This article first appeared in The Edge Malaysia Weekly on October 28, 2019 - November 3, 2019

STAR Media Group Bhd will soon be inviting The Star Online readers to register as members. This comes after it had told analysts earlier this year of its plans to put up a paywall by the third quarter.

“Soon, we will be inviting readers to register as members so that we can have a better understanding of them — a critical pathway to a successful future,” a management spokesperson tells The Edge.

The group did not comment on whether all content on its website will only be made available to registered users.

After missing its proposed third-quarter launch date for the paywall, the industry talk is that it is likely to happen next month.

“A paywall is nothing new and is one of our many options during this transformation period, which we have discussed and shared openly for several months [now],” the spokesperson says.

“Our focus will be on digital transformation, content relevancy and product innovation.”

An industry source says the plan for now is that there will be no charge.

“The group has been looking at having a paywall and the management is considering a dynamic model that is more flexible than a hard paywall that completely shuts out access to content on its site to non-subscribers,” says a source.

While it remains to be seen whether Star Media will eventually charge for most of its online content,  industry observers reckon the group is testing the waters with its move to get readers to register.

Inviting readers to register is something global media companies are considering and adopting too. For example, The New York Times put up a registration wall in August. A registration wall means users will have to register to gain access to content but may not have to pay. In the case of a paywall, users will have to pay.

“It is a tricky decision to make for a media company — whether or not to put up a paywall. It could drive up earnings or drive away readers,” says an analyst who covers the stock.

“This news about having readers register is interesting. From there, Star Media can do data analysis ...  it is a way for them to get to know their audience. What’s crucial in this case is to ensure that the content is good enough so that the user base is not impacted negatively.”

Says another media analyst, “This is definitely a move to ride The Star Online’s wide readership, but like most online platforms, figuring how to monetise the platform to its full potential is a challenge. So, with proper data analysis, Star Media will be able to look into targeted advertisements and curated content.

“It will also be interesting to see if and when the registration wall will turn into a paywall and how much it will charge for access to its website.”

Affin Hwang Capital Research, in an Oct 17 report, says, “While we acknowledge that a paywall is inevitable in the current challenging environment, we believe this could negatively impact users of The Star Online, which currently stand at about eight million monthly.

“Moreover, given that ad rates are tied to the visitation rate, lower readership could also affect online ad revenue. As at 1H2019, The Star’s print and digital segment contributed a sizeable 88% to the group’s total revenue, with the balance coming from radio (7%) and events (5%). At this juncture, the group did not provide a breakdown of the revenue contribution from The Star Online, merely indicating that the segment, as a whole, contributes about 10% to total print and digital revenue (1H2019: RM141.7 million).”

The digital segment includes The Star Online, Star Property, mStar and its over-the-top business dimsum.

Star Media’s fortunes have been impacted by the challenging operating landscape faced by all media companies.

For the past three financial years, the group’s revenue and profits have been declining. Revenue fell 38% year on year to RM630.4 million in FY2016, 26% y-o-y to RM469.2 million in FY2017 and 16% y-o-y to RM392.7 million in FY2018. Net profit declined 27% y-o-y to RM97.5 million in FY2016, 20% y-o-y to RM77.6 million in FY2017 and 93% y-o-y to RM5.2 million in FY2018.

Despite the declining earnings, Star Media is still in a net cash position. As at the end of June 2019, the group had net cash of RM347.8 million, an improvement from RM296.7 million at the end of 2018.

In the midst of a tougher operating landscape, the group saw the entry of a new CEO — Andreas Vogiatzakis — on Aug 13.

All eyes are on Vogiatzakis’ plans and strategies to drive Star Media forward through the current turbulent environment.

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