Analysis: With Netflix on board, is Astro about to realise its aggregator ambitions?

Astro is turning 25 this year and it is well on its way to fulfilling its ambition of becoming Malaysia's top aggregator of streaming services, a goal that was listed in its quarterly report for the financial year ending 31 January 2022. The broadcasting company recently inked a partnership with Netflix, adding on to the list of streaming platforms under its offerings - Astro Go, Disney+ Hotstar, HBO Go and iQIYI. It also comes shortly after Astro launched its own streaming service sooka earlier this month to offer both paid and free content.

"Our vision is to be Malaysia's number one entertainment destination across screens for everyone, whether individuals, homes or enterprises," the broadcasting company said in its quarterly report. Meanwhile, Citi also said previously that it was favourable about Astro's new initiatives, adding that the broadcasting company is "favourably placed" to push such an aggregation strategy which can put it on a sustainable business model.

In general, industry players A+M spoke to view this as an interesting move by Astro. However, Serm Teck Choon, co-founder and CEO of Antsomi, said it is not a surprise that Astro would sign up Netflix. He explained that Astro is treating global OTT players like "channels" in the past. "In the 1990s, Astro launched as an aggregator of TV channels. Due to technology and the Internet, OTT emerged. Hence, aggregating relevant OTT channels will allow subscribers to still find Astro relevant," he said. 

When asked if the new partnership will cannibalise sooka, Serm said this is not an issue because Astro still needs localised content while looking at Disney+ and Netflix as cable TV channels from the past, i.e. Disney channel and HBO. With many different customer segments under Astro, Serm added that this is a good opportunity for Astro to unite them all by aggregating the different OTT platforms to serve consumers. 

Sooka focuses on aggregating and curating content such as live global sports action, Malaysian dramas and entertainment programmes, and sooka exclusives and originals that resonates with Millennials on a mobile-based streaming platform. "There won't be any impact as there are different OTT platforms serving different segments. Astro needs to ensure subscribers pay to Astro monthly and the average revenue per user does not drop. Whether it is local or not, it is still okay," he said.

On the issue of local content, former head of media brands at Dentsu Aegis Network and former president of the Media Specialists Association, Chee Weng Yap, said it is a sensible move from Astro to increase or protect Its pay-TV audience base or regain churned audience. According to him, the competition in Malaysia has heated up with Media Prima, the key producers of local content, strengthening its local production capabilities with key hires. "Hence, the addition of OTT platforms in Astro's offering will definitely make it more appealing," he said, adding:

However, the audience is becoming more discerning and price point will be the key determining factor if the OTT mix is good enough to excite Astro’s audience.

Nonetheless, the partnership will have little impact on ad dollars because Yap said local content has traditionally always been the main draw of ad dollars in Malaysia. Similarly, Omnicom Media Group Malaysia's chief operating officer, Eileen Ooi, said whilst growing, OTT ad dollars still remain relatively small in the wider scheme of the ad expenditure. However, what is interesting is the details behind the partnership.

Is this a pure-play of scale and content distribution, or would it benefit both partners in data acquisition?

First-party data is important today and both Astro and Netflix sit on a wealth of data. Hence, how both parties build a model around data for their businesses and how that can spearhead Malaysia's next-generation ad dollars is the bigger question, Ooi said. 

Nonetheless, she said the move is a clever one for Astro. The reason being, OTT has seen a major leap in Malaysia over the last few years, and the growth in the adoption of OTT skyrocketed as a result of the pandemic. According to her, this trend is unlikely to slow down as consumers shift to a "by-demand content" lifestyle.

"Thus, Astro's shift into positioning as a go-to platform for content on-demand via its various OTT partnerships allows for Astro to be able to cater to every consumer segment for every type of genre. Content creation is an expensive model. Therefore, focusing on becoming the one-stop solution in content distribution or consumption via partnerships is definitely a smarter move," she explained. This partnership not only allows Netflix to reach an untapped market with Astro's distribution and possibly a new monetisation strategy, but also enables Astro to gain into previous segments it has left. For example, English-speaking audiences and to the wider Malaysian community. "It would be interesting to observe over time if Astro's entire business completely pivots into an OTT model," she added.

Benefits won't happen in the immediate short term

While there will be benefits for Astro, they will not be as evident immediately. The first wave of consumers who sign up are cord-cutters and are returning to Astro because they get an aggregated service, Saurabh Chandrashekhar, MD at MediaCom Malaysia said. "Essentially, Astro is going to regain the lost users it has had in the past couple of quarters. Those will come back and help to compensate for some of the erosion that has happened," he said.

The long-term benefit will be that as OTT platforms start sprouting, Astro is the only aggregation service that will create stickiness among users as they can mix and match at a programme level, not just a platform level.

He explained that is where Astro has the ability to come out as premium and drive users to come onboard. When it comes to advertising and media budgets, Chandrashekhar said the larger implication is not so much about the inventory and pure reach, but rather how can brands reach individuals that have blocked advertising online. "If we cannot buy the ads, it has to be looked at in a different way, be it syndicated content or sponsorships. Seamless branded content has to be thought through because there will be limited inventory opportunities if more people sign up and block ads," Chandrashekhar said. When that happens, advertisers and agencies have to think of the media budgets themselves rather than buying inventory since there will be none to buy, he added.

Will more media broadcasters take a page out of Astro's book?

While Chandrashekhar does not see other media broadcasters in Southeast Asia moving towards becoming an aggregator for OTT platforms, he said this trend is evident in larger markets such as the US or India where there are 40 to 50 OTT platforms. Also, the role of aggregators will be played more by tech platforms rather than media houses and broadcasters.

Ultimately, for broadcasters, their business is content so the more they get into an acquisition of all these platforms, instead of creating a pipeline for content it incurs cost. 

One of the issues or challenges for OTT platforms is the churn that happens. People sign up for a one-off reason and then leave. That is the problem that tech solutions will be able to solve better than a broadcaster," he said. Chandrashekhar explained that the issue is more about mixing and matching programmes. Hence, there has to be someone who understands how predicting what content works and at a user-level, predict when the churn will happen and what they can do to avoid it, he added.

Meanwhile, Omnicom Media Group Malaysia's Ooi said as with all products and services, the growth of a particular trend will lead to an emergence of new players. Hence, there will be proliferation and the aggregation begins.  "The OTT space continues to grow phenomenally but it will reach a tipping point where choices are too proliferate and a consolidation s required," she said. In a market such as Malaysia, Ooi explained that a clear need for distinction is important and is what consumers seek as options continue to flourish.

Photo courtesy: 123RF

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