Turmoil for TV?


  • Business
  • Saturday, 19 Aug 2017

Girish: We see all three platforms (free-to-air, pay-TV and OTTs) attracting their fair share of eyeballs and advertising dollar.

Traditional broadcast television stations are feeling the impact from the growth of other mediums such as OTTs

LAST week, Walt Disney distanced itself from Netflix. From 2019, Walt Disney, the entertainment conglomerate will pull out its movies screened on Nelflix and plans to stream them to viewers on its own platforms.

The move by Walt Disney marks the fight back by entertainment giants and television stations against disrupters such as Netflix that have grown to a multi-billion-dollar outfit and are into their own production of entertainment content.

The fight back is inevitable. Disrupters such as Netflix and other over-the-top (OTT) players are beginning to take a life of their own and eating into the profits of entertainment production houses and television stations.

For instance, Will Smith’s latest blockbuster, Bright, is a futuristic movie on humans living along with aliens fighting the bad guys. It is a big budget movie, costing some US$90mil, and is expected to premier in December this year for the Christmas season.

However, Bright will only be available on Netflix – not on the cinemas. The movie is expected to garner more eyeballs for the Netflix against the traditional media conglomerates such as Walt Disney and Rupert Murdoch’s 21st Century Fox.

Capel: It will take a while before we reach the critical point where all demographics move towards VOD?.
Capel: It will take a while before we reach the critical point where all demographics move towards VOD.
 

Walt Disney owns cable televison network such as the Disney channel, ESPN, and ABC broadcast television station. But it is now facing a real threat from players such as Netflix that are producing content on its own for its own streaming channels.

The end result is the OTTs are gaining more market share from audience and this is something that is beginning to be felt also on broadcast television channels.

Entertainment giants such as Walt Disney used to depend on its very own and other broadcast television stations to monetise its content.

In Malaysia, the famous cartoons of Walt Disney used to be a feature available only on television – channelled by both the free-to-air TV and pay-TV broadcast operators.

Now, its available on OTTs and video-on-demand (VOD) operators that deliver services cheaper and through the wireless broadband services.

The bottom line is the free-to-air TV and pay-TV operators are not seeing growth in their bottom line.

Bala: We expect digital videos, including YouTube, Facebook, VOD and out-of-home screens to grow at the expense of the free-to-air and pay-TV stations
Bala: We expect digital videos, including YouTube, Facebook, VOD and out-of-home screens to grow at the expense of the free-to-air and pay-TV stations
 

Media Prima, the country’s biggest integrated media group, has incurred a loss of RMRM171.4mil for the first six months this year.

Although the losses are largely tied to the shutting down of its associate company Malaysian Newsprint Industries Sdn Bhd, what was conspicuous is the poor performance of its television segment.

Media Prima’s television segment, which has been the mainstay of the free-to-air television broadcast station, posted a loss of RM20.7mil for the first six months this year.

The other major broadcast operator, Astro, which operates pay-TV services, has seen its growth in the average revenue per user (ARPU) plateau over the last three years.

In 2015, Astro’s ARPU was RM99 and now, it is RM100.40.

To add to Astro’s problem is the potential entry of a new player Ansa Broadcast (formerly known as U-television). It was reported that the company, which is linked to Berjaya Group’s Tan Sri Vincent Tan, is in the midst of entering the satellite pay-TV segment.

TV fight-back

However, Media Prima and Astro are fighting back, especially against the disrupters in the local entertainment scene.

For example, Media Prima Bhd launched the first local OTT streaming service in Malaysia called “tonton” in 2010 and as of May, it has 6.8 million users.

Astro Malaysia Holdings Bhd started going into the OTT segment since 2012.

In that year, it launched Astro Go where its existing customers are allowed to access the movies through portable mobile devices such as smart phones, tablets and laptops. As of April this year, Astro Go has 1.2 million registered users.

Apart from Astro Go, the pay-TV operator has launched Tribe in the Philippines, Singapore and Indonesia. Tribe is another version of OTT which offers a combination of Asian and sports channels.

Astro says it has 1.3 million registered users for Tribe and the starting prices varies in each country.

Apart from Astro Go and Tribe, the pay-TV operator has also introduced Njoi Now, which offers 18 channels for free. However, those channels are not something that viewers are likely to pay if charged.

 

“Nevertheless, Astro comes up with several mediums to fight against the disrupters,” says a media analyst.

