KUCHING: The media industry remains challenging next year as most of the industry players are bracing for more advertising expenditure (adex) to capture a bigger market share.
GAINING MOMENTUM:The broadcast media is set to capture more adex and market share as they are less fragmented combined with the increasing relevance of and propensity to TV advertising.
OSK Research Sdn Bhd (OSK Research) in its investment strategy for 2010 expected adex to grow by 8 to 10 per cent supported by the economic recovery as well as major adex friendly events for instance, the 2010 World Cup and Commonwealth Games.
It believed that newspapers will remain the most popular advertising medium although total adex market share of television and radio will go up on stronger adex growth compared with the marginal adex growth projected for newspapers.
Despite the economic slowdown, adex for the nine months to September 2009 grew 3.37 per cent year-on-year (YoY) to around RM4.7 billion from RM4.56 billion a year earlier.
The 3.37 per cent growth was significantly lower than the 17 per cent achieved for the nine months to September 2008.
The research firm observed that adex progressively picked up momentum in the second quarter of 2009 and third quarter of 2009 with 19.2 per cent and 16.2 per cent growth quarter-on-quarter (QoQ) respectively.
It expects the growth momentum for adex to be supported by the improvement in business and consumer sentiment.
At the meantime, OSK Research viewed that the Malay market segment will continue to be the primary growth driver of newspapers adex led by Harian Metro, which has been rapidly enlarging its market share over the last few years.
It noted that with the price of newsprint coming down from the peak, the research firm expect newspaper companies to make a comeback and sustain margins moving forward.
According to OSK Research, while newspapers remained the most popular advertising medium, television has been progressively getting a bigger market share of adex.
It cited that during the third quarter of 2009, television’s share of adex grew to around 38.8 per cent against 32.8 per cent in the first quarter of 2009 at the expense of newspapers’ share.
It pointed out that newspapers’ market share went down from 55.5 per cent in the first quarter of 2009 to slightly below 50 per cent in the third quarter of 2009.
Meanwhile, YoY television adex increased 10.9 per cent for the nine months of 2009 while newspapers adex contracted by 2.2 per cent over the same period.
As at September 2009, radio adex recorded the strongest YoY growth at 17.9 per cent which might be due to cost cutting or downtrading from newspapers to radio.
Normally, the average advertising cost is lower for radio at an estimated RM50 per 1,000 customers compared with RM90 per 1,000 for newspapers.
On the other hand, concerns that Astro All Asia Networks Plc (Astro) might lose its exclusive rights to broadcast the English Premier League (EPL) proved to be unfounded when it was announced that Astro together with the US-based cable television network, Entertainment and Sports Programming Network (ESPN) have secured the exclusive rights to broadcast EPL for the 2010 to 2013 season.
With the cost of the rights reportedly at about RM800 million, the concerns shifted to the potential pressure on Astro’s margins due to higher content cost.
Following a company visit, the research firm was informed that the RM800 million quoted was excessive and believed that Astro should be able to pass on part of the costs to its subscribers through a subscription fee hike.
OSK Research viewed Telekom Malaysia Bhd’s (TM) upcoming Internet Protocol television (IPTV) as a healthy competition to Astro as Astro has established a strong subscriber base with high growth potential for a higher penetration rate.
Despite forecasting a modest adex growth in 2010, OSK Research maintained its neutral stance on the sector as there is still risk of the economic recovery being slower than expected.
For stocks selection, it favoured broadcasters such as Astro and Media Prima Bhd over the print media due to increasing relevance of and propensity to TV advertising.
Its selection was further supported by the fact that the broadcast media is less fragmented compared with the print media, which
made it easier for the braodcasters to maintain their position as well as their direction.