Gainer, losers in media sector evolution

Piracy, consumer purchasing power and consumer preferences are among the stumbling blocks for the sector


PIRACY is seen as the biggest stumbling block to the global streaming players’ expansion in Asia as purchasing power for much of the population is below developed economies.

The streaming giants whoever need to expand in the region to gain critical mass need to work with local players to achieve this aim.

The expansion is driven by the fact that content costs are rising while TV revenues are under pressure.

CGS-CIMB Securities Sdn Bhd analyst Kamarul Anwar believes the low incomes factor could be the reason why free video-hosting platforms such as YouTube and TikTok have nabbed a lion’s share of user engagement time in emerging Asia markets.

He added that consumer predilections in the region also veer towards local and Korean programming.

“Media Partners Asia’s (MPA) data-consulting subsidiary, AMPD Research, found the time subscription video-on-demand (SVOD) subscribers in major Asia markets spend on English-language content was hardly half of the total streaming minutes in January to August 2021,” noted Kamarul in a report last week.

Although the road to amass subscribers in Asia is filled with speed bumps, the viewers continuously shift to the over-the-top format.

This has led MPA to project Asia Pacific’s video industry revenue in 2021-2026 to rise at a 4% compound annual growth rate to US$88 billion (RM366.08 billion).

“In our view, the US’ streaming giants would need to enlist local media companies to grow in Asia,” he noted.

According to him, Astro Malaysia Holdings Bhd is looking to partner with up to 15 third-party SVOD services, fashioning itself as the Netflix of the pre-Disney+ and HBO Max era in the mid-2010s, which houses all the content in the streaming library.

“We believe Astro’s pay-TV and streaming hybrid strategy could help win back some of its estimated 757,485 lapsed subscribers. We estimate its subscription revenue to rise 2.8% to 13.6% year-on-year (YoY) in the financial year of 2022 to 2024 forecast (FY22-24F),” the analyst forecast.

Kamarul expects Media Prima Bhd’s production arm to become one of the group’s growth engines, as international SVOD players need local content to attract Malaysian subscribers and viewers.

Notably, local media stocks’ market capitalisations have wilted for years due to fears of losing out to the digital influx.

CGS-CIMB believes this will remain more relevant than ever in the global “streaming war”.

“Astro is trading at a 75.9% discount to the global pay-TV and streaming giants’ of the calendar year (CY) of 2022F enterprise value/ Ebitda of 19.7 times.

“Media Prima is trading at 0.9 times CY22F price-to-book value, which we believe is unjustified for a company that has convincingly broken away from multi-year losses,” Kamarul stated.

With more streaming players gunning for digital advertising dollars, CGS-CIMB expects unfavourable news for news-based media organisations such as Star Media Group Bhd and Media Chinese International Ltd (MCIL).

Revenues for Star and MCIL have been on precipitous declines because their digital ads could not make up for the receding print ad sales, the broker noted.

The downside risk for the media sector includes the continuous video piracy to plague Malaysia and growth in Astro’s subscription revenue for YoY.

At the same time, Media Prima’s content sales are the sector’s catalysts.