However, consumers have largely reduced their monthly bills, as evidenced by the gradual decline in margins.

“Households that used to pay RM120 or more per month are now paying less than RM90 per month. That is the global trend,” says a media analyst.

Netflix and iFlix are the two names that have taken the local entertainment scene by storm. Viewers like them because of their offering of movies and television series.

Other media houses have also joined the bandwagon.

Star Media Group launched dimsum.my, an all-Asian video-on-demand service, since last November.

It was recently reported that Fox Networks Group will be introducing its new on-demand video streaming service Fox+ in Malaysia soon.

Extended timeline

Media planners and analysts feel that the OTTs have still come of age yet and it would take another three to five years before they steal the digital advertising money that largely goes to the television broadcast stations at the moment.

Carat Malaysia CEO Lorraine Capel says that online entertainment platforms such as VOD are the preferred content format in digital advertising.

“Online videos are seeing the highest growth in ad spend at 22% based on Dentsu Aegis’ data compared to all other digital channels,” she notes.

Capel says mobile devices are driving the overall push towards spending in digital.

“Smartphone penetration in our country is pushing towards 80%, as advanced handsets are increasingly more affordable and age ownership is becoming younger,” she adds.

IPG Mediabrands Malaysia CEO Bala Pomaleh reckons that video advertising could contribute to about 30% of all digital advertisements this year and this share, he says, looks set to further increase.

Based on the agency’s estimates, Bala says that currently, about 45% of advertisement spent goes to free-to-air TV stations and 30% towards pay-TV stations.

“Digital videos accounts for a quarter of the total money that is spent on advertisements,” he says.

“We expect digital videos, including YouTube, Facebook, VOD and out-of-home (OOH) screens to grow at the expense of the free-to-air and pay-TV stations.’’

Content is king

Going forward, media planers says the key would be content, as all media houses are increasingly moving towards OTT, which can be streamed on mobile devices.

“So, whoever, has the right content strategy will be the ultimate winner. As content is such a wide subject, it is hard to win in every space, and platform content strategists need to know what is best for them in terms of attracting audiences as well as monetising the content,’’ he says.

Bala attributes the growth of OTTs to several factors ranging from changing consumer consumption patterns to moving away from a fixed schedule to catch up on programmes.

The trend of watching the television at 8pm for prime news is over. Now, news comes instantly through mobile devices. The same goes for entertainment.

Consumers prefer to watch their favourite series on their tablets or lap tops.

According to Bala, video streaming providers that have created regional and local content have been successful in drawing higher audience following.

Can OTTs sustain growth?

Traditional television broadcast stations depend largely on advertisements to sustain their growth. Then came pay-TV operators such as Astro, whose business model is a combination of subscription as well as advertisement revenues.

The OTTs, operating at low cost, are driven purely on subscription revenues. Their model is to secure the library of movies from entertainment production houses and bundle them as a package to consumers in return for a fee.

Bala says OTT players will be attractive to advertisers if they have enough eyeballs and offer competitive advertising rates.

However, operators such as like Netflix and iFlix at the moment do not seem to be heading towards introducing ads within their ecosystem.

“Ultimately, we believe consumers will pick quality of content over whether the platform is ad free,’’ Bala notes.

GroupM Malaysia CEO Girish Menon feels that there is still a very large core of consumers who still access content via free-to-air TV and pay-TV.

“We see all three platforms (free-to-air, pay-TV and OTTs) attracting their fair share of eyeballs and advertising dollars.”

Girish says that for large fast-moving consumer goods advertisers, they will need to be present across all these platforms in order to adequately cover their broad audience.

“For advertisers who are targeting very specific, niche audiences, it will be either one of the pay-TV channels or one of the online video platforms which will be more relevant,” he says.

The question the traditional television channels are facing is whether the decline in advertisement spending and viewership on their platforms will continue and for how long.

Media planners and analysts feel it is a matter of time as consumers become more content conscious and demand convenience.

Carat’s Capel says the rising interest for video-on-demand services among consumers is still at a nascent stage.

“It will take a while before we reach the critical point where all demographics move towards VOD. Naturally, advertising support follows the audience.

“Pay-TV and free-to-air TV are still very relevant today. In fact, any media, including print, can be effective if properly used to engage with consumers. It’s a matter of who you are addressing to and how,” she says.

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