Star Media Bhd : Group’s second digital transformation wave

STAR Media Group Bhd has embarked on the second phase of its digital transformation plan with the launch of dimsum, its very own video on demand service.

Taking aggressive strides into the digital world to cope with the changing consumer consumption of news and entertainment, dimsum will offer Asian content and much of it on an exclusive basis only to the Star Media Group.

A project that took off nine months ago, Star Media Group managing director and chief executive officer Datuk Seri Wong Chun Wai cited the experience of Nokia not adapting to changes to a packed auditorium comprising employees that prompted the group's move into the video on demand space.

Nokia, which was dominant in the mobile phone space, saw itself being overtaken by Apple and Samsung.

When Microsoft eventually took over Nokia, the tearing chief executive Stephen Elop told a town hall: 'We didn't do anything wrong, yet we lost.'

Quite precisely. Nokia did nothing.

'I'm sure we don't intend to cry… that is why we need to change and adapt to changes,' Wong told the audience.

Elaborating further on the Star Media Group's launch of dimsum, Wong said it was part of the group's digital transformation plan to stay ahead of the game.

'If we do not reinvent ourselves, we will become irrelevant. With the hard times that all media companies around the world are facing, we need to try to do something. The worst thing is not to try at all,' said Wong. The first phase of the Star Media Group's march towards embracing the digital era was its venture into the Marvel Avengers S.T.A.T.I.O.N (Scientific Training and Tactical Intelligence Operative Network) via Victory Hill Exhibitions Pte Ltd (VHE).

Star Media Group's Singapore-listed Cityneon Holdings Ltd wholly owns VHE and its move to combine virtual reality technology and exhibitions has enchanted consumers.

The exhibition has opened in New York, Paris, Las Vegas and Seoul. In Las Vegas, the exhibition will run for six years, It will soon be extended to Taipei, followed by Australia next year.

Its latest exhibition in Singapore has recorded sales of more than 8,000 tickets even before the event - a record for that country.

The Star Media Group's move into video on demand service establishes itself as an official Over The Top (OTT) streaming service provider. It places the Star Media Group in the same space as Netflix, with the difference being that the group focuses only on Asian content and daily news.

Put in layman terms, OTT is the delivery of audio, video and other media over the Internet without the involvement of a multiple-system operator in the control or distribution of the content.

The biggest advantage of this business model is that it is asset-light as it is less capital-intensive compared to a television station. Thus, there is no pressure of heavy capital expenditure throughout the life cycle of this business.

The major hardware required is broadband that is already available in Malaysia.

Over the last few years, the advent of high-speed broadband has seen OTT players such as Netflix, Amazon Prime, Hulu and iFlix jostling for a piece of the binge-watching phenomenon.

The dominant OTT player at the moment is Netflix, which had a market share of some 75% in the United States as at end-2015. It has started spreading aggressively globally this year.

Netflix has disrupted the TV market and cannibalised telecom operators' revenue from IPTV and cable services.

However, Netflix has its drawbacks - it tends not to offer much local content in the foreign markets it operates in.

This is because its content library is predominantly Hollywood.

This is the vacuum that dimsum is capitalising on - providing Asian content to consumers in an effort to win over hearts and minds.

Even the name dimsum was weighed carefully before being chosen as the brandname.

In the Chinese language, dimsum literally translates to 'touch your heart' or 'order to your heart's content', which is exactly what the Star Media Group is hoping to do.

And it is offering a deal that Star Media Group chairman Datuk Fu Ah Kiow has described as something that should win over the minds of households.

You pay only RM15 a month and five users concurrently get to use it under one single account on five different devices. This translates to only 50 sen per day, or 10 sen per user!

'It's cheaper than even a cup of coffee,' said Fu during his speech to the employees.

dimsum will be screened in high definition (HD) that has no interruption or buffering.

It offers offline viewing and viewers get to choose whether they want their subtitles to be in English, Bahasa Malaysia or Mandarin.

Dimsum will also be providing news in three languages - Bahasa Malaysia, Mandarin and English.

Wong said that the next stage will be to introduce more Malay and Indian content.

More importantly, its library of content is 10,000 screening hours and growing.

If anybody thinks that the library content is too small, try telling that to Star Media Group chief digital officer Roy Tan.

'Remember when Netflix was launched in the beginning of the year, it was about that size,' he says.

Tan says that as a nation, only some 8% of the Malaysian population consumes English content. The bulk of the population consumes Malay and Chinese content.

Here's another fact - statistics show that Internet users in Malaysia are opting for online videos over traditional television viewing.

And the break-even period for OTT businesses is much less compared to the traditional broadcasters.

'Traditional broadcasters take between nine and 12 years before the TV business breaks even. We expect it to be much less,' says Tan. For dimsum, this gestation period is expected to be significantly reduced.

'We would like to take advantage of The Star's 1.5 million urban readership base as the No. 1 English daily with the highest disposable income. Combine this with new technology and a cheaper entry cost and we are excited and see potential in this business.

'The chairman and the board have gone through the proposals and we are convinced that this strategy would pay off,' says Wong.

The biggest challenge that many of the OTT players face is the availability of free video content on the Internet. However, the programmes offered by dimsum are mostly exclusive and will not be easily available on the Internet.

Because of the exclusivity, Wong says there is potential additional revenue to be gained by reselling the programmes.

'We are investing big in getting good and exclusive content,' he says.

For instance, Tribes and Empires - Storm of Prophecy - also known as the Chinese Game of Thrones - is exclusively available on dimsum.

China content aside, dimsum will feature plenty of the latest and exclusive Korean, Japanese, Hong Kong, Singaporean and Malaysian content.

'Our library is continuously increasing. For some of our series, we are also offering simultaneous cast as the country of origin,' says Star Media Group chief marketing officer for OTT, Lam Swee Kim.

Tan says some 90% of dimsum's content is not available for free on the Internet.

'You may ask how we are going to face the pirates, but why would anyone want to burn up data and support stolen content when you can get HD quality at 50 sen a day?' says Wong.

'Supposing that a person still wants to download a free drama, he will take time to look for the link. Then, there is the risk of being infected by a virus, and you will need storage to keep that movie. Furthermore, you burn data,' adds Lam.

With dimsum, however, no data is going to be burned with its telecom partners.

In fact, Wong says that so far, the telecom players have been extremely supportive of the Star Media Group's OTT venture. A huge reason for this is that the telecom players themselves are hungry for content.

Going forward, Wong says the group is looking to buy more Bahasa Malaysia and Tamil content from local producers.

'We are looking to get more Bahasa Malaysia and Tamil content.

Trend-wise, Tan adds that there is an obvious shift in entertainment consumption. TV consumption rates are falling everywhere.

'Within a family, everybody has a different taste for entertainment. The father does not want to watch what the son is watching. OTT enables you to polarise and watch exactly what you want. And that is precisely what is already happening now,' says Lam.

Tan says the trend is also changing for the types of programmes in demand.

He says Thai programmes are increasing in popularity.

'We've been riding the Korean wave, and it's been some 10 years now. I would say we are now at the tail end. You'll be surprised that China is now consuming a lot of Thai content,' he says.