KUALA LUMPUR: The challenging environment for the media industry is expected persist in the coming year amid a structural shift in the sector. Transition efforts by media companies to monetise their digital initiatives have yielded limited results and revenue is insufficient to cushion the decline in their traditional business.
AmInvestment Bank, which has a “neutral” call on media sector, said ailing circulation and high newsprint cost continue to be the drag for publishers including STAR MEDIA GROUP BHD, MEDIA CHINESE INTERNATIONAL LTD, Media Prima Bhd and Utusan Melayu (M) Bhd.
“Since 2015, the average daily circulation of newspapers has fallen at an average rate of 5% half-yearly with declines led by Malay
newspapers,” said AmInvestment Bank in a report.
“Meanwhile, average newsprint prices have surged 13% year-on-year,” it added.
The situation for local publishers was not helped by weak advertising expenditure (adex), which fell 3% from a year ago as advertisers turned cautious post the general election in May.
“Relative to the weaker adex in 2018, we are cautiously optimistic on adex in 2019,” it said, adding that the prospect of improved consumer sentiment in 2019 will entice advertiser to increase their spending, lifting the sector.
A key re-rating catalyst could come from the digital space, assuming that these media companies can grow their digital income stream quickly.
Telecommunication companies, in recent months, have slashed down their broadband subscription packages, while Tenaga Nasional Bhd, the electricity company, last month said it will announce in January a plan to enter the broadband market.
The recent development is expected to spur higher Internet usage among the population. For media companies, this is a double-edged sword.
“Lower fixed broadband prices with higher internet speeds made available nationwide are hastening consumers’ switch from traditional media to digital platforms, which enjoy lower entry barriers and intense competition,” AmInvestment said.
Star Media is pursuing a digital sector-focused approach to its investments while considering opportunities in non-core businesses that hold potential for group performance.
The group made further progress with dimsum, which delivers exclusive Asian content, by increasing its accessibility through mobile devices, Chromecast, Apple Airplay, Samsung Smart TV and Android TV.
The venture is still in its gestation period for the next three tofour years, but the group will continue its regional expansion plan for dimsum, aiming to partner with regional partners in South-East Asia.
AmInvestment said that over-the-top (OTT) space continues to face intense competition, prompting players to change their strategy.
For example, Media Prima has ceased its subscription model for tonton and has instead gone for a platform-agnostic approach through
collaboration with YouTube and Dailymotion.
ASTRO has decided to cease operations of its regional OTT Tribe and streaming app Tamago in tandem with its ongoing strategic review of its business and group structure.
“We are concerned that the intense competition in the digital space would continue to weigh on the monetisation of digital platforms,” AmInvestment said.
The firm warned that in the event that local media companies failed to grow digital reach for a sustained period, it may downgrade the sector.
“Additionally, if adex deteriorates significantly from this point, we would also turn negative on the sector,” it said.
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