Enough WOW in Media Prima’s TV home shopping?

TheEdge Wed, Dec 12, 2018 03:00pm - 5 years View Original


THE latest round of retrenchments by Media Prima Bhd has prompted many to ask, “What is the future of Media Prima’s once-influential TV stations?”

The answer might lie in its home shopping joint venture with CJ Group of South Korea.

According to a Media Prima official who spoke to The Edge on condition of anonymity, the media group will allocate more slots for its CJ WOW SHOP direct-to-home shopping programmes on its TV stations as the segment is showing a lot of promise.

“The home shopping segment brings a lot of revenue to us. The volume of sales garnered through CJ WOW SHOP is amazing. In one instance, we sold more than 200 Habib Jewel’s Athira diamond pendants within 22 minutes,” says the official.

Launched in 2016, CJ WOW SHOP has become one of the biggest revenue generators for Media Prima in a short two-year period. For its financial year ended Dec 31, 2017 (FY2017), the segment recorded RM129.5 million in revenue, more than double that of the preceding year.

That is 10.8% of Media Prima’s total group revenue. The segment is the fourth largest revenue generator behind the TV network, print and outdoor media. While the group was still in the red in FY2017, the losses incurred by the home shopping segment were far smaller than the TV network and print.

But setting aside more slots for home shopping would mean less content for its TV stations. TV3 targets the Malay mass market audience through its soap opera and drama series, religious and women talk shows as well as entertainment programmes such as Muzik Muzik and Mentor.

The official reveals that other TV stations will also feature more CJ WOW SHOP segments from now on, noting that low-rating stations such as TV9 and ntv7 have already begun doing so.

With Media Prima planning to add more slots for CJ WOW SHOP, the official says the group believes the segment will turn a profit sooner rather than later — a belief he says is reflected in the continued improvement in segmental revenue as well as the narrowing of losses.

In the first nine months of the year, revenue for the home shopping segment of RM151.89 million had already surpassed last year’s of RM129.5 million. At the same time, the segmental loss had narrowed to RM2.76 million from RM12.04 million in the previous corresponding period.

If the trend continues, Media Prima’s home shopping segment is expected to turn a profit next year, says the official. For the cumulative nine months, the TV network registered a 12.4% year-on-year increase in net loss to RM62 million.

“This is why the management had to take the bitter pill by reducing the number of staff at our TV network. We cannot beat the trend in the industry landscape, whereby TV stations are no longer seen as the premier method of entertainment for individuals and families,” says the official.

“With the dwindling viewership of our TV channels and advertising revenue shifting to digital platforms, we fear that our TV network will no longer be what it was. With technological advancement and consumer preference changes, media companies have to adapt.”

On Nov 26, Media Prima’s subsidiary, Sistem Televisyen Malaysia Bhd, which operates TV3, gave 190 employees three months’ retrenchment notice and offered 43 others a mutual separation scheme (MSS).

This move was the third by Media Prima in five years. The first, in November 2014, saw the group forking out RM78.9 million to compensate affected employees. In December last year, it took the step of offering its employees no-pay leave.

In the latest round of workforce downsizing, the bulk of employees offered MSS were from the technical section, such as camera, lighting and soundmen, as Media Prima intends to outsource some of its technical functions.

In 2016, when it launched its transformation programme, Odyssey, it had already earmarked home shopping and the digital segment as priority areas.

The acquisition of Rev Asia Holdings Sdn Bhd from Rev Asia Bhd in May last year, coupled with its own digital assets, provides  Media Prima with the largest digital reach among Malaysian companies.

However, digital platforms, too, are facing the same problems traditional media is encountering, in the sense that advertising revenue largely goes to global digital giants Facebook and Google.

Nevertheless, Media Prima’s digital media business is growing in terms of revenue and profitability. In 9MFY2018, the segment recorded an 80% y-o-y increase in revenue to RM64.06 million.

The segment’s profit after tax more than quadrupled during the period to RM7.96 million, from RM1.51 million a year ago.

The media industry has been ailing since the advent of the internet, and media companies have had to find ways to adapt, and quickly. The question is whether Media Prima has responded swiftly and significantly enough.

In a Nov 22 report, PublicInvest Research analyst Chua Yi Jing says that although the group’s core net loss has narrowed during the quarter and the 9MFY2018 period compared with a year ago, the progress is still slower than expected. “The poor set of results was mainly due to higher-than-expected operating expenses, which have been an ongoing issue for the group. As expected, the overall traditional adex (advertisement expenditure) remained soft (-12% y-o-y in 3Q2018) due to a lack of adex-friendly events and the structural shift towards digital platforms.

“Although the group is expected to realise an estimated one-off net gain of RM127.7 million upon the completion of the sales and leaseback exercise in 4QFY2018, which will bring the full-year headline earnings back to the black, we remain cautious on the persistent operating loss.”

 

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