KUALA LUMPUR (April 27): The advertising expenditure (adex) of traditional media dipped 9% in the first quarter of the year (1Q20), with the biggest loser being the newspaper segment, down by 24%, according to statistics by Nielsen.

Total gross adex in the first three months of 2020 registered at RM1.34 billion, remaining flat from the same period a year ago, sustained by a 56% year-on-year growth in digital adex.

“It is likely that the decline in traditional channels has not bottomed, with the movement control order (MCO) likely to accelerate the shift to digital media from traditional prints. That said, we believe free-to-air TV could see some gains with most of the population being homebound.

"This could have been even stronger had the mid-year sporting events (Euro 2020 and Tokyo Olympics) not been postponed. Listed players have begun moving into the digital space, with the likes of Star Media Group Bhd introducing a paywall for its online platform and Media Prima Bhd looking to offer integrated solutions and services to its customers,” Kenanga Research, citing the statistics, said in a research note today.

With the ongoing MCO stemming from the Covid-19 pandemic, it said, it is highly probable that traditional platforms would be affected more. Newspaper publications may not physically reach readers as easily, while out-of-home advertising is proving to be less relevant as the traffic flow greatly dwindles during the MCO.

With almost the entire population being homebound, television and digital channels will see even greater consumption as a source of entertainment and news updates, it said.

Media Prima, it added, having a fair share in television advertising, may also seek to push its integrated solution offerings in a time when advertisers are cautious about spending on marketing. Fundamentally, it noted, the group’s past downsizing of its print segment appeared timely given the current circumstances.

While these efforts may take time to gain meaningful traction, tight cost controls are crucial to keep profit sustainable amid the weakness in traditional channels, it said.

Kenanga maintained its "outperform" call on Star Media with an unchanged target price (TP) of 31 sen, but downgraded Media Prima to "market perform" with an unchanged TP of 14.5 sen.

“Our top pick for the sector is Media Chinese International Ltd as we believe its short- to medium-term prospects are well buoyed by a leaner cost structure and tax incentive wins. On top of the 7% dividend prospect, the company holds net cash per share of about 16 sen, against its last closing price of 20.5 sen,” it said.