Organized by Media Partners Asia | media-partners-asia.com
Four Seasons Hotel, Hong Kong | September 2011 Summit Report
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Partners The Asia Media Summit 2011 | II Table of Contents
Overview: Opening & Introduction 1
The Future of Media & Marketing 2
Online China: Diversification and Expansion 4
India: New-Wave Media Conglomerates 6
News: The Upside-Down World of News Economics 8
Indonesia: The Rise of an Entertainment Powerhouse 9
The Philippines: Ad Dynamics in a Fast-Growing Market 11
Korea: Fresh Horizons at Home and Abroad 13
Sports: Rising Stakes, Rising Rewards 14
Consumers and Media: The Future of Television 15
Financial Levers of the Future 16
The Asia Media Summit 2011 | III Opening remarks and overview
The increasing resilience of Asia’s emerging economies was reinforced at the fourth Asia Media Summit from Media Partners Asia (MPA), even as the shadow of a global economic downturn lingered over the event for the second time in four years. Last year’s 8.6% increase in net ad spend acoss the region will slow to 4.3% this year but is expected to rebound to 7% in 2012, according to estimates from MPA. This will provide a welcome foundation for leading media companies whose main challenge now is capitalizing on future growth by building long-term scale and value.
This year’s deceleration in ad spend growth is less pronounced than it was in 2009, the last time turmoil in the global economy undermined growth in Asia, thanks in particular to consumption-driven economic dynamos in China, India and Southeast Asia. Opening the Summit, MPA executive director Vivek Couto outlined a three-speed picture of Asian media growth that is starting to become more pronounced. Taking the lead are Indonesia, India, Vietnam and China, the outliers on track for double-digit net ad growth between 2010 and 2015, comfortably ahead of an impressive 8.4% five-year growth trend for the region that excludes two sizable slow-growth markets, Australia and Japan. Southeast Asia’s buoyant economies also feature heavily in the next growth tier, comprising the
The main challenge is Philippines, Malaysia, Thailand and Korea. The slowest growth prospects for adspend are “ being exhibited by the last group of markets, Hong Kong, Singapore, Taiwan, Australia “ maintaining long-term and Japan, from 5.1% for Hong Kong from 2010 to 2015 to just 1.2% for Japan, shaken scale and value by a severe earthquake earlier this year. Advertisers also appear relatively undaunted by global markets, more preoccupied Vivek Couto, Media Partners Asia instead with rising costs and inflation within Asia according to a qualitative study
conducted among Asia-Pacific members of the World Federation of Advertisers. Eight of ten multinationals, who between them spend US$1.8 billion on media and marketing in Asia-Pacific, didn’t expect global economic conditions to impact their marketing investments in Asia, though nine out of ten said marketing plans could be affected by escalating business costs and competition, while seven out of ten were more cautious due to inflation potentially curbing household spend. The overall picture was somewhat mixed, though on a regional basis Southeast Asia appeared to give more cause for concern than China or India.
For media owners, the next phase of growth is less about revenue and more about reinvesting the rewards of scale and profit, particularly to build a more diversified revenue base. This dynamic is playing out in India through investments in different languages and regional media, in online media in China through e-commerce and online payments, and in Southeast Asia by leveraging content investments to create multiplatform franchises. This report examines these initiatives and more – we hope you find it a stimulating read.
Three growth tiers Net Advertising, CAGR 2010-15
Indonesia 14.0%
India 13.1%
Vietnam 11.5%
China 10.3%
Philippines 8.5% Regional average (excludes Australia and Japan) 8.4% Malaysia 7.9%
Thailand 6.9%
Korea 6.7% Regional average (includes Australia and Japan) 5.9% Hong Kong 5.1%
Singapore 4.4%
Taiwan 3.6%
Australia 2.8%
Japan 1.2%
0% 5% 10% 15% Source: MPA research estimates
The Asia Media Summit 2011 | 1 The Future of Media & Marketing
From left: Digital media has provided advertisers and agencies with a new challenge: understanding how consumers influence each other, as well as understanding how they react to marketing Kristie Lu Stout, CNN (moderator) messages. Making sense of this complex web of interactions promises to transform how Barry Cupples, Omnicom Media Group marketing budgets get spent.
Jayant Murty, Intel As a result, practitioners are re-examining the limitations of established yardsticks for measuring marketing effectiveness based on return on investment or ROI, originally devised for advertising in mass media but less suited for the more targeted and interactive opportunities offered by digital media. There are some potential additional ROI metrics on hand, however. These include ROI as return on information, because it’s worth spending on research and analytics that can point media and marketing plans in the right direction, as well as ROI as return on ideas, because ideas increasingly have the potential to deliver game-changing competitive advantages.
