Two of the country’s biggest television advertising studios have announced plans to merge and pool resources in a move expected to raise the bar on the domestic production of high-quality TV commercials for the Kingdom’s airwaves.

Under a deal expected to be concluded next week, Cambodia Broadcasting Service (CBS), a subsidiary of business tycoon Kith Meng’s Royal Group, will absorb TV advertising company Legend Tiger Investment Co Ltd and merge its operations with its own television commercial production arm. The merger would create the nation’s largest and best equipped television advertising production facility.

Glenn Ala, head of TVC operations for CBS, said that until now the two companies have operated as direct competitors vying for the increasing demand for television commercial production. Their combined resources would be pooled under a new shareholder agreement in which Legend Tiger “becomes a subsidiary, owned and operated by CBS”.

“The subsidiary will have two stakeholders, Kith Meng as majority shareholder and Bou Panha [as minority shareholder],” he said, referring to the current executive producer for Legend Tiger.

He added that a general manager would be appointed by CBS to run the company after the merger is finalised.

While Ala declined to disclose any financial figures or the amount of assets held by each party, he said the deal was made possible by the rising fortunes of CBS’ television commercial production arm.

“CBS’s TVC production department had a slow start but has recently grown in strength and profitability, primarily due to the infusion of skills and talents sourced both locally and internationally,” he said, adding that the company had to build up its network and brand image.

“Now with the merger, things can only get better because we combine the creative teams of both, and get the added benefits of Legend Tiger’s experience and network, [plus] CBS’ talents and resources,” he added.

CBS owns and operates three of the Kingdom’s biggest entertainment and news channels – CTN, CNC and MyTV – and raked in an estimated $20 million in advertising revenue in 2015. Meanwhile, Tiger Legend boasts a roster of high-profile clients that include CIMB Bank, Axiata, Cellcard and Cambodia Beer.

According to Ala, the consolidated TV commercial production facility would look to focus on keeping local advertising money from going to production houses in Thailand, Vietnam and the Philippines.

“We will strive to provide international quality productions and try to keep the ad production dollars from leaving the country,” he said. “And with the backing of the largest media company in Cambodia, we will be able to narrow the gap even further between brands and TV audiences through branded content.”

Julian Rake, managing director of local public relations and digital media firm Quantum Media, said that while there was no doubt that local demand for high-quality production of commercials was on the rise, there was a “disconnect” between the rates television stations were charging and prime time slots.

“There is a bit of a disconnect in [TV commercials] because advertising rates are so cheap here on Cambodian television stations with such a proliferation of different channels,” he said. “Marketing directors must sometimes wonder why they would pay top dollar for high-end production only to place their ads in such cheap time slots.”

He added that the low cost for prime time slots creates a disincentive for advertisers to invest heavily in high-quality commercial production.“Of course a big production house can offer its clients economies of scale and do quality work at a lower price, but there is a finite amount of that work around,” Rake said.

He added that it would be difficult for a production house to survive purely on making TV commercials without tapping into additional production streams such as “drama or reality shows”.