This article first appeared in The Edge Malaysia Weekly on May 29, 2017 - June 4, 2017

IN the face of a fast-changing media landscape with rising competition, Media Prima Television Networks (MPTN) CEO Datuk Kamal Khalid believes television is still relevant.

“The caveat that I would give is that TV has to work harder to maintain its relevance,” he tells The Edge in an exclusive interview.

“Content is very important. Local content is very important. It has got to be compelling content. You cannot take viewers for granted. They are a lot more sophisticated than you think they are, especially in this day and age. There’s so much choice available to them.

“The loyalty that traditional broadcasters used to enjoy is a thing of the past. Today, there are many channels competing for the same audience, essentially. So, there is going to be a certain degree of fragmentation. The key thing for us is to understand our audience, know what they want and produce content that resonates with them.”

Kamal points out that the role of TV has morphed.

“Traditionally, when you talk about television, you are talking about a device in the middle of the living room where the family congregates and watches content. About five to seven years ago, the term ‘television’ was broadened or changed a little bit to mean television content. Television would be your favourite TV show, whether it is our Akasia romantic drama, a football match or Game of Thrones. But you don’t have to watch it on a TV set, you can watch it on a small screen, you can watch it on your laptop or home computer. It’s the content. TV means that — television content,” he says.

“With the proliferation of Netflix and so on, I think that definition, the meaning has become embedded … you don’t have to watch the content on television. Taking it a step further, now you have people who do not watch traditional TV content. You have kids who turn to the net to watch three to five-minute videos … things that we wouldn’t consider to be conventional TV programmes. But that is the kind of entertainment they consume. And TV, as a business, needs to be aware of these changes.”

Kamal shares that his team was aware of the shifting landscape earlier on and had “an intuition that the consumption of TV content would not remain conventional”, thus resulting in the launch of tonton in August 2010 — an over-the-top (OTT) streaming service. It was the first local video portal in Malaysia.

Last year, it included a subscription income model for its relaunched tonton video-on-demand services. Today, it boasts 6.8 million users.

“tonton was launched four months before the iPad came to Malaysia in 2010 … the timing was very fortunate. The second thing that spurred tonton’s growth was the high-speed broadband project that was launched in 2011. Those two things were huge accelerant [factors], and when we started the service, it was free — we didn’t expect to make much from it. It was more important to maintain the relevance of our free-to-air (FTA) channels. Even seven to eight years ago, we were noticing that people were beginning to view content online [and we wanted to] build up a large and fairly loyal subscriber base,” he says.

“The first step for us was to launch tonton. We had an intuition that the consumption of TV content would not remain conventional ... like what it was when my generation was growing up. We have to step back and admit that just coming up with a 60-minute drama and putting it on air is not enough. It has to be supported with a content ecosystem that is slightly different, such as the use of parallel platforms like YouTube and social media. As long as we come up with compelling content and package it in a way that people will consume and make it available through the delivery channels that they visit, then I think TV is still relevant.”

Kamal says tonton is a hybrid service model. “There is a portion that is free, and much of the premium content in our archive, probably about 30,000 hours strong, of which 85% is local — all of that is available behind the paywall. It is called the freemium model. Advertising is still an important component — the revenue we get from the service — but the subscription model is the one that we think will fuel future growth.”

MPTN, the TV unit of listed Media Prima Bhd, ventured into Singapore recently through a strategic partnership with Singapore Telecommunications Ltd (Singtel) to bring tonton to the city state. This is tonton’s first foreign venture.

Kamal says once this venture stabilises, the next step is to look at other countries in the region for similar partnerships.

He says the company has identified several potential collaborations, but “they are not quite as far along as with Singtel”.

“We are hopeful of announcing another one before the end of the year,” he adds.

MPTN operates Malaysia’s four leading FTA stations — TV3, which is over 30 years old; TV9; 8TV; and ntv7. Given that it has been in the TV space for over three decades, the company does have a first-mover advantage. But the competitive landscape has certainly intensified with pay-TV operators and OTT players, such as Netflix and iflix, entering the field.

With a challenging operating landscape and intensifying competition, the TV business of Media Prima has certainly been hit. According to the group’s FY2016 annual report, the segment’s profit contribution dropped to 7.4% from 53% a year ago as its earnings fell over 90% year on year to RM5.1 million despite a marginal increase in revenue to RM626 million.

Kamal admits that 2016 was “a very challenging year”.

“We are still going through a transition. The best way to put it would be that we would be in a very much worse position had we not taken some of the initiatives that we did last year, which was to diversify our revenue. We needed to make a little bit of investment, we needed to move out of our comfort zone. I think all the initiatives that were taken have borne some fruit, and we just need to maintain the momentum,” he says.

“Media Prima was almost completely reliant on advertising for the longest time. Some of the steps we have taken in the past 12 to 18 months were a concerted effort to shift away from that … to pivot from the complete reliance on one revenue source, which rendered us completely vulnerable, especially in times when consumer confidence is soft and spending is slow. So I think 2016 has been a little bit of a transitory year for us. But the initial signs had been encouraging.”

Interestingly, it is not just talk as data also shows that TV is still relevant.

Kamal reveals that for the first half of this year, MPTN’s awards show, Anugerah Juara Lagu, reached close to six million viewers while local football league matches continue to outstrip the top English Premier League matches in popularity.

“People are still watching TV. It all boils down to content, and content cost is going up. So you have to be judicious with the kind of content you air. We have to be very selective — where to park our investment as it is no longer commercially viable to splurge across all time belts,” he says.

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