"THE shape and product have to change,” says Star Media Group Bhd group managing director and CEO Datuk Seri Wong Chun Wai.

Wong, who started his career as a journalist at its Penang bureau more than three decades ago, is referring to the group’s future.

He is realistic about the changes a traditional print media company has to make when the operating landscape becomes challenging.

“We are 45 years old this year — this is the beginning of the strongest change for Star Media Group to move on and continue to be sustainable,” he tells The Edge.

Wong, who has seen The Star grow into the country’s most widely circulated paid English daily, is concerned about the group’s financial numbers. To him, the print media business is not as profitable as it was before.  

To sustain growth, the group will be launching dimsum, the country’s first homegrown OTT (over-the-top content) service, providing Asian content exclusively, on Nov 8.

“Basically, we see the importance of taking on the digital effort. Of course, all media groups are talking about digital, but how does one monetise it? To us, rather than focusing on just the news part, we feel that there is value in the entertainment segment. We are serious about our new venture into OTT. It is a sizeable venture for us,” Wong says, but declines to say how much it will be investing.

Media analysts are surprised by the news.

“It is surprising that they are going into this space. Yes, Star Media needs to diversify … But this new venture isn’t going to be a walk in the park,” says a media analyst with a local bank-backed research house. “OTT is the next big thing, yes, but can it make money? And how much are investors willing to invest in this field? To give you an idea, iflix Malaysia posted a net loss of RM120 million for the period of August 2014 to December 2015. Players need to have enough cash and strength for this marathon … it is not a 100m sprint.

“For OTT, players need good content and strong data analytics — those are two key things. When it comes to content, some people may not realise it, but local content is important,” he adds.

The analyst believes the group can still be a dividend play. “The big question is the sustainability of their dividend payout. For this year, they have communicated to us analysts that they are targeting 18 sen, which translates into a 7% yield.”

Star Media declared 18 sen dividends for FY2014 and FY2015. It reduced its payout to 15 sen in FY2013 from 18 sen in FY2012.

Star Media’s earnings picked up in the financial year ended Dec 31, 2015 (FY2015) after two consecutive years of lower year-on-year earnings. Net profit grew 20% to RM132.96 million in FY2015 after two consecutive years of contraction.

Net profit dipped 22% to RM111.4 million in FY2014. It made RM142.9 million in FY2013 and RM208 million in 2012. For the six months ended June 30, the print and digital segment posted a profit before tax of RM50.2 million — a 40% decline from the year before.

It is a reality that the print media industry has been disrupted by digital technology and newspaper companies need to find ways to survive. Diversification is one of them.

According to Audit Bureau of Circulations, The Star’s circulation dropped 13% y-o-y to 248,413 copies in the July to December 2015 period, while Sunday Star dipped 12% to 246,652 copies.

Nevertheless, about 60% of the group’s revenue still comes from the print segment, which contributed nearly 100% to its profits in FY2015.

The group’s large war chest is the ace up its sleeve; it had net cash of RM337 million as at June 30.

Indeed, Star Media has been diversifying and tracking back; its diversification is mainly in the digital space.

In 2011, it bought a 5% stake in digital media group Catcha Media Bhd (now known as Rev Asia Bhd). The shareholding had reduced to 3.7% on  April 7, 2016.

In 2012, the media group launched The Star ePaper. From 49,006 copies for the six months ended June 30, 2013, it breached the 100,000 mark in FY2015.

In FY2013, the group expanded its digital footprint through the acquisition of Ocision Sdn Bhd, which owned three internet portals — iBilik.com, Propwall.com and Carsifu.com.

Last year, the group’s 64.97%-owned Cityneon Holdings Ltd — which it bought in 2008 — acquired Victory Hills Exhibition, which has the global rights to exhibit the Marvel Avengers S.T.A.T.I.O.N. Exhibition and Transformers from Hasbro.

Singapore-listed Cityneon is Star Media’s first venture into the exhibitions and events industry. The group has another exhibition company called Perfect Livin’, which is parked under I.Star Ideas Factory Sdn Bhd.

Of the group’s many segments, the event, exhibition, interior and thematic segment was the only one that saw an increase in profit before tax at RM18.3 million for the six months ended June 30, 2016. A year earlier, it suffered a loss before tax of RM118,000.

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