Malaysia recently held its 14th general election which concluded in the welcoming of a new government on 10 May 2018. This marks the first ever change in government since the Barisan Nasional (BN) coalition came to power in 1957 – the year Malaysia gained independence from the British. The new ruling government Pakatan Harapan promises a fresh start for consumers and businesses alike since becoming disenchanted over the rising cost of living and a corruption scandal surrounding BN since 2015.
Under the new regime, consumer sentiment and business confidence will improve and subsequently drive economic growth over the next 5 years. As a result, IHS Markit expects advertising revenues to return to growth and competition to increase in Malaysia’s media market.
In its election manifesto, Pakatan Harapan pledged to abolish the Goods and Service Tax (GST), reduce the cost of living and increase purchasing power. This will boost consumer sentiment which in turn will lead to an increase in advertising spend. Malaysian advertising revenue has declined each year since 2014 according to IHS Markit’s Advertising Intelligence service. IHS Markit forecasts a favourable 2.7% CAGR in total advertising revenue 2018-2022 in addition to an updated 6.4% CAGR in the country’s gross domestic product (GDP) over the same period. Advertising revenue per capita is expected to grow from €30.5 in 2017 to €33.8 in 2022.
In recent years, there has been a shift in the focus of advertising budgets from traditional to digital media. As such, Malaysia’s traditional market players such as Astro, Media Prima and Star Media have promptly ramped up digital offerings in response to the change. IHS Markit forecasts TV advertising returns will be flat, growing at CAGR of 0.5% over the next five years to become €241 million in 2022, whilst digital advertising revenues will grow 11.3% over the same period to become €433 million.
In an attempt to control price increases, the new government also pledges to ensure companies cannot monopolise the market, such as Astro’s two-decade stranglehold over direct-to-home (DTH) satellite pay TV broadcasts in Malaysia. Founded in 1996, Astro obtained an exclusive 20-year DTH satellite pay-TV broadcast licence in 1997. The licence officially ended in February 2017 which saw Ansa Broadcast launch its satellite pay-TV service in September 2017. An open market will lead to further increases in competition within the broadcasting sector. IHS Markit expect Ansa Broadcast’s entry will disrupt rather than threaten Astro’s dominance in the short to medium term, given Astro’s existing stronghold. However, if the new government is determined to enforce fair competition and lower barriers to entry, we can expect the introduction of new measures such as changes in broadcast regulations, and incentives to invite more newcomers in the future.
For traditional operators, the new government’s reforms will challenge the dominance these operators have built over the past several decades. For example, Astro must ensure a compelling price and content offering which appeals to new and existing customers. Like other traditional operators around the world, Astro is facing pressure from within the pay-TV industry including the Telekom Malaysia operated IPTV service Unifi TV (formerly HyppTV) as well as OTT subscription operators such as Netflix, iFlix, Viu and DimSum. In terms of price, OTT providers offer much lower subscription fees than those of pay TV packages which makes it difficult for pay-TV operators to compete on price. However, in terms of content, Astro can take advantage of its production capability and create exclusive, local and original content across a shorter window to provide value for its subscribers. We also expect the company to continue investing in premium content such as sports programming as a key part of its content strategy.