Galaxy, which is part-owned by terrestrial heavyweight TVB, had banked on a formula of TVB-produced local dramas to drive viewership, given the popularity of such content with the Hong Kong public.
However, with subscriber figures estimated at below 10,000, it appears that the channel is being viewed as a lesser alternative to TVB itself, despite favourable analyst predictions at the channel's launch.
The operator has responded by slashing its monthly charge from HK$168 (US$21) to $128.
"I think you will now see a deeply cut-price model from Galaxy," said Simon Dewhurst, head of media investment banking at CLSA Asia-Pacific Markets. "The programming is not particularly compelling. I think we were possibly wrong that, because dramas on TVB do so well, good dramas on a pay-TV platform would attract viewers. It would seem that drama isn't necessarily as big a driver as sports and movies."
However, Dewhurst ruled out the possibility of a price war involving exTV's two rivals, iCable Communications and Now Broadband TV, given the strong market position held by the latter two operators.
iCable, which operated a pay-TV monopoly for seven years, currently has approximately 600,000 subscribers and charges $298 per month. Now, meanwhile, broadcasts through its comprehensive broadband internet network, and enables customers to subscribe to individual channels.
The remaining broadcaster, City Telecom, costs $88 per month. Recent months have seen the departure of two operators from the sector - YesTV and Taiwanese player, TV Plus.
"There are insufficient homes to support more than one service," remarked Dewhurst.
Galaxy has also reportedly faced difficulties in reaching Hong Kong homes, due to the majority of the city's internal distribution systems being owned by Wharf Holdings, iCable's parent company.
"(Galaxy) really has fought a really hard battle to get access to the home," said Dewhurst. "You can frustrate that process with smoke and mirrors."
See page 27
WHO'S WHO IN HONG KONG'S PAY-TV MARKET
iCable Communications The undisputed market leader, iCable owes its position of strength to a seven-year monopoly which came to a close in 2000. With 600,000 subscribers, the operator has a comprehensive network and exclusive ownership of English Premier League broadcasting rights.
High prices and lacklustre non-sports programming are its key weaknesses.
Now Broadband TV Owned by PCCW. Has approximately 200,000 subscribers, with a distribution system that allows it to bypass conventional cable networks, and a robust consumer proposition. Consumers can subscribe to individual channels and receive them via a broadband internet connection.
Galaxy Satellite Broadcasting Forty-nine per cent owned by terrestrial broadcaster TVB, Galaxy's exTV offering has received a mixed reception, with subscriber figures estimated at below 10,000. Has also encountered difficulties in reaching Hong Kong homes.
City Telecom City's Hong Kong Broadband Network provides pay-TV services over a broadband internet network, charging $88 per month.