“In the world we live in, data is key,” said Barry Cupples, regional CEO of Omnicom Media Group, a media agency network that currently oversees around US$5 billion of marketing budgets in Asia-Pacific. “We’ve got to get data first, to drive the information that leads us to better-informed investment decisions,” Cupples added. “The ‘I’ [in ROI] is still open to question, because ideation is integral. We are playing with all three.”
Wary that technology giants such as Google have already taken a lead in helping brands incorporate digital data into their marketing plans, large communications groups are ramping up number-crunching capabilities of their own. Omnicom Media Group’s initiative in this area, unveiled in the US last year, has been christened Annalect, combining media analytics, business intelligence, econometric modeling and search services.
Such investments will help migrate marketing plans from traditional mass-media campaigns, still effective in many parts of Asia, to include more targeted and interactive options online. Progress however has been hindered by the reluctance of many advertisers to invest in research, as well as share sales data that would help agencies test new models for marketing effectiveness. Digital transformation is still in its infancy, though
The data from social while there is little agreement on how new measures should be assessed, marketing “ “ models are coalescing around interactions through social media, and how these influence media will change what people think about different brands. “There are no real currencies that are new,” the industry Cupples said. “The only way we are going to drive those new currencies, if we have data at the heart of everything, is through social. It will change the industry because the data Barry Cupples, Omnicom Media Group available through social is huge.”
The Asia Media Summit 2011 | 2 Social media rewrites the media and marketing playbook. “Don’t count how many people you reach,” counseled Jayant Murty, Intel’s regional director for integrated marketing and brand strategy. “Just reach the people who count.” A single influential blogger can make or break or campaign, Murty explained, while brands that fail to engage with online conversations could see their standing tumble dramatically. Those that do address consumer concerns are more likely to thrive, as Intel discovered when bloggers uncovered a problem in one of its products. “If you tell them what you’re doing, it’s amazing how quickly they turn in your favor,” Murty said. “If you give them an impression you’re not listening, they can walk you out of that market.”
Intel is well known in media and marketing circles for viral online hits such as Museum of Me, an application that collates data and images from participants’ Facebook profiles and turns them into a virtual exhibition. Intel’s marketing mix in Asia varies quite widely, however. In Korea, where no money is spent on TV, the focus is on mobile, content and sponsorships. TV still accounts for 80% of the budget in India, though digital – including a sponsored Bollywood portal on YouTube – still plays a role. “What we’re getting better at – I don’t think we’re good at it – is staying neutral, and not making up our minds on where we want to spend our money and how we want to spend it,” Murty remarked.
There are plenty of tools to measure sentiment and influence around a brand but the hard part is measuring what contribution that sentiment and influence makes, Murty added. “What we end up doing most often is correlation and not causality,” he said. “We pretty much plot everything that you see: what’s happening on tweets, retweets, mentions, how many people are coming to the site, how much time are they spending and with what content. Then you look at what’s happening with retail data: what’s the store traffic, how many people bought brand X versus brand Y, and so on. We just measure volumes of conversations. When conversation volume goes up and it’s positive, it’s hard to assume it doesn’t impact the way people make decisions.”
Adapting to a new media and marketing landscape remains a challenge, especially as the way most brands and agencies in Asia are organized today is still largely geared towards
If you’re not listening, traditional forms of marketing. “I can’t think how many data streams we get into this “ “ company, from Google Trends to CPCs to CPMs to blogs and tweets and retweets,” Murty consumers can walk you observed. “You can get completely paralyzed by that data stream. The companies that are out of a market successful in this space are those that look at social as corporate strategy and not media strategy, and it’s not necessarily the large companies that are doing a good job.” Jayant Murty, Intel
The Asia Media Summit 2011 | 3 Online China: Diversification and Expansion
From left: China’s US$5 billion online ad market remains one of Asia’s most dynamic media sectors, still enjoying a 40%-plus growth trajectory year-on-year. These new ad dollars are not Alex Miller, Renren only driving the continued growth of established online media such as search and display Kun Zhang, PPLive but also the development of new competitive battlegrounds, online video and social media in particular, heightening competition for eyeballs while bringing new advertisers Alfonso de Dios, Telos Media Works and ad budgets online in the process.
PPLive and Renren, both represented at this year’s Asia Media Summit, are well-resourced to meet the challenges ahead, particularly as the attractiveness of China’s online sector among international investors has started to cool, causing some companies to delay public financing plans. PPLive, a peer-to-peer video site that has struck deals with over 120 broadcasters in China, secured a US$250 million investment from Japanese internet conglomerate Softbank earlier this year, at the time a record sum for online video in China. Social network Renren, also supported by Softbank, fared even better, raising US$743 million in its May IPO.
Nonetheless, each faces testing times, particularly as cash-rich internet giants such as Baidu, Sina, Sohu and Tencent, well aware how shifting dynamics in online media could undermine established revenue streams, ramp up their own video and social offerings. Although both PPLive and Renren are eyeing more diverse sources of income in the long run, PPLive from paid subscriptions and Renren from e-commerce, the short-term priority remains defending the core base of advertising revenue.
