Thursday 28 Mar 2024
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KUALA LUMPUR (July 8): With the prolonged advertising expenditure (adex) weakness coupled with the growth in digital segment that has been unable to offset this, Hong Leong Investment Bank (HLIB) Research views that there is still no catalyst in sight for the media sector in the second half of 2019 (2H19).

Thus, the research house has maintained an "underweight" view on this sector.

Despite seeing that traditional adex will remain muted, its analyst Khairul Azizi Kairudin is expecting to see healthy growth for digital adex, mainly from mobile and video advertising.

"High internet and smartphone penetration rates of 86% and 82% will continue to drive digital adex, which in turn will be a bane for traditional adex due to cannibalization as the former commands better flexibility and offer targeted advertising capability," said Khairul in a report today.

Additionally, Khairul said media companies have embarked on cost cutting measures, which include voluntary separation scheme (VSS) and cost optimisation as they are acknowledging the sector headwinds.

Pay-TV subscription is expected to deteriorate further in view of threats from OTT (over-the-top) players, rapid sale of Android boxes and smart TVs, said Khairul.

With the rapid sale of illegal Android boxes in the market, Khairul estimates that this will result in RM1 billion in national revenue loss and potentially up to RM150 million in taxes being withheld from the government.

Meanwhile, the domestic OTT space is ready to enter a new phase as both Star Media Group Bhd and Astro Malaysia Holdings Bhd have stepped up their games, said Khairul.

Recently, Astro announced its tie up with iQIYI, a popular online video platform based in China with more than 87.4 million active users monthly, while the Star's management is planning to form a strategic partnership for Dimsum, and this potentially includes telco player to expand its presence beyond the current market, said Khairul.

Moving forward, Khairul expects media companies to embark on more content partnership, especially on the vernacular segment as it is a proven strategy to attract more viewership and subscriber base.

The conversion to digital TV transmission in September 2019 will allow consumers to enjoy better audio and picture qualities, said Khairul, adding that 15 TV channels and six radio channels are already available on the myFreeview platform currently, and more new broadcasters are expected to join the service in the near future.

"We believe myFreeview would provide competition to Astro's NJOI, and we view this positively to Media Prima, fuelled by optimism on lower transmission fee and improved viewership," said Khairul.

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