Astro expects lower content cost in FY18By Adela Megan Willy
http://www.theedgemarkets.com/my/article/astro-expects-lower-content-cost-fy18Astro Malaysia Holdings Bhd, which has been impacted by expensive sports content and the sharp depreciation of the ringgit this year, is confident that the content cost for its television business will go back to between 32% and 35% of annual TV revenue in the next financial year ending Jan 31, 2018 (FY18).
“If our currency stabilises, and minus major sports events, our content cost could go down to about 33% or 34% in FY18,” Astro group chief executive officer Datuk Rohana Rozhan told reporters at the sidelines of Astro’s 20th anniversary celebration here yesterday.
Astro had previously maintained the content cost at between 32% and 35% of its TV revenue.
Astro’s content cost for FY17 is expected to rise up to roughly 38% of TV revenue, following the local currency’s depreciation — Astro buys most of its content in US dollars — and two major sports events, namely the Rio 2016 Olympics and the Uefa Euro 2016.
In the second quarter ended July 31, 2016 (2QFY17), Astro’s net profit slipped 8.6% to RM125.43 million from RM137.24 million a year ago, mainly due to lower subscription revenue and higher content costs, and the impact of the weakening ringgit.
Revenue, however, was up 4.3% at RM1.43 billion from RM1.37 billion in the previous corresponding quarter due mainly to an increase in advertising, home shopping and other revenue.
Meanwhile, on whether the group is still confident about raising its average revenue per user (Arpu) to its targeted RM119 in five years from the current RM99, Rohana said the company is confident as “we are actively introducing new products and innovating our content, and the number of subscribers is constantly growing”.
The rise in its Arpu would be driven primarily by new and improved products and services as well as a rise in the number of customers subscribing for content packages, according to Rohana.
Astro is aiming to raise its service penetration to 90% or about seven million households in five years. Currently, the group serves five million or 69% of Malaysian households via both its pay and subscription-free TV services.
“Although we are seeing a change in the buying patterns of our customers, particularly the lower-end ones as they are opting for smaller [content] packages, there is still a high take-up rate of big product bundles among our high-end customers.
“These are subscribers who pay for added value and quality. Therefore, we will use this opportunity to drive up our connectivity,” added Rohana.
On Bursa Malaysia, Astro’s share price inched up 0.36% to settle at RM2.80 yesterday, valuing it at RM14.57 billion.
who are just paying but not watching,paying whatever the bill, are the culprits who contribute big earnings !