Changing frameworks: New legislation is facilitating the development of the creative sectors

With communications as a key part of Malaysia’s current national development plans, the media and advertising sectors have seen major new interest from both investors and legislators. This renewed emphasis on the creative industries, with content generation and other value-added services brought to the fore, bodes well for the future of the sector, which is trying to make more of a global name for itself. Challenges still remain, however. On the structural side, the multi-lingual nature of the population underlies fragmentation of a relatively small market with a total population of only 28.4m. Meanwhile, on the cyclical side, the fortunes of the national and global economy are very much behind the swings and changes of advertising expenditure. Nonetheless, with an increasingly technology-savvy population experiencing rising incomes, new platforms and consumer needs are creating some important opportunities in the industry. Moves by the government to support creative industries via the Economic Transformation Programme are also producing some results, particularly for the local film production sector (see analysis).

REGULATION AND OVERSIGHT: The legal and regulatory framework for the Malaysian media is currently undergoing changes, following a call from the Ministry of Information, Communications and Culture for the National Media Consultative Council to deliberate the future shape of the sector. This consultative process, which involves government, print, broadcast and online media representatives, has been taking a look at the handful of media laws that have been in place in the country – in many cases dating back before independence. This legislation includes the Printing Presses and Publications Act (PPPA), implemented in 1948 and last amended in 2012. It governs the issuing of newspaper licences and allows the government wide powers in revoking and issuing such permissions to print. Other key laws are the Sedition Act, also enacted in 1948, with an amendment made during 2012 that changed the rules for online media, and the Official Secrets Act (OSA) of 1972, which both limits the scope of media reporting and emphasises national security.

A bill to establish a media council has been brought forward that is likely to lead to changes in the legislative environment. The council will likely monitor online and offline media. This preceded a 2012 government decision that amended the PPPA to end the annual awarding – or withdrawal – of newspaper licences. The amendment also gives publishers legal recourse should their application be rejected. Debate continues over the scope of the council and the degree of liberalisation the state has in mind in regards to the legal framework.

Another key piece of legislation is the Communications and Multimedia Act of 2000. This covers broadcasting and online media, with the Communications and Multimedia Commission – established under the minister of communications – regulating this segment. In the online world in particular, there has been much greater latitude given to diversity in opinions, as government policy has been firmly set to encourage multimedia sector growth, with internet-based media mushrooming in recent years, alongside growth in Malaysia’s online community and connectivity.

MEDIA: In the meantime, offline media remains closely linked to government and state authorities. Five main media groups are active in the nation, most of which have both a print and broadcast presence.

The first of these is Media Prima, which is listed on Bursa Malaysia’s main board and, according to the company’s quarterly report at the end of the third quarter of 2012, had RM2.29bn ($739m) in assets. Gross revenues stood at RM398.76m ($128.7m), down on 1Q11 by around 6%. According to the company website, substantial shareholders include the Employees Provident Fund Board, with 18.46%, Gabungan Kesturi, with 11.49%, and Altima, with 8.25%. Media Prima’s print arm consists of the New Straits Times Press (NSTP), which publishes the English-language New Straits Times (NST), the Malay-language Berita Harian and Harian Metro, along with their Sunday editions.

Media Prima’s 4Q11 figures show a readership of 240,000 for the NST daily, but fall to 234,000 for the Sunday edition, while Berita Harian had 1.035m readers with 1.097m for its Sunday edition, Berita Minggu, in the same quarter, while Harian Metro’s daily edition was read by 3.722m, and its Sunday, Metro Ahad, by 4.04m. These titles are closely linked to the United Malays National Organisation, the largest party in the ruling government coalition.

The Malay-language side of NSTP’s business is increasingly its most profitable, with company figures showing that Malay took 31% of the print sector’s advertising expenditure (adex) by language in 2011, up from 26% in 2010. Overall market shares for other languages were 40% for English in 2011, down from 44% in 2010, and 29% for Chinese and Indian languages, down from 30% the previous year. NSTP’s Malay titles contributed 80.3% of the group’s adex in 2011 and the remainder provided by English-language titles.

TELEVISION: Media Prima also holds four free-to-air (FTA) TV channels in its portfolio on the airwaves: TV3, 8TV, NTV7 and TV9. According to Nielsen audience measurements, these four channels accounted for 46% of all Malaysian viewers over the age of four in 1Q12, slightly down from 47% in 1Q11. The market share was even higher in terms of Malay viewers over 15 years old, which was 51% in both quarters.

Amongst these networks, TV3 remains the country’s most popular station, holding all of the top 10 programmes – excluding sports – in the first quarter of 2011. The most popular of these is the music and entertainment show, “Anugerah Juaru Lagu”, watched regularly by around 4.4m viewers, according to Media Prima data and Nielsen ratings.

The other three channels have more specific target audiences: 8TV, owned and operated by Metropolitan TV, a Media Prima subsidiary, is aimed at a Chinese audience; TV9 is aimed at an audience that is conservative Malay; and NTV7 targets Chinese and urban audiences. Media Prima programmes were watched by 47% of ethnic Chinese viewers over four years old in 1Q12, up from 46% in 1Q11.

