The task ahead


  • Business
  • Saturday, 11 Jan 2003

SISTEM Televisyen Malaysia Bhd (TV3) is nothing short of happy with the strides that it has made turning its television rating around following moves to improve content and operational efficiency over the last 12 months. 

Yet, even as it basks in this knowledge, the broadcasting company is cognizant of the fact that it would be pure folly to assume that it can sustain its current top position in the non-Malay segment by leaving things as they are. 

With competition hot on its heels and the advertising landscape becoming increasingly challenging, TV3 realises that the only way to stave off its contenders is to find new distribution channels, which translates into new advertising medium, in order to generate new revenue streams, Malaysian Resources Corp Bhd chief executive officer Abdul Rahman Ahmad says. 

“We have to accept that we are nearly hitting saturation point. No other TV station in the world hits 47 per cent audience share like we have,” he says.  

But this has not always been the case. When the new management of TV3 under Rahman came in early 2002, TV3's general ratings were at its lowest at 37 points. The situation has altered greatly over the last one year.  

According to Rahman, the company undertook a massive restructuring plan, which involved a programming restructuring called 'Best of Breed', changes to the company's internal structure from one that was internally-driven to one that is a more consumer-driven organisation and a shift in focus to primarily the audience and advertisers. 

None of its competitors have given in to complacency either. Government-run TV1 is set to become a pure information-based programming channel. As a result, all entertainment programmes will shift to sister channel TV2.  

While the impact of this move is left to be seen, Rahman is fairly confident that the net effect will be somewhat positive for TV3. His argument is that not all TV1 viewers will migrate to TV2 and thus there will be potential for some leakages or spillover to TV3. 

In time to come however, satellite television operator Measat Broadcast Network Systems Sdn Bhd's Astro service could turn into a formidable adversary. So far, TV3 has remained insulated from competition from this quarter, as Astro has been more aggressive in going after the non-Malay market. 

“As TV3 is more Malay-driven, leakages currently come from TV2 and NTV7. But, as I understand it, Astro too is close to reaching saturation point and could soon be aggressively targeting the Malay market. This means that TV3 will have to offer something better,” Rahman says.  

Furthermore, we have to accept that segmentation is a key trend now and going forward. While we need to improve by serving our audience better and doing better things, we have to look at other mediums. But this is still in the planning stage,” he adds. 

TV3's restructuring proposals, which involve parent MRCB and sister company The New Straits Times Press (M) Bhd, have now only to obtain the approval of the companies' respective shareholders. The restructuring will enable MRCB and TV3 to settle their debts totalling RM1.2 billion. 

In the process, TV3 will transfer its listing status to Newco, which will ultimately hold the shares of TV3 and NSTP now owned by MRCB.  

Since January last year, TV3 has undergone sweeping changes. When the two professional managers were first brought in, TV3 was perceived to be losing its share of mainly the non-Malay viewers. Its general ratings at the point were at its lowest level - some 37 ratings points - thus placing it in the number three spot, for the non-Malay segment, after NTV7 and TV2. 

To capture more viewers, TV3 set up a brand management group, whose job is purely to look at the different segments for its advertisers. Specific time slots were created for particular segments of the market, like mass market, housewives, working adults, Chinese as well as kids and teens.  

“With that we launched our Best of Breed programming strategy in August last year. Within two months, our ratings shot up from 37 rating points to 47 ratings point, the last numbers I got. Which means at any point of time, 47 per cent of viewers are watching TV3,” Rahman says with a hint of pride. 

What is considered to be an even bigger achievement for the broadcasting outfit is regaining its pole position in the non-Malay segment, from its previous number three spot. 

“Here, we introduced two new products – the Hong Kong TVB Hits Drama, which used to be aired over TV2 and the very successful Korean series ‘Winter Sonata’. For women, we introduced a daytime soap opera entitled ‘Rosalinda’. While this is aired at 3pm daily, believe it or not, the number of audience watching this is more than 2.5 million. This is prime-time ratings,” Rahman stresses. 

More programming changes were executed last August to recapture its Chinese viewers. Apart from the Chinese block that was created for the 6 pm - 8 pm time slot, a partnership was struck with Golden Screen Cinemas so all new Chinese movies would be aired on TV3. In addition, an entertainment bites programme entitled “From the Green Room” was introduced last month. This has turned out to be another success story as the programme captures an average of 1.6 million viewers. 

As a result, the station has regained its share of Chinese audience, from 32 per cent last August to 38 per cent last month.  

“We have achieved quite a lot in terms of positioning. Internally, we have also tried to become more efficient by cutting down and reducing our rentals as well as ensuring better programming control to maintain write-offs,” Rahman says. 

“In addition, we recently announced a voluntary separation scheme. We feel this is the right time to do it as we are in a position of strength now. Furthermore, we know that this is the right organisation structure for the company and this is what is needed in order to be more productive,” he adds.  

While the cost-cutting measures have delivered results, Rahman says it was a foregone conclusion that any cost savings would have to be reinvested in programming efforts. In the past, TV3 was generating earnings before income tax, depreciation and amortisation (EBITDA) of between RM55 million and RM60 million. This increased slightly to about RM63 million last year. 

“TV3’s problem is basically a debt problem, not an operational one. Once the debt is settled, the EBITDA that is generated will flow straight to the bottom line,” he assures.  

On the advertising front, TV advertising is being squeezed largely owing to the fact that the tobacco players are withdrawing their spending. Tobacco companies previously constituted 30 per cent of TV3’s revenue. But even in light of this, the station managed to increase its overall revenue by 1 per cent. 

“This, to my mind, is considerable. Even in the last quarter, we still managed to achieve positive revenue in a declining market. As a result, our advertising share has increased from 46 per cent to 47 per cent-48 per cent,” Rahman says. 

For the current financial year, the company is hopeful that its revenue will be positive. At the same time, it realises that the extent of how positive it turns out to be hinges a great deal on the general economy. 

The current uncertainty over the US/Iraq war issue will undoubtedly cast a pall over multinationals’ spending on advertising. 

“But we are still bullish. We have set a 10 per cent target for revenue growth, which we admit will be very tough to achieve. But even if we don’t achieve this, we hope to still see positive growth in revenue,” he says.  

Although TV3 has been suffering losses since 1998. For financial year 2002, it made a net loss of RM16.9 million from a loss of RM2.5 million the previous year. Rahman says he expects TV3 to return to the black for the current financial year.  

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