Can Malaysia achieve Asean DTTV target by 2018?

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FORTY broadcasters have expressed interest in the digital terrestrial television (DTTV) platform to be rolled out by MYTV Broadcasting Sdn Bhd but the Malaysian Communications and Multimedia Commission (MCMC) has yet to give them the green light, say industry sources.

“The minister has announced that 40 channels have registered with the regulator on DTTV. But how ready are the broadcasters as well as the policy? When will the 40 channels be processed for approval?” asks a source.

“As it is, since the beginning of the year, a few incumbents have started to appeal to the regulator to let them migrate first, so that is delaying things as well.

“Interested parties have been registering their info officially with MCMC since January. There have been registrations of interest and meetings with MCMC. Of the 40 channels, over 25 are new ones while the rest are incumbent channels,” the source adds.

While it is important to ensure the well-being of the incumbent broadcasters, the migration news is not new, remarks a media player.

“In fact, the Malaysian Digital Masterplan was presented in 2004 and the DTTV pilot was completed in 2008. Surely, the key industry players, like the broadcasters, should have got ready with revised business models in the last 10 years?”

The MCMC did not respond to calls from The Edge.

Media analysts say Malaysia is still lagging behind in its readiness to fully transfer to the digital television space.

“There is a 2018 hard deadline for Asean to switch off analogue and move fully into digital … but at the rate things are going, it could be difficult for Malaysia to have a full digital switch-off even by 2020,” comments a local media analyst.

“There are a number of issues that still needs to be addressed and ironed out. For example, who will bear the cost of the set-up boxes? Will they be subsidised? And have the incumbents evolved their business models for the change to digital?”

When contacted, MYTV Broadcasting chief operating officer Haniza Ros says, “If the government and the industry stakeholders [broadcasters, manufacturers, Telekom Malaysia Bhd, MYTV, MCMC, cross-ministerial and state efforts] are really together on this, we will achieve that [deadline of 2018].

“MYTV will strive to complete the infrastructure layout by mid-2016 as we can only collect our revenue in full once we achieve 98% digital network coverage and two million set-up boxes in circulation/distribution.”

MYTV Broadcasting will distribute two million free decoders to selected homes and has been installing them since May 17 under the test phase.

“Our Hybrid broadcast broadband TV set-up box will definitely be a game-changer in the broadcasting industry. The 5-Pillar Services introduced by MYTV are proof proof that the relationship between the broadcasters and viewers has changed and moved with the times; Malaysia is embracing Vision 2020,” says Haniza.

Observes a media analyst, “Yes, they [MYTV] have plans and have rolled out a couple of things but their hands are tied too. The industry is very regulated compared with, for example, OTT (over-the-top) platforms.”

OTT services are mushrooming and these players can become serious contenders to the TV and DTTV industries if they are able to scale up their businesses and figure out a viable business model. In Malaysia, the OTT players include TonTon (under Media Prima Bhd), RTM mobile and iFlix.

Media players point out that OTT margins are “very, very small” and that the providers have yet to figure out a sustainable business model. “This is why global broadcasters such as HBO and Fox are still in business and actively revising their business models to suit the evolving landscape, including supplying digital HD content,” says the senior manager of a media group.

Malaysia’s digital initiative has already been delayed — its original target was a rollout in 2010. However, it was 2013 before the government got around to inviting tenders for the project.

In November last year, MYTV Broadcasting inked a framework agreement with TM to provide DTTV services in the domestic market. It was reported that the agreement — which will result in TM receiving an annual contract value of RM70.47 million or RM1 billion over 15 years — was for the provision of infrastructure and network services to MYTV.

MYTV Broadcasting, which is linked to Tan Sri Syed Mokhtar Albukhary, was awarded the contract in April last year, beating other telecommunications companies like REDtone Network Sdn Bhd and i-Media Broadcasting Solutions Sdn Bhd.

DTTV services will be rolled out in two phases with the first starting in Kelantan, Terengganu and Pahang this year. The second phase targets 98% of the Malaysian population by mid-2016.

Just over last week ago, Communication and Multimedia Minister Datuk Seri Ahmad Shabery Cheek announced that all districts in the east coast would receive digital transmissions by January 2016 and digital television services will be available across the country by the end of next year. He also said that the test transmissions would be expanded to Sabah and Sarawak and then to the northern and southern parts of the peninsula, followed by the Klang Valley, at the end of this year.

More players after the same pie
The television segment used to enjoy a steady flow of advertising revenue but with new players such as MYTV Broadcasting Sdn Bhd wanting a slice of the pie, the earnings of the incumbents are being squeezed hard.
      “The entry of new players like MYTV will definitely have an impact on the likes of Media Prima (Bhd) and Astro (Malaysia Holdings Bhd) but it also depends on the content provided by the new players and their pricing strategy. For example, if MYTV’s set-up box is priced attractively and it provides more channels with decent content, then the company could become a serious contender in the TV arena,” says a local media analyst.
      “Content is king. For example, people subscribe to Netflix because of the series House of Cards. In Malaysia, however, it should be noted that vernacular content attracts more eyeballs. Ratings by Nielsen show that viewership of Western channels here is very low, at 1%, while it is high for the vernacular segment.”
      The analyst adds that with more TV channels coming on stream, there will be fragmentation in the market. “If you have more players in the market, the game will change. Media players will have to evolve and protect home turf.”
      The changing landscape has certainly kept the existing players on their toes.
Astro (fundamental: 1.10; valuation: 2), for example, launched Malaysia’s first free satellite television service — NJOI — in February 2012 in collaboration with the government. It has up to 25 TV and 20 radio channels.
      Media Prima (fundamental: 1.95; valuation: 2) launched an over-the-top service called tonton in 2010. Today, tonton is Malaysia’s No 1 video portal with HD-ready quality viewing experience. According to its website, it has close to four million registered users.
      Media Prima’s results for its first quarter ended March 31, 2015, show that its TV segment contributed significantly lower revenue of RM136.4 million, which was down 8% year on year. Meanwhile, its earnings of RM10 million were 56% lower y-o-y.
      In a May 15 note, AmResearch says the lower earnings could be explained by pay television grabbing a bigger share of the adex market during the quarter  — 42% (up eight percentage points y-o-y) — compared with free-to-air TV (-2% y-o-y). “However, advertising on FTA TV will be sustained as it will continue to be used by advertisers to reach the mass market,” it adds.
      Indeed, Astro may have taken away eyeballs from the FTA media group but recently, the dominant pay-TV operator itself has been seeing some weakness in its key statistics.
      In its results for the first quarter ended April 30, 2015, ARPU (average revenue per user) was flat quarter on quarter and growth in pay-TV subscribers was slower.
      Maybank Investment Bank notes that for the second time since its relisting, Astro lost subscribers — 5,000 in pay TV, 24,000 in HD and 8,000 in Super Pack. The research house cautions that the weak first quarter may herald further weakness ahead. “Astro attributes it to GST denting consumer sentiment but opines that this will only last for one or two quarters.”

This article first appeared in The Edge Malaysia Weekly, on July 20 - 26, 2015.