A tough environment for media in 2018
KUALA LUMPUR: Analysts remain neutral on the media sector in 2018 on tepid prospects as digitalisation initiatives undertaken by the media companies remain ineffectual in cushioning the decline in advertising expenditure (adex) rates.
The team at AmInvestment Bank Bhd (AmInvestment Bank) saw that rising penetration of high-speed internet and falling cost of data are aggravating the already gloomy state of affairs.
This was hastening the switch from traditional media towards digital mediums, in which entry barriers are low and monetisation is challenging, it said.
In addition, the imminent analogue-switch-off (ASO) in June 2018 creates uncertainty for TV players, especially in the free-to-air (FTA) segment.
“We reckon that consumer sentiment will remain weak in 2018 against the backdrop of Malaysia’s high household debtto-income ratio,” it added in a report yesterday.
“Data from the Malaysian Institute of Economic Research (MIER) show that the Consumer Sentiment Index (CSI) has recovered from 70 in 4QCY16 to 77 in 3QCY17, but remains below the optimism threshold of 100.
“We believe the recovery is
We reckon that consumer sentiment will remain weak in 2018 against the backdrop of Malaysia’s high household debt-to-income ratio. AmInvestment Bank
transitory given a lacklustre job outlook and wages growth.”
On a positive note, AmInvestment Bank believed the Winter Olympics in February 2018 and FIFA World Cup in June and July2018 would catalyse advertisement volume and help sustain adex rates.
“In our opinion, the events are far more enthralling compared to those of 2017, during which the SEA Games and Merdeka celebration were the only notable events,” it opined. “This means 2018 should be a better year for the overall industry, relatively.
Independent of the sporting events in 2018, AmInvestment Bank believed publishing companies will continue to register a decline in circulation revenue.
For the past three years, it said average daily circulation of Malaysian newspapers has been falling at an average rate of six per cent every half year.
“The decline was most precipitous in Malay newspapers, which explains the poor financial performance at Media Prima Bhd recently.”
While digitalisation is moving quickly in the metropolis, the research house noted that high-speed internet remains underpenetrated in rural areas.
This would shelter pay TV subscriptions from churn momentarily, giving Astro Malaysia Holdings Bhd (Astro) a window for business transformation.
“For this reason, we believe Astro’s earnings will be among the most resilient in 2018, given subscription revenue still constitutes bulk of its revenue
The risk is mitigated by the local companies’ strength in vernacular contents.
Other media platforms remain relevant, it added, as the radio and out-of-home segments appeared relatively more resilient.
Data from Gfk Radio Audience Measurement shows that radio listenership and time spent listening in 2017 remained relatively unchanged compared with 2016.
“In the out-of-home segment, earnings are underpinned by migration from traditional billboards to digital panels, which command better margins. In addition, there were new rollouts of advertising panels after the completion of the MRT. Taking the developments into account, adex in both the segments is expected to hold up in 2018.”