Media Prima thus has a commanding position as the country’s FTA provider, with the group’s TV stations contributing the largest share of adex. This, however, has been in decline recently, down 20% between the first quarters of 2011 and 2012, from RM149m ($48.1m) to RM119m ($38.4m), according to company figures.

RADIO: Media Prima has another strong collection in its portfolio on the airwaves. Fly FM, Hot FM and One FM have all helped boost radio’s share of Media Prima’s adex, despite an overall decline in radio’s adex performance nationwide. The groups’ radio stations saw adex rise 10%, from RM12m ($3.9m) to RM14m ($4.5m), between 1Q11 and 1Q12, while the national total went down 2% from RM92m ($29.7m) to RM90m ($29m) over the same period.

Media Prima also has an outdoor media family to its name, composed of Big Tree and Kurnia, the latter consisting of Kurnia Outdoor and Jupiter Outdoor Network. The outdoor division posted an increase in gross revenue between 1Q11 and 1Q12, from RM36.3m ($11.7m) to RM40.84m ($13.17m). The division held a 44% share of the outdoor market in 1Q12, with its nearest rival, the Redberry Group, holding 16%, according to Media Prima’s figures. The outdoor group has a number of major and exclusive media rights, notably in the Klang Valley’s KL Monorail and Express Rail Link, along with the Curve Mall, Kota Kinabalu and Kuching airports, and various toll highways in Peninsular Malaysia.

ONLINE PRESENCE: Finally, Media Prima also has a major presence online. Put together, its websites held the number one position in terms of unique visitors (UVs) in March 2012, at 3.04m UVs, according to company data. This was ahead of the number two spot, held by Mudah.my, with 2.84m UVs.

Central to the group’s online presence is the fully owned subsidiary Alt Media, which runs the websites for the group’s print and broadcast outlets and lifestyle and entertainment portals GUA.com.my and GUAMUZIK.com.my. Alt Media also has a new video portal.

HOT OFF THE PRESS: A major presence in print is also provided by the Star Publications group, which prints the English-language daily, The Star, and its Sunday edition, The Sunday Star. The group is owned by the Malaysian Chinese Association, which is the second-largest party in the ruling coalition government.

The group also publishes the magazines Kuntum, Shang Hai, Galaxie and Flavours, while also owning the radio stations Red FM (in English), Suria FM (in Malay), 988 FM (in Mandarin) and music channel, Capital FM.

ENGLISH-LANGUAGE DAILIES: According to figures quoted as Nielsen research, in 2011 The Star had the largest readership of the country’s English-language dailies, with 1.024m to the New Straits Times’ 973,000. In terms of circulation, according to the Audit Bureau of Circulation (ABC) Malaysia, in Peninsular Malaysia The Star had an average daily circulation of 267,991 in the July-December 2011 period, while New Straits Times had 62,467, with its Sunday edition rising to 84,778. These figures actually made The Star and its Sunday edition (which had an average circulation of 269,133) the most popular paper in both Malay and English.

Both The Star and News Straits Times also circulate in Eastern Malaysia, with the ABC showing figures of 2051 in Sabah and 6278 in Sarawak for the former and 1183 and 1545 for the latter, during the July-December 2011 period. Eastern Malaysia also has its own titles, the most popular of which are, Daily Express in Sabah, with an average daily circulation of 26,669, and The Borneo Post in Sarawak with 61,165 as its average daily circulation.

The newspaper with the largest circulation across Malaysia, according to the ABC figures, was Sin Chew Daily, which is owned by Sin Chew Media Corporation. This company also owns the Guang Ming December 2011 period averaged 387,240, added to night edition sales of 18,074.

Also influential, despite having a small circulation, is The Edge Publishing Group, which publishes weekly and daily financial papers in English. Circulation of The Edge Financial Daily was 22,395 during the period in question, according to ABC’s Peninsular Malaysia figures, with no statistics available for Eastern Malaysia.

PAY-TV: In the area of broadcasting, Astro Holdings dominates the pay-TV sector. It owns digital TV and radio network Astro, plus a widening range of magazines and other film and online media. The company breaks down into two parts – Astro Overseas and Astro Malaysia Holdings, with the former active in China, India and Australia, and the latter responsible for domestic operations and co-owned by state investment arm Khazanah Nasional and Usaha Tegas and its affiliates.

Astro Malaysia has been a pioneer in offering new technologies and platforms for its services, launching Astro Mobile TV in 2008 and Astro B.yond High Definition (HD) broadcasts in 2009. Astro B.yond internet protocol TV was rolled out in April 2011, along with the Astro First on-demand movie service.

Astro began operations back in 1996, when it was granted satellite rights for 20 years, using the Malaysian East-Asia Satellite system, which now consists of three satellites, covering the South and South-east Asian region. Astro thus offers services in Brunei (as Kristal Astro), Indonesia (via a 20% stake in PT Direct Vision) and India (via a 20% stake in Sun Direct).

WIDE VARIETY OF PROGRAMMING: Astro’s digital services also enable it to tackle one of the longstanding issues in Malaysian media – the range of language groups. The channels it makes available cover a wide variety of languages, with digital services often able to offer subtitles. The broadcaster has also been able to offer a wide variety of genres, as well as the very latest Western and Eastern programming, making it a favourite with a younger audience.

