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Astro Malaysia takes battle to online disruptors

Pay-TV operator bets on regional content to counter streaming services

Astro will be offering more personalized products beyond just TV content to generate demand in the region.

KUALA LUMPUR -- Astro Malaysia Holdings, the country's dominant pay-TV provider, has been on the defensive lately. It is battling both what it called the "misunderstanding" among investors that it is a traditional broadcaster, and the encroachment of internet streaming services into its mainstream TV subscription revenue.

The company's stock price has been trending downwards to the lowest levels since it listed in 2012 following a below-expectation financial performance in the year ended Jan. 31. Net profit grew 24% from the previous year to 770.7 million ringgit ($200 million) on revenue of 5.53 billion ringgit. But TV subscription revenue fell by 2%, underlying the downward trend due to cord-cutting -- industry jargon for contract cancelling in favor of other options.

"We are not a pure-play pay-TV provider," said Astro Chief Executive Rohana Rozhan in an interview on Wednesday. She argued that customers are spending more time on the Astro ecosystem, which includes radio, online shopping and other on-demand products through mobile devices. The company also produces 12,000 hours of content yearly for distribution through satellite transmission and mobile devices in Malaysia and the region.

The cord-cutting trend is not unique to media companies such as Astro. In Singapore, StarHub's net profit dropped 27% to 249 million Singapore dollars ($189 million) in the year ended Dec. 31 on reduced contributions from its mobile and pay-TV operations.

"We face real competition with consumers having too many choices from various content providers," said Rohana, a former Unilever executive.

Astro Chief Executive Rohana Rozhan

Astro believes the way to compete amid the industry-wide disruption brought by mobile technology is to look for different growth engines. It is reaching out to regional peers for partnerships to boost its product offerings and footprint.

At the same time, it is revamping its content offering, and avoiding direct competition with internet streaming services like Netflix, which commands over a 100 million viewership worldwide. Astro has been cutting down on the exclusive rights to distribute Hollywood content, which it said were costly and highly commoditized. Instead, it is using the savings from the switch to beef up vernacular programs.

The diverse multiethnic composition of Malaysian society and cultural similarity with its neighbors in Southeast Asia provides Astro with a marketing edge. Vernacular content produced in Malay and other regional languages accounts for over 70% of Astro's total 5.5 million viewership.

These contents are cross-sold through Tribe, Astro's "over-the-top" online video service available in Indonesia, Thailand, Singapore and the Philippines. To grow its current user base of over 3 million, Tribe has recently entered into a partnership with Telkomsel to tap into the Indonesian mobile operator's 60 million-strong user base.

It is also tying up with renowned producers in Indonesia, Thailand and the Philippines to produce original content for regional audiences. Horror genre offerings, including "3 A.M. Bangkok Ghost Stories" and "Gantung" have been widely circulated in the region, as has kids animation "Cam & Leon."

This vernacular content is the "differentiator" to drive revenue forward, said Rohana. She believes that, with more investment, it has the potential to become the "new premium" in lieu of Hollywood content.

Using its vast customer database, Astro said it will be producing more personalized product offerings beyond just TV content to generate demand in the region. With deeper engagement in the region, which has a population of over 600 million, the company wants to carve out a niche amid a looming industry consolidation.

"If we don't do it, we are giving time to Netflix to do it," said Rohana.

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