Astro Malaysia Holdings Bhd’s agreement with TELEKOM MALAYSIA BHD (TM) for the latter to air the highly popular Barclays Premier League (BPL) matches and two Astro sports channels benefits the former mainly in two ways.
First, it defrays, somewhat, Astro’s acquisition cost of the rights to the BPL matches.
Second, the deal, to a certain extent, diffuses any growing regulatory pressure to end Astro’s stranglehold on BPL matches in the country.
During the signing of the deal between TM and Astro, Astro chief executive officer (CEO) Datuk Rohana Rozhan described the partnership as a “win-win collaboration”.
On the other hand, TM CEO Tan Sri Zamzamzairani Mohd Isa said, in jest: “With the new offerings, we would be able to offer our subscribers service regardless of weather conditions.”
Under the deal, TM is allowed to air two Astro SuperSport channels on its Internet Protocol television (IPTV) service HyppTV, including selected BPL live matches for seasons 2013/14, 2014/15 and 2015/16.
In addition to the two channels, both parties have also agreed to enter into an agreement for the airing of selected NJOI channels, subject to certain conditions spelled out in the Channel Supply Agreement.
The deal can be described as a marriage of convenience, as the two will derive synergistic benefits from each other.
Astro will obtain an additional revenue stream, while TM will be able to provide better content offerings for its subscribers.
At the event to mark the collaboration, Communications and Multimedia Minister Datuk Seri Ahmad Shabery Cheek described the pact as a marriage between two most unlikely indirect competitors.
Astro’s Rohana notes that the wider reach to the masses via TM’s HyppTV will provide an additional revenue stream for the pay-TV giant and also enhance advertising value.
She quips that Astro will realise its additional revenue from the collaboration “as soon as TM pays the bill”.
In addition, the three-year collaboration is also expected to help enhance Astro’s advertising value.
“Our revenue streams come from the number of customers we have, average revenue per user (Arpu), sponsorship and advertising. Sponsorship and advertising, in turn, are dependent on the number of viewers.
“More viewers would mean more value for advertisers,” Rohana explains.
The pay-TV advertising revenue stood at RM115mil in the first quarter ended April 30.
In the said quarter, Astro’s Arpu rose slightly to RM94.20 against the RM93 realised for the full-financial year ended Jan 31, 2013 (FY13). Astro’s pay-TV subscribers rose by 40,000 to 3.32 million from 3.28 million in the preceding quarter, while NJOI customers grew by 55,000 to 264,000.
As it stands, Astro has a total customer base of 3.58 million, translating into a 53% penetration rate of total TV households in Malaysia.
On the other hand, TM’s HyppTV subscribers will be able to enjoy greater content offerings. TM will be allowed to air 60% of all BPL matches that are shown on Astro.
The telco giant has been perceived to be less attractive than its new partner in terms of TV content offering despite having more than 100 channels on its HyppTV.
And the fact that many urban households already have connectivity to Astro doesn’t make it easy for TM to win over those customers.
Industry players say the pact with Astro will help TM become more appealing in terms of content offering.
“The airing of the two Astro SuperSport channels, which offer premium sports content including some of the BPL content on HyppTV, will also enhance the attractiveness of TM’s products for its consumers,” Zamzamzairani says.
According to Zamzamzairani, TM has expanded the reach of HyppTV to a greater number of homes and customers with the availability of the service nationwide on Streamyx 4Mbps and 8Mbps, and making it accessible everywhere on multiscreen devices. “We will earn more eyeballs, as the viewership is already there,” he says, referring to its existing pool of subsribers.
“Sometimes we collaborate, sometimes we compete. We opened up our high-speed broadband infrastructure for wholesale, and on the retail front, we compete with each other,” Zamzamzairani adds.
Earlier, executive vice-president of new media Jeremy Kung tells StarBizWeek that HyppTV is currently the country’s fastest-growing IPTV, with over 550,000 UniFi customers nationwide.
On the current take-up rate of HyppTV’s other channel offerings, Kung notes that the response has been “very encouraging” with regard to the consumption of video-on-demand (VOD). The number of VOD subscribers on HyppTV has grown organically as the UniFi subscriber base increases.
Kung says contributions from HyppTV are blended in with UniFi’s contributions to group revenue. For FY12, TM’s Internet and data business contributed some 46% of TM’s revenue.
TM currently offers subscribers the sports package for RM30 per month. Those who register after September will be charged RM50 per month.
Analysts and industry players hold mixed views on the collaboration.
Industry players observe that TM will need to add more attractive content to its offering to retain subscribers whose contracts are expiring, as well as to incur net adds.
They point out that Maxis Bhd, which has an existing partnership with Astro, could easily snatch the contracts of expiring subscribers away from TM.
They believe Maxis will likely be aggressive in acquiring new subscribers, going forward.
“At the end of the day, Astro is the biggest winner by opening up and sharing its content with different telcos.
“The company will get additional revenue from all the partnerships,” an industry player opines.
A case in point is the Maxis-Astro tie-up, he says, where Astro pockets 100% revenue from the content while the broadband revenue is shared with Maxis.
“Astro has a strong content provision, as it holds the rights to the BPL and has developed various local content.
“This will ensure customer loyalty,” an analyst says.
He adds that most households will only terminate their Astro connectivity if there is a more compelling and extensive offer, which is non-existent as of now.
The amount TM will have to fork out to pay Astro for the sports content is not known.
Astro was speculated to have paid between a hefty RM800mil and RM1bil for three years of broadcast rights for the BPL.
Analysts note that by sharing content, Astro will recoup its investment faster and could reinvest the money for other content.
“The sharing of content will not only help it (Astro) in reducing its content cost if it sells (the BPL content) to TM, but it can also still compete based on its customer loyalty, services and quality,” an analyst says.
Analysts say the deal could prove to be a politically savvy move by Astro to please regulators as well as its competitors.
Under the new content-sharing rules, which took effect in May 2012, all TV stations without broadcasting rights to certain major sports events would be able to share the contents obtained from rights holders on reasonable commercial terms.
Kenanga Research is positive on this development, as it could further enhance HyppTV’s sports channels, whereby a variety of sports content is generally viewed as one of the key reasons for subscribers to opt for Pay-TV services. The latest tie-up could cause Astro to lose some competitive advantage, given that the enhanced sports content would provide less motivation for UniFi subscribers, whose contracts are due for renewal, to switch to Astro’s services.
“Although the price tag of the agreement remains a trade secret, we understand that the content acquisition cost forms part of TM’s content budget in FY13. Based on our earlier understanding, TM has allocated RM100mil to RM120mil per annum for content acquisition,” Kenanga Research analyst Cheow Ming Liang says.
On the flip side, RHB Research Institute Sdn Bhd’s analyst Lim Tee Yang finds the collaboration only mildly positive for TM.
“We believe the content will not come cheap and is unlikely to materially affect earnings in the short term. Besides competitive reasons (for Astro), TM may have chosen to have limited access to BPL to avoid squeezing margins already pressured by high labour costs and high-speed broadband maintenance costs,” the analyst notes.
Lim says that while the deal offers TM the opportunity to uplift its Arpu, this may not directly translate into earnings in the short term due to the associated content cost, which it believes will not come cheap.
He points out that TM spends far less on content cost (RHB estimate of around RM200mil-RM300mil this year) compared to Astro (roughly RM1.2bil).
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