The 20-year lease, however, is approaching its end, with many in the sector expecting that other providers may try in future to take a piece of the pay-TV pie. Asian Broadcast Network is widely thought to be one of these possible new entrants, yet Astro’s domination of the sector – it offers around 153 channels – seems likely to continue, as it currently offers a near monopoly of available content, ranging from HBO to CNN, among others.

Figures for viewership on the company website state that around 50% of all Malaysian TV households have Astro, with approximately 3m viewers. Figures from Media Prima showed Astro as being watched by 41% of viewers over the age of four in 1Q12, up from 39% in 1Q11. The percentage was higher – at 48% – for the Chinese and urban, over-30 groups.

Astro also owns Airtime Management and Programming Radio Network, which is behind eight radio stations – THR Gegar, THR Raaga, SINAR FM, LITE FM, MIX FM, MY FM, Hitz FM and Era FM. Astro also publishes a number of magazines in addition to its own listings, AstroView, including the football-focused Four-Four-Two, youth and fashion magazines iFeel, inTrend and Style and men’s magazines FHM and Men’s Uno.

The final large outfit is the Redberry Media Group, which operates the 24/7 news channel Bernama TV and owns The Malay Mail, a tabloid, and The Malaysian Reserve, a financial daily. The group also has a series of airport concessions, including exclusivity at Kuala Lumpur (KL) International Airport and KL’s low-cost Carrier (LCC) airport, which provide outdoor media channels via Focus Media, Pointcast and Meru Utama.

ADVERTISING SECTOR PLAYERS: The advertising sector features a number of interrelated professional bodies. Key here are the Association of Accredited Advertising Agents Malaysia (AAAA), which aims to improve advertising practices; the Malaysian Advertisers Association, which brings together brands with annual marketing and communications expenditures of more than RM6bn ($1.94bn); the recently formed Malaysian Digital Association, consisting of digital advertising outfits; the Communications and Multimedia Content Forum, a self-regulating authority for the industry; and the Advertising Standards Authority, which oversees print, broadcast and online advertising codes.

Most of the large international agencies are present. Members of the AAAA include companies such as Olgivy & Mather, Crush Communications, Grey Worldwide, KISS Communications and Saatchi & Saatchi. Recent award winners include Arc Worldwide/Leo Burnett Malaysia, which won Best Overall Agency 2012 from Malaysia’s Advertising and Marketing magazine, and Wit Ink Creative, Naga DDB and Grey and Ogilvy, which took the top Effie Malaysia 2011 awards.

Figures from Nielsen for the first four months of 2012 show that in terms of medium, newspapers continued to take the largest share of adex, at 42% of the RM3.15bn ($102bn) total – some 2.1% down on the 42.5% achieved in the same period of 2011. Adex as a whole dipped 0.8% over the two periods. FTA TV came second, in terms of adex, with 25.8%, down 9.1% on the previous period, while pay-TV, third, stood at 23%, up 20.7% on 4M11.

Indeed, newspapers and FTA TV – long the traditional mainstays of adex – were the only two categories that saw losses between the two periods. In 2011 adex rose 12%, compared to 2010, reaching RM10.76bn ($3.47bn). Expectations were high that adex would recover significantly over the course of 2012, with events such as the UEFA Football Championship, the Olympics, and a possible general election all likely to cause spending to rise.

BIG SPENDERS: The top individual categories of spenders in 1Q12 were local government institutions, with RM88.7m ($28.6m), up 17% year-on-year (y-o-y), followed by mobile phone operators, with RM75.4m, down 20% y-o-y, women’s facial care, with RM71.9m, up 7%, and fast food centres, at RM53.1m, down 14% y-o-y. In 1Q12, in the private sector, the three companies with the highest ad spend were Unilever (with 20% of private sector adex), Proctor & Gamble (with 14%) and Canon (with 11%). These companies were also the top three in FTA and pay-TV spend.

Online and mobile advertising require further development before becoming major players. Nielsen figures showed a 0.6% adex share for the internet in 2011, up 22.1% on 2010, but still slight. Figures from the first four months of 2012 show this rising again, by around 5.9%, on the first four months of 2011. Potential is strong with use of social media sites and smartphones rising as broadband connectivity spreads. At the end of 2011, there was a 62.9% social network penetration rate. The smartphone penetration rate was around 27%, according to Nielsen, while press reports of figures collected by GfK Malaysia in January 2012 showed tablet sales up 509% between 4Q10 and 4Q11.

OUTLOOK: Statistics from the Malaysian Institute of Economic Research show the consumer confidence index up in 1Q12, to 114.3 from 106.3 in 4Q11. GDP growth, meanwhile, was 4.7% in 1Q12, down from 5.2% in 4Q11, as the global economic outlook declined.

The year could be viewed as a mixed one for consumer spending and adex, with much dependent on a surge in the second half of 2012. Yet the government’s drive to increase Malaysia’s value-added industries and innovation should mean that the underlying trend will continue to be one of expansion.