Star Media aims to maintain lead amid industry challenges

Content strength: Tan and Ng in discussion about a transformation exercise to stay ahead of the game and ensure the sustainability of the business.

THE media industry worldwide is undergoing a disruption at a breakneck pace. Malaysia is not spared from this disruption as media owners are positioning to have a stronger presence in the digital space amid shrinking advertising expenditure in traditional media.

For its survival, media companies are adapting to the current trends and forward thinking in a business which is highly competitive and driven by advertising revenue.

To stay afloat, several main stream media companies like Media Prima Bhd, Star Media Group and Utusan Melayu (M) Bhd have announced cost cutting and restructuring measures to weather the disruption and dwindling ad revenues.

Utusan Melayu and Berjaya Media Bhd have since fallen into the Practice Note 17 status. The latter is the publisher of theSun.

Based on Nielsen’s latest adex figures, which exclude pay-TV, outdoor and digital media, total ad spend for the second quarter of 2018 declined by 8.1% to RM1.585bil compared with RM1.724bil in the same quarter in 2017.

On a month-on-month comparison, total ad spend for August was lower at RM488.2mil against RM571.2mil in the same month of 2017.

In terms of ad spend by medium, newspapers, which commands the largest market share in the traditional media business, declined by 19.6% in the second quarter against the same period in 2017.

As for ad spend, the newspaper segment share was lower at 37.7% in the second quarter against 43.1% in the same period last year. Realising the glaring challenges and headwinds in the media business, Star Media Group, the leading English daily, has undertaken a transformation exercise since late last year to stay ahead of the game and ensure the sustainability of its business.

Transformation strategy

Commenting on the group’s transformation strategy, chief operating officer Roy Tan says it’s three-fold – putting consumers’ at the heart of the organisation, placing data at the core of the operations and being economically sustainable.

For consumers to be at the heart of the organisation, he says the content of the product, for example, has to be relevant to the audience and advertisers.

“This means that being truthful to our consumers and the way to do that is by the content which we create and the clarity relating to it. From a business standpoint, we need to work towards forging a closer relationship with marketers and agencies.

“To do that, among others, we need to provide them with holistic solutions. In this regard, a service call creative solutions has been set up to address their needs via various platforms like print, audio, digital and videos,” he explains.

Tan says the group is beefing up its content by investing in technology and talents, adding that it has also set up new departments to meet this objective.

Towards this end, three new departments have been established – technology, analytics and product and marketing – to bolster growth and be at the forefront of the media industry.

The company, he adds, has a strong growth marketing team to drive engagements with consumers and facilitate return on investments for clients. The team, among others, will look into resolving specific industry issues and roll out services for key industry segments over the next six months.

Grounding the operations in data, he says will enable the company to know whether the relevant engagements via the contents with readers and advertisers are successful.

Making an analogy of data and print, Tan says for newspapers it is difficult to identify those who are consuming the content as opposed to digital where consumers are easily indentifiable. Data also helps to track the type of contents which are consumed and the relevant growth and engagement figures. Realising the importance of data, an analytics department has been set up to better understand the consumers.

“We have appointed a former consultant to be the head of the department.

“The analytics team will assist on two fronts. On the consumer side, it will help us understand what consumers prefer in our products and content. On the clients side, we can know the relevant platforms or a combination that will help achieve and drive better results for their business,” he explains.

As part of its expansion, the company will be investing heavily in various technologies over the next three years.

“For the first time, we have hired a chief technology officer to look into and help rationalise on the usage of new technologies for the group,” he says.

Having said that, he stresses that investments in technology or the people should provide the expected rate of return to the group.

Transformation post GE14

On the relevancy of the transformation strategy post the 14 General Election (GE14), Tan says it gives the company the opportunity to deepen its communications with the audience.

He stresses that the biggest barrier in terms of communications has been the Printing Presses and Publications Act (1984) and not its shareholders.

Post GE14, he says in terms of content (newspaper and digital), all the relevant metrics are up.

The subscription rate for the print on an average has risen by between 15,000 and 20,000 a day and digital subscribers are also increasing daily post GE14.

The print segment, which is the main revenue generator, has for the first time this year, saw revenue improvement after declining in the last few years.

“For the first half of the year, the rate of decline in revenue has slowed. The operating expenditure has fallen faster than the rate of decline in revenue, translating into improvement in earnings in the first six months.”

Asked if the trend would continue in the second half of the year, Tan says it’s too early to gauge whether the revenue can hold up amid the global headwinds.

“Nevertheless, I am cautiously optimistic based on the first half performance that the second half will see improvement,” he explains.

Star Media Group’s net profit increased by five-fold to RM12.7mil in the first half of the year compared with last year on the back of cost-savings and significant improvement to its print and digital business.

Cost-cutting and acquisition

Is cost-cutting the right strategy amid a more aggressive media landscape? In terms of cost-cutting, he says the company has formulated a new KPI data across all departments.

It measures how an employee is performing relative to his or her peers.

“We want to balance the qualitative and quantitative aspects of such a move. For me, staff experience is of utmost importance. We will prefer to rightsize rather than downsize. We want to have the right mix of people in line with the right size of the business. For its acquisition strategy, Tan says it encompasses the media and non-media assets.

For the media assets, he says those which have been not performing will be disposed of.

For example, the disposal of the Li TV group was to mitigate further losses, he says, adding that the audience at the same time are also migrating to other channels like videos.

As for the sale of the 52.51% stake in Cityneon Holdings Ltd for RM360mil, Tan says the disposal will allow the group to unlock value in its investment and concentrate on the expansion of its primary business.

For non-media assets, he says, there are no plans to sell land in Penang although there are plans to derive yield from the property.

He says future acquisitions should contribute significantly to the group.

As for its radio stations, he says there are no plans to sell them as the radio group is profitable.

“The revenue and cost structure of the radio business still works in this country and I am positive about its growth prospects.

“We view radio as part of the media eco-system,” he says.

For future investments, Tan says they must bring in returns to the group in a span of between three and five years.

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