This article first appeared in The Edge Malaysia Weekly on April 10, 2017 - April 16, 2017
FOR more than 20 years, Astro Malaysia Holdings Bhd has dominated the pay TV business in the country, thanks to its exclusive satellite broadcast licence and the high barriers to entry. But today that high barriers to entry are being dismantled and Astro is finding its competitors are not just other satellite TV providers but also content providers that transmit via the Internet, namely the over-the-top (OTT) players — both legal and illegal.
Not only that, the competition is no longer just local, but global. The game has changed.
Group CEO Datuk Rohana Rozhan acknowledges this new reality but says Astro has not been sitting still. It has always been actively evolving and looks set to undergo a fundamental shift moving forward.
“We came into this year understanding a few things. What technology has opened up is a new world order where business models are completely disrupted. There will be a fundamental shift at Astro ... in the way we do business and in how our people pivot,” Rohana tells The Edge in an exclusive interview.
“We also understand that for a big brand to maintain [its position] as a market leader, we have to keep on innovating and investing. We cannot do it incrementally when disrupters are doing it fundamentally. For us, it is about embracing that and knowing when we have to make a fundamental shift. We don’t shy away from it, we do it.”
The transformation journey never ends at Astro, Rohana says. “It is not like we woke up one morning and realised there is disruption and we have to change. We have been changing every day because we know that consumer habits, lifestyle and product lifecycles change all the time. But technology has just accelerated that and also changed the pace of innovation.”
“My point is, don’t underestimate the fact that it took us 20 years to get to where we are and that we come from a position of strength. Astro is not a stranger to reinventing ourselves, even at a high cost. Remember the time we swapped all the set-top boxes at our cost? We understood then that already, it was no longer a one-way linear relationship. It had to be a two-way interactive relationship and we had to provide a service whereby customers could download by choice,” she explains.
She recognises that corporates must always reestablish their brand ethos to remain relevant and current.
“More importantly for us is to change the pace of this organisation. That’s life today — people just want more and more. The reality is now, now, now. It’s a completely different phase. We are trying to transit our people to this new world. It’s quite difficult,” she admits. “We have to pace up.”
Defending household turf, building individual user base
One advantage Astro has today is the vast audience base it has built over the years — it has a foothold in 5.1 million households and serves 21 million people.
The group did have a two-decade head start. But the question is, can it defend that prized base as consumer preferences change so quickly in the midst of a fast-evolving operating landscape and the entry of global players such as Netflix and iflix?
Even local playershave jumped onto the bandwagon. Star Media Group Bhd launched the first home-grown OTT service — dimsum — at the end of last year.
Rohana acknowledges that the group has competition and it is on a global scale. “Global competition comes with global scale. They [these competitors] are the most efficient buyers of content because they can actually aggregate out the cost over many cities,” she says.
“We are quite distinct in our plans. Our strategy first is to defend the homes. We need to reinforce our position, not only with the households but that prime pole position in that household. It is extremely important nobody else has it except us. To aggressively defend the homes is to make sure that they have service that is comprehensive and content that is second to none.
“We are quite confident of the content that we have simply because we have a 21-year relationship with international studios that gives us a most comprehensive offering, the latest titles and scale. We will get the movie simultaneous to DVD window All that is available on demand and you do not have to wait for a scheduled viewing.
“As for local content, we produce 13,000 hours of local content a year. The good news is that our homes watch four hours a day, of which three hours is local vernacular [content]. Malaysia is increasingly vernacular. That gives us a distinct edge,” she says.
“For us, we have a relationship for 21 years ... let’s build on that and provide a great service for our consumers.” she adds.
Moving forward, Astro realises that one of the things it needs to focus on is the individual.
“Now it is all about an app — the on-the-go experience. It is all me and my time kind of thing. We have three million downloads on the Astro Go app. Today, 1.1 million users actually watch [Astro content via the app] three hours or more a week — that means they are getting sticky. They watch about three hours on our app compared to less than 100 minutes a year ago, which means it is really growing. We are encouraged by that,” she says.
Astro first dived into the OTT scene five years ago when it launched the Astro On The Go app in 2012. The app allows users to watch Astro content on their mobile devices.
Just over a week ago, it relaunched Astro Go. Depending on the package users subscribe to, the app will allow existing Astro customers to enjoy up to 71 channels and over 23,000 on-demand titles from Hollywood, Korea, Japan, China, Hong Kong and India. Non-subscribers can download and use the Astro Go app but their access will be limited.
“We have very clear distinct targets as to what we need to achieve and we aim to at least double Astro Go targets. So if it is 3.5 million downloads, it will be seven million downloads by the end of this new financial year. That is a key focus for us today,” she says.
Astro Go aside, the group also launched an OTT service for the Asean region in March 2016 called Tribe, which now has one million registered users in Indonesia and the Philippines.
Analysts commend Astro’s move into OTT.
“There is a track record of overseas companies launching their OTTs and surviving. If Astro had stayed still, they may survive for another 10 to 20 years at best. It is better to evolve now and suck up the pain rather than risk becoming obsolete,” says an analyst from a bank-backed research house.
