ALREADY faced with intensifying competition in the over-the-top (OTT) space, and potentially higher costs arising from a strengthening US dollar, it appears that another challenge looms ahead for Astro Malaysia Holdings Bhd.
News that the English Premier League (EPL) is “actively working” on plans to launch a Netflix-style digital streaming channel to sell live games direct to fans raises concerns about Astro’s prospects.
Astro is the official EPL broadcaster in Malaysia and the offering is seen as the crown jewel of its sports package offerings.
Any possibility of being unable to secure rights to air these matches in the future will surely be detrimental to the company’s bottom line.
At the moment, Astro holds exclusive broadcasting rights to the EPL for three seasons till 2021/22.
It is believed that at least one-third or half of the content and consumer company’s current subscribers have the Sports Pack as part of their subscription.
Last Saturday, the EPL’s new CEO, Richard Masters, revealed they were working on plans to launch the digital streaming channel.
Masters said trials of the new OTT service that cuts out traditional broadcasters could start as early as 2022, in select test markets.
“Eventually the EPL will move to a mix of direct-to-consumer and (traditional) media rights sales, ” he was quoted as saying.
A few days later, however, the league’s executive director, Bill Bush assured that they would “continue to prefer broadcast-rights deals” despite moves to adopt a direct-to-consumer model in the next cycle.
“We’ve done a fair bit of direct-to-consumer testing and obviously we’d move in a flash if that’s where we thought the consumer was, but at the moment the balance is still very much with a territorial broadcaster, ” he said.Bush also noted that the Premier League could experience several challenges in trying to approach consumers directly, such as lower revenue (compared to the amount it earns from selling rights to traditional broadcasters).
According to a report by The Guardian, the EPL makes £3.1bil each year from TV rights, of which £1.4bil comes from foreign buyers.
In Singapore, SingTel reportedly pays £70mil per season to the EPL.
Based on the statements from the Premier league’s top officials, it appears that they would still like to hold on to their lucrative broadcast-rights deals for a little longer before possibly going all out with a streaming service.
At this point, there are still many uncertainties such as when the streaming service service will be rolled out; and once it does come into effect, which countries it will be available in.
It is also worth noting that the EPL has been enjoying payments from Astro for broadcast-rights over the years. Furthermore, it is a headache free deal with Astro where the Premier League does not have to worry about rights protection in Malaysia and leaves it to Astro to handle.
Due to this, the possibility is strong that Malaysia may not be among the markets where it will choose to direct-stream its matches.
When contacted, Astro declined to comment on the matter.
An analyst from CGS-CIMB Research notes that there is no certainty that the Premier League will go ahead with the direct-to-consumer business in Malaysia.
“Yes, it will be detrimental to Astro’s earnings if the Premier League withdraws from Astro, as the Premier League is a crown jewel of Astro’s sports offering.
“But it will also be potentially damaging to the EPL to bet on Malaysians wanting to pay for a legal streaming service, ” analyst Kamarul Anwar tells StarBizWeek.
He adds that the EPLwill also have to consider whether this bet will justify undertaking marketing strategies and expenses, and technical support and logistics costs to run a streaming service in each individual country that it hopes to penetrate.
In the event that the Premier League does decide to launch its streaming service in Malaysia, Kamarul believes there is a possibility of the Premier League tying up with Astro, similar to the arrangements with Chinese online video platform iQIYI and HBO.Such an arrangement means the Premier League’s plans could eventually result in a favourable outcome for Astro - but for now, the uncertainties remain.
On the overall prospects for Astro, Kamarul says the research house forecasts a year-on-year earnings dip for Astro in the financial year ending January 31,2021, owing to the expenses to buy the broadcasting rights for the 2020 Olympics and UEFA Champions League.
“However, the earnings growth trend should return the following year, ” he says.
Astro, for the third quarter ended October 31,2019, had recorded an 11.5% increase in net profit at RM170.8mil, while revenue came in slightly lower at RM1.22bil.
At the time, the company had noted that the market remained challenging with structural changes in the global content, media and advertising industries, including threats of piracy and ‘streaming wars’. It said its focus was to strengthen its core Pay TV and NJOI businesses, and invest in next generation customer interface and partnerships with global OTT.
According to its website, Astro, with its Pay-TV and subscription-free TV service NJOI, serves 23 million individuals in 5.7 million households, or 77% of Malaysian households.
Astro, along with its local peers, continue to face headwinds not just due to piracy, but also the emergence of international players with deep pockets, like Netflix and the newer players like Apple TV Plus and Disney Plus.
While issues relating to piracy and intensifying competition are unlikely to go away anytime in the near future, it will be interesting to watch developments in the EPL space in the coming years.