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This article first appeared in The Edge Financial Daily on February 22, 2019

Media sector
Maintain underweight:
The Kuala Lumpur Digital Anti-Piracy Summit held recently was an eye-opener for stakeholders in the media industry. Various government agencies and foreign media practitioners discussed best practices for combating content piracy. We walked away from the event feeling optimistic, we are of the impression that the government is taking serious efforts to tackle this issue, with the first among many, being the ban of Android television (TV) box. If this materialises, Astro Malaysia Holdings Bhd should be the key beneficiary. Maintain “underweight” rating on the media sector until we see tangible outcomes.

 

Globally, the impact on the media industry is estimated at US$50 billion (RM204 billion) annually due to content piracy. In Malaysia, the media industry is hit with an estimated RM1 billion in lost revenues and potentially up to RM150 million in taxes being withheld from the government. Furthermore, many jobs have been lost due to this issue and companies have to earmark significant compensation to the impacted staff, which hit their bottom line especially for the pay TV and free-to-air stations, for example Astro and Media Prima Bhd.

The reason behind the success of piracy content is the advertisement network being able to generate revenues on the illegal network. In Malaysia, the Malaysian Communications and Multimedia Commission (MCMC) identified that 90% of popular illegal streaming contained advertisement (ad) network. Surprisingly, this ad network came from well-known mainstream brands. Streaming on illegal sites poses high-risk ads and thus impacting brand image with the likelihood of supporting organised crime and terrorism funding.

There are two types of site blocking that have proven to be a success in Malaysia and other countries, namely judicial and administrative. Malaysia practises administrative site blocking where: i) rights owners submit a request to a regulator with supporting evidence; ii) regulator reviews request and evidence; and iii) regulator directs Internet service providers to implement blocking. Nevertheless, the best practice for site blocking is to follow the UK standard — dynamic site blocking. Dynamic blocking is best in encountering domain hopping which can ultimately eliminate the illegal websites effectively. To date, 246 illegal streaming websites have been blocked by the MCMC.

Perhaps the effective way to combat piracy content is from the consumer end. Consumers need to be educated on the risk of piracy content. Such action was a success in the Philippines where Globe Telecom ran anti-piracy ads called #PLAYITRIGHT. In addition, consumers need to be taught the risk of illegal streaming site associated with malware attacks. Malware attacks are common when the consumers visit an illegal site, of which malware is able to steal personal data from the users’ devices.

One of the reasons Malaysia lacks enforcement activities is due to its outdated 1987 Copyright Act. The act does not cater to the rapid change of technology in today’s world, including the sale of Android box and digital content piracy. In addition, there is an urgent need for an only single agency to handle the piracy content to be placed under the MCMC’s purview. Moving forward, stakeholders have suggested that the matter should be handled under one enforcement unit for swift monitoring and actions.

We left the event feeling optimistic as we witnessed that the government was taking serious efforts to tackle this issue and we can expect positive results on the decision to ban Android box in the near term. Astro is a key beneficiary should this materialise. Nevertheless, despite the optimism, we see a long road to recovery for the overall media sector amid weakening advertising expenditure on traditional platforms. We maintain our “underweight” rating on the sector. — Hong Leong Investment Bank, Feb 21

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