Astro's New Flight Path
Astro is back. After being taken private in June 2010, Malaysia’s dominant pay-TV provider relisted on October 19, raising US$1.5 billion in the process.
It’s all part of a long-term plan to tackle a major barrier to future growth: a capacity crunch in legacy infrastructure, unable to keep up with demand for new ways to watch TV.
For Astro’s top-tier subscribers in particular, points out CEO Rohana Rozhan, that signaled the danger of a lost opportunity.
“Affordability is not an issue for them at all,” she says, in an interview with The Asia Media Journal.
“In fact, if we don’t provide the right products and services, they will spend with others to supplement what Astro cannot give them.”
Astro had little trouble persuading new households to sign up when it delisted, adding around 250,000 net new customers each year thanks to committed investment in content across languages and genres, for upscale audiences as well as the Malay heartland.
This helped Astro secure a presence in around 3 million homes – around half of TV homes in Malaysia.
After 2008 however, average revenues per user (Arpus) had started to contract, even though pay-TV expenditure as a proportion of household income among Astro’s affluent early adopters remained relatively small.
At the same time, the government set in motion the rollout of a high-speed broadband network, making it easier for upscale urban households to access content online, both legally and illegally.
The network is on target to hit its end-2012 target of 1.3 million homes passed, of which around 1 million are Astro subscribers.
While Astro was building reach and revenue at an impressive rate, its ability to meet the growing demands of an expanding audience base, through a greater choice of content packages and services, was diminishing.
A major culprit was limited bandwidth on its primary distribution platform, direct-to-home (DTH) satellite.
“The business we’re in is consumerism,” Rohana explains.
“Once you have the reach, you have to be able to attract people as the aggregator of choice, you have to start addressing customer needs,” she adds.
“That’s the journey we’re on.”
The solution was costly but unequivocal: new set-top boxes for the entire subscriber base, with added HD and DVR capabilities to reignite Arpu momentum as well as internet connectivity to relieve pressure on limited satellite capacity.
Telco partnerships meanwhile, notably including a recent tie-up with Maxis that will provide access to the high-speed broadband network, open up the possibility of revenue from bundling broadband and pay-TV, as well as dedicated HD and on-demand IPTV services.
“Suddenly a customer can double up and spend what they want,” Rohana enthuses. “It enables a certain lifestyle that the customer wants.”
The push onto the new hybrid DTH and IPTV platform, dubbed B.yond, started in earnest three years ago, prompting Astro’s main promoter Ananda Krishnan to take the company private as margin pressure intensified.
The rollout has already passed the half-way mark, with new boxes in 1.8 million homes.
Of these, 1.1 million are subscribing to HD, an Arpu tonic and sign of promising ROI for the B.yond investment, while 227,000 are paying for DVRs.
With Astro public again, Rohana’s challenge is to sustain the drive for more revenue from existing subs, while continuing to develop reach and scale by expanding the base.
VOD and HD
Astro has already seen revenue gains from two VOD services for early window movies, with recently launched Hollywood offering Astro Best joining Asian-oriented Astro First, which has notched up nearly 5 million sales since making its debut around two years ago.
Some satellite capacity will still be set aside for push VOD services, with the launch of a new satellite in 2014 set to boost capacity, targeting mid-tier subscribers less likely to have optimal broadband connectivity.
Key for growth however will be unblocking stalled growth at the top, with interactivity and multiscreen services, as well as from airing more popular shows and movies.
These extras should encourage more subscribers to trade up at the same time, though Rohana feels more work needs to be done.
“In order to persuade all of them to be on the HD offering, we know that 27 channels [Astro’s current HD offering] is not enough,” she contends.
“So what should it be? It should be at least 60. We will get the right product proposition and the right linear services to underpin that.”
This is an edited extract from the Q4 2012 edition of The Asia Media Journal. The entire issue can be downloaded as an iPad app here.