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India,Indonesia,Korea

Round-Up: This Week's Major Moves

1) INDIA HEAVYWEIGHTS PREPARE FOR OTT

Star India has beta-launched its new OTT video service, Hotstar, with 20,000 hours of content across Hindi entertainment, sports and movies. Star will likely fully launch the service as the ICC Cricket World Cup starts next month, embracing a predominantly ad-supported model.

Star is India’s largest media company with close to US$1.3 billion in sales, and is increasingly keen to expand its digital presence to capitalize on the growth of online video. Last year, Star pulled its long-form content from YouTube, which has emerged as the sector’s largest proxy, generating close to US$200 million in ad sales in India, according to industry analysts Media Partners Asia (MPA).

India’s online video opportunity could scale up to almost US$850 million in net revenues by 2020, largely funded by advertising, MPA projects.

At the same time, executives at Star remain frustrated by the slow progress of digitalizing India’s large-scale cable industry, a process that was supposed to pave the way for more consumer-oriented revenue models. The broadcaster remains in an impasse on contentious rate negotiations for digital distribution with India’s largest cable MSOs.

Meanwhile, major telcos such as Airtel and Reliance Jio (RJio) are also aggressively entering the digital marketplace. RJio, for example, has applied for a pan-India MSO licence to offer high-speed broadband, IPTV and OTT across a fiber network.

RJio parent Reliance gained access to 20 Mhz of nationwide spectrum in 2010 by buying license holder Infotel Broadband, which secured the spectrum in a BWA (Broadband Wireless Access) auction for US$2.7 billion. Separately, RJio has signed an infrastructure-sharing deal with Reliance to access both inter- and intra-city fiber as part of plans to roll out fiber-based broadband in 900 cities, in addition to 4G wireless services.

2) GROWTH CHALLENGE FOR KOREAN PAY-TV

KT SkyLife, one of Korea’s largest pay-TV operators, has had a tough month, with its share price down 7.1% to Jan. 15 close year-to-date (-14% after last week's announcement).

The sell-down followed news earlier in the month that its parent, telco major KT, will merge KT SkyLife with KT Media Hub, another subsidiary. KT Media Hub has been spun off in December 2012 to focus on content acquisition, distribution and VOD for KT’s IPTV services.

The decision may be due to KT’s new management  more focused on cost savings and rational growth than moving upstream into content, production and related services  and less to do with KT SkyLife itself, which has come under pressure due to softening subscriber growth. In December, KT SkyLife subs base declined for the first time.

The operator is also awaiting announcements from the regulator that may limit its market share (combined with KT’s IPTV services) in the future.

3) INDONESIA: MNC GROUP’S INVESTOR DAY

MNC Group held an investor day in Jakarta earlier this week, led by group CEO Hary Tanoesoedibjo. Key takeouts included:

Broadband and IPTV MNC parent Global Mediacom is accelerating rollout of a fiber-based broadband network, targeting 1.5 million homes passed by end-2015. Services will include bundled broadband and IPTV, leveraging content from MNC’s free-to-air channels as well as DTH pay-TV business, MSky. Rollout will occur in Jakarta, Semarang and Surabaya, aiming for 30-40% subscriber penetration.

Free-to-air TV The company will invest US$120 million in capital expenditure to build new integrated TV studios and facilities, after recently obtaining a US$250 million syndicated loan to finance its capex and working capital.

MNC is also ramping up its fourth national free TV channel Sindo TV, extending the network from 46 to 50 stations this year to reach ~80% of TV households. The channel, which largely focuses on news with some entertainment and sport, is targeting US$30 million in ad sales in 2015, based on 1-2% audience share, and is looking for a 4-5% share longer-term.

At end-2014, MNC’s three TV networks combined had more than 30% of the national audience. Despite elections, Indonesia’s ad market slowed to 7-8% growth last year, according to the latest forecasts from Media Partners Asia. Hary is expecting an 11-12% uplift in ad revenues across MNC’s free TV business in 2015.

Games Letang, a Chinese mobile gaming company, 51% owned by MNC Media Investment, is expected to generate US$45 million in revenue in 2014 on the back of popular gaming titles. MNC Media Investment is 87% owned by Global Mediacom.

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