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Teacher spurns $11m offer in Hong Kong tutor wars

Lawsuits; multimillion-dollar battles for talent; celebrities emblazoned on billboards all over town. It sounds like Hollywood but this is the bizarre, high-stakes world of Hong Kong's super-tutors.

Education is big business in the territory, where tiger moms (and dads) employ huge reserves of energy and money to secure top grades for their offspring in the crucial university entrance exams. The best tutors attract banker-sized salaries and the cult status of pop stars.

Students at Jing'an Education College Affiliated School in Shanghai.
Philippe Lopez | AFP | Getty Images
Students at Jing'an Education College Affiliated School in Shanghai.

But now, as years of breakneck growth tempers on the back of a rapidly ageing population, a tussle between two of Hong Kong's best-known tuition companies for a top teacher has spilled over into the public arena.

Modern Education published an open letter in local newspapers last week offering Lam Yat-yan, one of Hong Kong's most popular tutors, an annual income of HK$85m ($11m) if he jumps ship from rival Beacon Group and lures 25,000 student enrolments.

Modern Education, whose parent company listed on the Hong Kong stock exchange in 2011, made its move for Mr Lam, a 28-year-old Chinese language tutor, just after Beacon filed for its own initial public offering.

Mr Lam, who looks more like a boy-band singer than a teacher with his fashionably coiffed hair and fitted clothes, enjoys a strong following. "I have friends who worship him like a god," said Coby Lam, one of his former students. "A friend of mine got better grades after going to his class and that's why I signed up for it."

Tiffany Lai, another former student, said she joined the bandwagon along with most of her classmates because she was afraid she would miss out.

"I think he's a good talker, that's his biggest selling point," she said. "I saw people crying even in some of his video classes, all because of the motivational things he said."

With testimonials like these, it is no wonder these colleges have to worry about "key person risk" even more than founder-led companies such as Facebook or Tesla Motors.

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Star tutors have to sign non-compete clauses and several poaching attempts have escalated into messy legal disputes.

Beacon revealed in its listing prospectus that its top tutor was responsible for generating 40 per cent of its revenue of HK$328m in the last financial year.

"The loss of such tutor's service to our group may cause a significant reduction in student enrolments and materially and adversely affect our business," the company warned potential investors.

Tutors are typically paid commission per student and the use of video technology has allowed them to expand their reach. When Mr Lam gives a live class, Beacon records it and later rebroadcasts it as many as 18 times, with students who watch the video getting just a HK$20 discount on the HK$590 fee for four sessions.

Mr Lam said he wanted to stay at Beacon as long as it provided a "fair and reasonable workplace", telling his 67,000 fans on Facebook that "it makes no difference for me to make 50m or 80m dollars more".

Hong Kong has more than 900 tuition centres focused on high-school pupils but enrolments dropped from 206,500 in 2010 to 180,300 last year because of a decline in the school-age population, according to a report commissioned by Beacon and produced by Euromonitor, the market research group.

During the same period, revenue generated by the sector rose from $119m to $132m but both Beacon and Modern Education's parent company reported a drop in sales last year as competition intensified.