The recently concluded partnership agreement between Astro All Asia Networks plc and Maxis Bhd caught many industry observers and players off guard. The deal, announced last week, was formal ised with a signing ceremony in Kuala Lumpur.
It made perfect sense to industry players for the partnership to be sealed, especially since both the companies are linked to billionaire Tan Sri Ananda Krishnan. But what surprised stock market analysts is that Maxis had previously said it was not working with Astro on its Internet protocol television (IPTV) ambitions.
Maxis then took measures to secure its own content from various content providers. In June, Maxis signed an agreement with 14 content providers for its IPTV platform, further reinforcing speculation that Maxis was planning to “go it alone”.
Even more interesting is that Maxis and Astro both admitted that they had actually been in discussions for the last two years. This culminated in the recently announced partnership agreement.
With the announcement, both Astro and Maxis have upped the ante on the local IPTV war, delivering a “sucker punch” to IPTV players such as Telekom Malaysia Bhd (TM), Vassetti Datatech Bhd and other payTV service providers.
Last year, Astro also signed a deal with Time dotCom Bhd to provide its content via the latter’s IPTV platform.
Astro’s partnership with Maxis may have an immediate impact, especially on TM’s Hypp. TM has been providing its Hypp.TV content through its hugely successful UniFi high speed broadband services.
Needless to say, Hypp.TV has done well in acquiring some good content.
The main battle in the PayTV market segment basically centres on gaining the widest network footprint and obtaining the best content for subscribers. In both factors, Astro have a significant edge over Hypp.TV and other IPTV players.
Astro’s satellite-based transmission ensures that it has an immediate footprint covering the entire nation and beyond. This ensures its addressable subscriber base can easily cover the whole 6.7 million households in Peninsular Malaysia.
Thus far, Astro is leading the market with 3.1 million subscribers nationwide, which is more than 50% of the potential market in the peninsula.
It is noteworthy to know that TM is making a cool bundle on a monthly basis with its remarkable subscriber net additions to its UniFi high speed broadband service.
In June, TM said it has over 365,000 UniFi subscribers. By end-August, when announcing its financial results for the first-half of 2012, TM said it now has over 420,000 subscribers. That’s a remarkable growth rate of 15% in just about two months!
At this pace, TM would over-achieve its target of 500,000 Unifi subscribers by the end of the year. TM bundles Hypp.TV as part of its high-speed broadband (HSBB) service. Unifi could become TM’s major revenue earner as it potentially can hit revenues of over RM760 million by yearend. A feat indeed!
According to a senior official of TM, 80% of its UniFi subscribers watch Hypp.TV. It currently has more than 94 channels under HyppTV.
This brings us to the battle for television content among payTV service providers. With Astro’s commanding market leadership, getting relevant content will be key to succeeding in order to gain market share in terms of subscribers.
Maxis, TM and other players such as Vasseti Datatech are spending or planning to spend big bucks, going into the millions, to acquire content regionally and globally.
The IPTV war has also attracted many television content providers from as far as Eastern Europe to come to Malaysia.
TM’s Hypp.TV is a potential threat to Astro’s dominance.
Maxis too, would have been a threat to Astro, if the partnership had not materialised.
With Astro and Maxis working together on an exclusive 10-year content partnership, this will immediately impact Hypp.TV’s strategy going forward.
Whether the Maxis-Astro alliance will be seen as an unfair advantage to other players is something that remains to be seen.
Perhaps, now is the time for Hypp.TV to also seek the sharing of content with Astro. But with the exclusive deal between Astro and Maxis lasting 10 years, this may be difficult.
Astro on its part, has forked out millions for content acquisition and its own local content creation. Industry sources say Astro has spent an estimated RM180 million for three seasons of the English Premier League alone.
In addition, Astro owns Celestial Pictures, which in turn owns the famed Shaw Brothers Film Library, the world’s largest Chinese-language film library.
Needless to say, Astro has much resources at its disposal, which it can leverage to safeguard its market leadership. In a free market scenario, Astro should be allowed to determine with whom its wants to share its content, if it wants to share at all.
However, since sports is not a major subscriber pull factor, the entry of new IPTV and cable TV players are a concern for Astro. Thus working with Maxis makes sense.
Maxis has a customer base of over 14 million, which will be of key interest for Astro to extend its market leadership in the pay-TV segment. Maxis will benefit by being able to offer compelling content for its IPTV services and instantly emerge victorious in the IPTV war.
TM, on the other hand, too will gain, as Maxis is using TM’s UniFi network to provide its home fibre Internet services, immediately obtaining homes passes of over 1.3 million.
All this makes the development in the IPTV industry very interesting. So far, Astro is making the right moves. Its partnership with Maxis is a sucker punch indeed. An insider with a telco quipped: “There is mutual benefit for Maxis and Astro...and others. But Astro wins the most!”