Earlier this week, Hong Kong telco PCCW shared more of its plans to revitalize the city’s HK$4 billion (US$520 million) free TV sector, at an all-day shindig in the city’s trendy PMQ design and retail development.

Its part an ongoing TV expansion by PCCW, which already operates Hong Kong's biggest pay-TV network, Now TV, and is poised to compete in regional OTT after buying mobile VOD platform Vuclip earlier in the year.

PMQ, which in a former life served as accommodation for married police officers, was a fitting choice for the latest announcement, as a rare example of successfully combining heritage with modern lifestyles in Hong Kong.

PCCW as well as up to three other possible contenders, all seeking to fill a competitive vacuum in Hong Kong’s lackluster free TV sector, will need to pull off a similar balancing act.

Success still requires hits on linear channels – where most TV ad budgets will be for the foreseeable future – while catering to evolving multiscreen viewing habits, in one of the world’s most affordable broadband markets.

It promises to be a battle for rights and talent, as well as audiences and advertising.

A lopsided playing field

The current free-to-air leader, TVB, currently reigns almost unopposed after ratings and revenue for number two player ATV tumbled in recent years.

At the same time however, TVB’s hit-making prowess has waned in recent years, perhaps losing its edge as its dominance grew, prompting people to seek out alternative entertainment online.

Hong Kong’s free TV viewing has started to contract as a result, by 2-3% over the last couple of years according to Nielsen, limiting the scope to grow ad revenue.

Additionally, the city's TV ad market has performed poorly this year.

Nonetheless, media agencies feel the sector is still big enough to accommodate more mainstream channels, increasing choice for both viewers and advertisers while potentially bringing lapsed viewers back to linear TV.

“The market can absorb one more station, at least,” Melanie Lo, CEO of GroupM Hong Kong, tells Media Business Asia. “But if the other three potential players come in, it’s going to be very tough.”

Any high profile activity tends to ignite advertiser interest in a particular segment, heralding a window of opportunity for free-to-air TV in Hong Kong.

Overall, TV attracts a relatively low share of ad spend in the city, about 30% including pay-TV, according to estimates from Media Partners Asia.

Print, while slowly losing share, remains the dominant ad medium, reflecting the city’s older demographic profile as well as fierce rivalry in daily newspapers.

At this stage however, it’s unclear who else might enter the fray in free TV. PCCW’s plans are the most concrete of any aspiring new entrant.

Other contenders

ATV’s licence will expire in March, forcing the broadcaster, which has secured fresh investment in recent months, to reapply should it wish to re-enter the race.

PCCW’s new channel, dubbed ViuTV, will take up broadcast spectrum currently used by ATV, once the incumbent goes off the air next year.

Three other players have also applied for a free TV licence: HKTV, run by local entrepreneur Ricky Wong, now arguing his case in the courts after HKTV’s bid was rejected; i-Cable, which also runs a rival pay-TV and broadband service to PCCW’s Now TV; and Forever Top, a new consortium backed by David Chiu, son of former ATV chairman Deacon Chiu, and Pansy Ho, daughter of Macau magnate Stanley Ho.

PCCW is the only one so far with a full license, granted in April after being approved in principle two years ago.

Its selection of programming showcased at PMQ, while short on detail, was well received by media buyers, seen as catering to a range of advertiser friendly demographics, while bringing fresh production talent into TV with more open contracts than TVB.

“Some of the programming ideas are quite innovative,” says Hong Kong ad veteran KK Tsang, who has set up his own agency, The Bees Group. “I think they will attract younger and higher-income groups,” he adds.

ViuTV will step up PCCW's production engine with a series of locally produced factual entertainment programs, as well as local news and financial content, plus select international sports, drama, variety and factual programming.

Additionally, PCCW Media MD Janice Lee (pictured) formally announced the company’s streaming video service, also called Viu, at PMQ.

Viu OTT will make its Hong Kong debut on Monday, ahead of a broader rollout across Southeast Asia in the coming months, with Singapore likely to be next in line.

One selling point for the video platform, built around a freemium revenue model, is some early-window Korean drama, available with traditional Chinese subtitles eight hours after the original telecast.

A legal alternative can shore up the business ecosystem for Asian entertainment, especially in Hong Kong, where cheap set-top boxes that stream pirated shows onto TVs are becoming more common.

PCCW also has non-exclusive Southeast Asia rights for a range of Korean and Chinese shows, although details on the deals are unclear.

A tough opponent

In Hong Kong however, PCCW’s most immediate challenger looks like TVB.

Hong Kong’s free-to-air incumbent, while moving on plans to win back viewers by diversifying its schedule and improving its programs, has also been buying early window rights for Korean shows, while sprucing up its own multiscreen services.

The broadcaster has already cornered a significant chunk of Hong Kong’s online video ad market, alongside pioneering publisher Next Media, an early entrant into online video. It is also looking to launch an SVOD service early next year.

“What TVB is doing now is very progressive,” GroupM’s Lo says. “They are trying to move as fast as possible.”