Dr. Leung Anita Fung Yee ("Dr. Leung"), the Chief Executive Officer of QJY mentioned, "Since the acquisition of the exclusive advertising rights of the Drama Channel of Hubei TV station early this year, QJY has become one of the few foreign-owned companies which has been successfully secure exclusive advertising agency rights of a local TV station in China. Other than reducing the operating costs, the acquisition of the exclusive advertising agency rights in respect of commercial air-time of the Chongqing TV Station will further strengthen QJY's position by extending the TV advertising platform in China. The co-operation with two of the leading provisional TV stations, Chongqing TV Station and Hubei TV station, it is expected to draw more provincial TV stations for future collaboration.
Dr. Leung explains that the Channel broadcasts on a 24-hour continuous basis and its content is mainly focused on TV drama series and entertainment programmes. The total advertising airtime for every 24 hours is around 260 minutes. The 2006 annual rate card is up to RMB 800 million. Following market trend adjustment, the rate card will be raised to RMB 960 million in 2007. As the owner of the exclusive advertising agency rights, QJY has absolute discretion on pricing, discount, placing and marketing strategies of advertising operations and so on. QJY will also have the right to plan and organize publicity and public relation activities together with the Channel, and offer its suggestions on programmes procurement. All sponsorship and advertising incomes of the Channel, including tangible and intangible and cash or in-kind, will belong to QJY.
Dr. Leung comments the main reason that QJY can enter into cooperation arrangement with another leading TV station in China within less than six months is because since QJY has taken over the advertising business of the Drama Channel of Hubei TV station, quite a number of prestigious brands have become its advertisers, leading Hubei TV station to increase the market shares and uplift its corporate image. QJY has also contributed significantly to the initiation and supply of TV drama series, which led to extra gains in the programmes' viewing rate. Such outstanding achievement by QJY has urged the Chongqing TV station to consent the transfer of the exclusive advertising right of the Channel to QJY. The advertising agency business will be carried out by QJY (China) Advertising Company Limited. ("勤加緣（中國）廣告有限公司") who has nationwide advertising business license to operate in China and other agencies that QJY China appointed as its representatives for business development and client recruitment.
The Chongqing TV Station will continue to work closely with QJY in the production and the purchase of quality programmes that will help boosting the viewing rate of the Channel. The two parties will join forces to create a new look for the Channel based on an international and stylish positioning which will make it stand out amongst other entertainment channels in China. The total programme cost to be spent on the Channel is expected to be around RMB25 million a year. The worldwide distribution rights of these programmes all belong to QJY, and QJY will run the programmes not only on the Channel but also through the local and international distribution network for greater returns to QJY.
The acquisition of the advertising rights of the Channel by QJY will formally commence on 1 January 2008. The advertising income and sponsorship will be recognized in the year. As a result, QJY expects the Group's turnover be increased significantly as a result of the increased advertising business in 2008
In accordance with the rules of Hong Kong Stock Exchange, the transaction requires the approval of an extraordinary general meeting ("EGM"). At that EGM, the renewed employment contract of Dr. Anita Leung, CEO of the Group, will also be presented to the shareholders for approval. The new term change her employment package (remuneration, housings, etc) from the original US$1,000,000 to US$50,000 per annum. Under the new package, Dr. Leung will also be entitled to profit sharing relating to the aggregate sum of the QJY's net profit after tax over the financial years ending 30 September 2008, 2009 and 2010, aligning her performance with the financial performance of the Group.
About Qin Jia Yuan
Qin Jia Yuan Media Services Company Limited (HKEx: 2366) is a China-focused one-stop shop for TV media services, providing integrated programme, distribution, advertising and marketing and public relations services to production houses, advertising agencies and advertisers. The Group was listed on the main board of the Stock Exchange of Hong Kong on June 30, 2004 following a successful initial public offering. Its strategic shareholders include Aegis Group plc, a public company listed on the London Stock Exchange and one of the world's five largest media groups.