Tough times continue for media sector
KUCHING: Times continue to be tough on the media sector as the market turns cautious on lower advertisement spending.
Affin Hwang Investment Bank Bhd (AffinHwang Capital) saw that media sector revenue improved slightly in the first half of 2018 (1H18) by 2.4 per cent year on year (y-o-y) to RM1.4 billion.
This was mainly due to higher contribution from the non-core traditional media segments, but the research firm saw that this was partially offset by declines in revenue of the core print and FTA TV network divisions.
“The media sector’s total core earnings turned into losses in 1H18 -- excluding Astro Malaysia Holdings Bhd -- as the companies posted weaker core earnings,” it said in a sector outlook.
“The momentum in ad spending weakened after Malaysia’s 14th General Election as the market turned more cautious despite positive events such as the World Cup.”
AffinHwang Capital said the operatingenvironmentfortheprint division remained challenging as it believed it is likely to persist through the remainder of 2018.
“Revenue for print is likely to continue to remain under pressure due to the declining trend in hardcopy circulation in tandem with the change in readership preference for Internet/mobile devices, while advertisers are being more cautious due to continued uncertainties in the market,” it added.
“Given the rising costs of doing business, we notice that all the print media companies have embarked on efficiency and productivity improvement plans which will include transformation and rationalisation activities within the organisation.
“This, in our opinion, should help to gradually improve the print division’s future earnings.”
The research house also believed the structural changes in the media industry will keep the operating environment very challenging for the traditional media divisions (print and TV network), even more so with an uneventful remainder of 2018.
“Giventherisingcostsofbusiness operations, cost management and productivity improvement plans are needed in the near term in order to improve future earnings,” it added.
“All the media companies have also expanded beyond the traditional media into other divisions, which include digital media, digital billboards and commerce.
“These initiatives, in our opinion, are still at their early stages and need time to offset the decline in the bottom line of the core businesses.”
The print media companies have been adversely affected by the user preference for mobile devices/ social media/ Internet, which has impacted demand for print copies.
Furthermore, newsprint prices are escalating due to a supply shortage. In the pay TV space, subscribers and ARPU have been trending downwards and we expect this to continue with rising competition from various digital platforms.