Polls to bring windfall to local TV networks
Employee bonuses will bloat and dividend payouts will surge for local broadcasting companies this year as politicians—led by the country’s five presidential candidates—burn cash through massive advertising budgets ahead of the May national elections.
Hopes are high from within the industry that 2010’s profit levels, which saw former Senator Manuel Villar reach deep into his pockets in a tight race for the presidency, could be matched in 2016, officials said.
The bullish outlook for the year comes amid creeping competition from cable, new free-to-air TV players and online content—challenges that the two major networks are not equally equipped to face.
“We are hoping to match, if not surpass, our performance in 2010, which is one of the company’s banner years in terms of profitability,” GMA Network chair and CEO Felipe Gozon said in a recent interview.
GMA Network, which operates one of the two channels in the Philippines’ television duopoly, reported that 2015 profits more than doubled to P2.13 billion, thanks partly to campaign spending that began late last year. Gozon said 2016 would easily beat last year’s performance.
Higher earnings allowed GMA to raise payouts to investors. About P1.9 billion in profits were given to investors earlier this year, Gozon said.
This year’s profit boost disguises failed or late investments by GMA, industry insiders said. “They were in acquisition talks, so maybe they withheld on some investments,” said one source, who requested anonymity.
One such area in which GMA has lagged in investing is digital television, a service the company is still testing. Its rival network, Lopez-led ABS-CBN Corp., enjoys a virtual monopoly in digital TV due to its rival’s sluggish rollout.
Digital TV allows for the easier broadcast of more channels as well as better audio and video quality. However, most television sets in the country simply can’t receive digital TV signals. This requires networks to sell set-top boxes to households.
ABS-CBN started selling set-top boxes last year and, because GMA still broadcasts using analog signals, the latter is completely left out of homes that have set-top boxes.
“Once a significant volume of the market is ready, willing and able to receive digital TV signals, we will exit the beta phase and activate our existing investments on transmission and content management equipment,” GMA’s Gozon said.
Meanwhile, ABS-CBN also has beachheads in several other areas where its main rival is absent. ABS-CBN operates the country’s top cable TV firm, SkyCable, which also offers fixed-line Internet connections to households.
A partnership with Globe Telecom Inc. also allowed ABS-CBN to launch its own mobile phone service in 2013. These go on top of ABS-CBN’s investments in magazines, movie production, radio and a local theme park.
“If you look at where we generate our revenue, it’s totally different,” ABS-CBN treasury head Rick Tan said in a separate interview. Last year, ABS-CBN saw profits jump 25 percent to P2.54 billion.
Tan said television advertising revenues remained significant. Rest assured, the company’s total profits will get a boost from election spending.
“It’s going to be a good year, definitely,” said Tan. “Every election year is different. If polls are close ahead of the voting, then candidates tend to spend more.” TV ads still account for more than 50 percent of the company’s top line. But this share is significantly less than the 90 percent of revenues derived by GMA by selling airtime on TV.
Investors have rewarded ABS-CBN’s diligence in spreading out its risk over more revenue sources. From a low of about P24 in 2012, ABS-CBN shares were trading at just under P60 before we went to press. As of this writing, GMA shares were trading at P7.33 each or below the IPO price of P8.50.
Despite what seems to be diverging paths for the two broadcast giants—with GMA staying focused on the cash cow and ABS-CBN more willing to take risks—mutual respect still remains.
“We still consider ABS-CBN as our closest competitor in terms of both viewership and ad revenues,” GMA’s Gozon said, adding that “free TV remains the most effective and cost-efficient way to reach target audiences in the country.”
ABS-CBN’s Tan, for his part, said: “We’re not dismissive of anybody. We recognize the strengths of the competition.” He said the continued rivalry with GMA, as well as the recent entry of new players such as CNN Philippines, Bloomberg TV and TV5, kept ABS-CBN management on its toes.
“Once you’re smug, that’s when you get into trouble,” he said.
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