“Planning is easy but execution is key. They have to prove that the increase in user base is sustainable,” he adds.
Asked if NetFlix and iFlix have encroached into Astro’s turf, he says not as much as he had expected when global players first entered the fray in Malaysia some two years ago. “It is not as big an impact just yet and they (NetFlix and iFlix) seem to only attract urban customers. The big numbers from the rural market have not been impacted yet,” he says.
“It is not a big threat until live content is allowed on the OTT platform. Now, if that happens, the game will change drastically for Astro. The big threat now for Astro and OTT players alike is piracy,” he adds.
Rohana has the same view.
Piracy threat
“The threat, where I see it, is not the new disrupters but more so, piracy. What happens in this digitalised world and as technology improves is that piracy becomes prevalent. It is no longer an Asian or Malaysian phenomenon, it is a global phenomenon.
“Why I think piracy is worrying is because it is not sustainable in the long term. Simply because content is premium. There is no such thing as commoditised content. It is talent, creatives, on-air talent, artistry...how [do you] commoditise that? That is the worrying part,” she says.
Indeed, another media analysts point out that access to pirated content has never been easier or cheaper than now.
“The main concern is the Android box that one can find if you walk into a digital mall … Just pay RM600 once off, which is RM300 for the box and RM300 for the installation, and you will have access to many channels under the sun. Just like that and one can get the same Astro channels and content as the OTT players and even exotic stuff. Piracy is a bigger threat to pay-TV operators and OTT players alike,” she says.
Asked about the falling pay-TV subscriber numbers that make up the bulk of Astro’s revenue stream, Rohana was quick to defend the group’s track record.
“Some people in the market still believe that Astro is an old pay-TV business whose measure is household, but our business model is changing. For us, it is making sure that we serve everyone as individuals and not give up on our advantage —pole position in the household —but we are now also a digital company and OTT player with in-depth engagement with each consumer,” she points out.
“I always find it ironic because the same analyst who is asking me about household numbers is giving someone with zero revenue, zero ARPU (average revenue per user), zero households such a high valuation. How does that even work? For us, we are building on a relationship that we have and we are generating cash. For us, we understand. We try not to be confused by noise. We are a long- term sustainable creative brand. Our job is to make sure we engage with our consumers and we become the media of choice with the consumers — and we will build on that.”
The number of pay-TV subscribers have been on a downtrend for three consecutive quarters since 4Q2016 but started rising again to 3.467 million in 4Q2017, from 3.443 million in 3Q2017.
Astro also has a subscription-free satellite TV service called NJOI that covered 1.65 million customers at the end of January 2017.
Digitalising Astro
This year, Astro is going full on into its digitalisation initiative. Another clear target is for the group to be 75% digitalised by the end of its financial year ending January 2018.
“What people don’t realise is that sometimes, you can’t be too far ahead because the market is not ready. Today, it is in a sweet spot because you have the smartphone penetration, the broadband penetration and the cost of broadband all aligned. If you had launched it slightly earlier, you wouldn’t have the smartphones, the bandwidth was sporadic at best, the cloud technology was not there yet. How do you do that?” asks Rohana.
“If you look at our business simplistically, we can divide it into the so-called dominant legacy business — and we have every intention of digitalising that. And we are committed to that. We want to digitise the whole ecosystem, from the back-end operation to every customer touchpoint,” she explains.
For example, Astro customers will be able to request and track on their devices a technician on his way to fix their set-top box at home. The aim is to create a self-service consumer experience.
Astro’s digitisation transformation includes collaborating with Amazon Web Services, which will see the group moving its content to the cloud.
The group also has digital-first initiatives such as Tribe, eGG (Every Good Game — a dedicated 24/7 eSports channel in the region) and GoShop, a home-shopping platform.
“[These are] all very new but we need to [do it]. First, the initiatives are digital and two, they get scale. Scale is extremely important. We are up against global players. Scale is important so that we are the most economical buyer and we can offer the best price for consumers,” says Rohana.
On top of this, the group has been building its pool of data scientists and analytics talent.
“What people forget is that Astro is not just a content company but also a technology company. For us, it’s always been understanding technology and understanding our consumers — what experiences and lifestyle they aspire to have. At the heart of it, it is content. We are content people. Basically, it is essential that we come up with content that resonates,” Rohana notes.
“We are beginning to learn and analyse what our customers want so that we can source for the right things and pay for the right things. We can be an economical buyer of content and we can delve deep into what we need to do,” she says, adding that Astro is looking at content portability and mobility whereby a subscriber can access his Astro subscription while on holiday overseas.
Rohana declines to reveal how much Astro is pumping into its digitalisation transformation, but assures that it will be cost effective.
“It will definitely help our margins and we expect this to be a good financial year,” she says.
It looks like Astro recognises the need to evolve and digitalise to keep pace with technology to future-proof itself. Will it succeed? Only time will tell.
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