PCCW re negotiated fromUS$3 billion to US$2.43 billion. Although the joint venture with Telstra helped to reduce PCCW’s debt by US$3.56 billion, PCCW still needed to make an effort to improve its financial situation, which as burdened by the outstanding balance of the US$9 billion inherited from take over HKT.

The HKT deal was originally valued at US$38 billion, the largest takeover in Asia to date. The deal demonstrated his ability it secure a loan of US$13 billion based on the US$1 billion stock, which was raised in 48 hours. The company invested US$256 billion in the initial development, at one time planned to invest a further US$1.28 billion within the next decade. Its original target was to attract 250,000 customers by the end of the first year. But the service managed to attract only 90,000 subscribers up to June 2000 and had remained at the same level for the prior six months. The number included a 25,000 subscriber- overlap with its internet Broadband business. The iTV service has been an economic and marketing failure.

Marketing Strategies

Selecting Target Market: From the early days HKT introduced iTV to the lower income group living in high rise apartment complexes as they were more tightly packed and thus cheaper to target. This was the same group targeted by i-Cable, the local television provider which had a head start several years earlier. These less affluent customers were cautious in making their choice of pay-entertainment. It would take a great deal of motivation for those customers to fully appreciate the value of VOD and related services and to deviate from accustom alternatives.

Product strategy: Branding was not a problem for HKT, as a new innovation, iTV needed more than a strong branding strategy to succeed. In terms of content iTV stuck to the original plans to focus on its first killer application VOD and positively developed the other services such as interactive banking and news on demand. The VOD service was not perfect. Customers were unhappy about the quality of the movies. Without putting extra effort into content development, iTV could not compete effectively.

Pricing Strategy: A monthly subscription-based pricing plan was offered by iTV. Customers had to pay a monthly fee of HK$178 or HK$238 which allowed them to receive some basic services. On the other hand i-cable was offering a cable television service at a monthly subscription rate of HK$280 which already included three basic movie channels plus other news, sports and documentary channels. Randal Cox another pay television operator was coming in with the offer of a monthly fee of HK$180 which includes 10 channel coverage of local and international news, sports, music and movies. Under such competitive market conditions and based on HKT’s limited iTv service offerings, there was no justifications, in term of content and quality. iTV had to raised it fees in order to increase its revenue.

Promotional Strategy: There was a mix promotional tryout including ATL and BTL to support its marketing strategy. The first advertisement promoted a techno style image trying to appeal to the status conscious while the second commercial conveyed to money conscious consumers that i-TV service were value for money. Though the change in focus might have generated additional interest, it was not substantial enough to boost i-TV’s market share.

Strategies for Richard Li

Richard Li, son of an influential multibillionaire founded PCCW in April 1999. In 1999, his company, PCCW was awarded the Cyber port contract to build an “info-tech centre” on 26 hectares of reclaimed land on Hong Kong Island. As Li’s interest in new technologies and Li’s ambition was to create the world’s biggest Broad band business we can identify viable strategies for Richard Li to consider as follows:

Broad Band Strategy: iTV fell into PCCW’s Broadband “business to customer” business unit as a result of the takeover. Its profile seemed to match one of the company’s mission statements to “deliver innovative service that enhance the life styles and business of our customers. As an example for the new era Broad band services in the industry, iTV would still be an asset to the company as long as its operation harmonized with NOW.

Brand Strategy: We are focused on advertising and getting our Branding to our customers. Li’s influential family background and his personal academic and career track records will help to raise consumer’s confidence in the company.

Revenue Strategy: The NOW service isn’t about subscriber revenue. Investment for NOW was not cheap. To services transacted through its sites. The company also imagines that users would migrate to Broadband connections, thus generating revenue from fees for subscription to those services.

Preferred Strategy

• iTV would gradually unite with the broadband internet service to form a new generation of VOD and interactive services

• The digital blending would provide more flexibility for the internet marketers to work on the different marketing media available in order to find the best solution.

• iTV future marketing strategy had to demonstrated full understanding of its customer’s needs in terms of performance and psychological expectations, in order to succeed.

• Company’s existing iTV, broadband internet and mobile phone subscribers grouped to form a ready distribution channel for NOW.

Conclusion

From the above discussion it is clear that if we can identify the real situation and rectify the marketing strategies and our recommendations are considered as a valuable contribution, iTV will gain its market share as well as revenue within six months and will turn into a profitable company.

References

• Centre for Asian Business Cases (school of Business the university of Hong Kong)

• www.PCCW.com

• www.itvhk.com/september2000

• www.info.gov.hk/digital21/eng/strategy_part12.html

• www.info.gov.hk/datastate/hktelecom-indicators.html

• Pay-TV revolution begins”, south china morning post Hong Kong, 9th July, 2000.