“The focus right now is still creating user stickiness, getting higher user coverage and then receiving more advertising dollars,” said Kun Zhang, PPLive’s vice president of corporate development. “Eventually, once you get enough user stickiness you can build more revenue models, such as pay-per-view. Many sites have been trying that with premium content, but from free to pay is very difficult to do.”
Video sites in China are aggregating as much content as they can to maximize user
choice, while adding enough differentiated content to make them stand out from their “ rivals. PPLive’s differentiation strategy is founded on online sports rights such as English The focus right now is Premier League, with PPLive offering live games as well as a self-produced interactive “ user stickiness program discussing matches after the whistle has blown. It is also branching out, recently providing interactive elements and 24-hour broadcasts for Hunan TV’s China Super Girl Kun Zhang, PPLive reality show.
The Asia Media Summit 2011 | 4 Renren meanwhile has seen earlier user growth slow in recent months, with much of the momentum in social media picked up by microblogging services from Sina and Tencent, though this has not impacted time spent on the site, said Renren’s advertising product manager, Alex Miller. “Renren is not simply a news platform, it’s a place where you’re emotionally connected,” Miller added. “That’s our core competency. That’s why social gaming traffic is down from 50% in the past to about 20%, though we have continued to grow page views per user. Concentrating on the core social experience and building a strong real-name social graph has been our primary focus, and will continue to differentiate us.”
Longer-term, Renren is also seeking to develop e-commerce revenues, recently dropping the fee it used to charge brands to set up a public page on its platform while ramping
up investment in its own group buying service, Nuomi. A major new social shopping The social experience“ initiative, Renren Mall, is scheduled to go live in October. “ differentiates us Although social networks are starting to dominate online time, accounting for half of page visits and 41% of time spent online according to a recent study by DCCI (Data Alex Miller, Renren Center of the Chinese Internet), online video should enjoy a more immediate lift from advertising, thanks to the medium’s similarity to TV, though social media adspend should also start to pick up over the next one to two years.
Despite the dynamism in China’s online ad market, there are still significant barriers hampering its growth, pointed out Alfonso de Dios, former Greater China head of media and communications for FMCG giant Procter & Gamble who is now running his own consultancy, Telos Media Works.
Both marketers and agencies are still wrestling with how to integrate consumer-centric brand-focused programs into the digital ecosystem, de Dios said. Social media in particular presents significant challenges to mass market brands who have to work out how best to engage with a huge customer base. Data reliability and integrity also remain important – a recent agency report claimed that up to up 70% of internet data in China is fraudulent.
Nonetheless, the emergence of new growth engines such as online video and social networks will continue to spur new growth. “The next few industries that invest online will be the FMCGs and the food and beverage companies,” de Dios said. “You will see more spending coming into the system.”
The next industry to “ invest online“ will be FMCGs
Alfonso de Dios, Telos Media Works
The Asia Media Summit 2011 | 5 India: New-Wave Media Conglomerates
India’s media sector has experienced change at an unprecedented pace and scale, compressing 50 years of media development into just 15, leaving little time for sustainable business models to find their footing in a fiercely competitive marketplace. There are encouraging signs the market is about to turn the corner however, enabling media companies to operate in a healthier environment in the future.
“It’s a market that’s been growing on all fronts at the same time,” said Haresh Chawla, group CEO of TV and internet conglomerate Network18. “That has created a lot of competitive pressure on the players but that compression will now give way to expansion.”
Indications of consumer willingness to accept higher prices as both the box office and mobile services emerge from an initial wave of price-driven competition should stand the media business in good stead too. Low consumer-based media revenues say more about India’s current regulatory regime and intense market competition than any reluctance to pay, Chawla argued. “As we’ve seen in other sectors, things eventually iron themselves out and you end up with a more sensible regime,” he added. “We’ve seen that in banking, in insurance, in telecoms. It will take a bit more time in media, because it is a little more sensitive and the government wants to play a larger role, but over the next four to five years you will see these things correcting themselves and the market truly becoming what it should become.”
A recent restructure is also positioning Network18 for future growth. Its TV distribution
business has been moved into its majority-owned TV18 Broadcast division, where the “ group expects more immediate growth, while the holding company now serves as a Compression will give stable for assets with longer-term revenue potential such as digital content, e-commerce “ way to expansion and home shopping. “Network18 is the company we are building out for let’s say five years hence, where you get the value of the internet market in India plus you get a hedge Haresh Chawla, Network18 from the television growth,” Chawla explained.
The group still carries some debt incurred from major forays into TV entertainment and online media during the 2008 global downturn, but Chawla expects planned disposals of non-core assets, such as a minority stake in travel portal Yatra, to reduce that leverage to a more comfortable level. “There are such stakes available which we plan to monetize, and keep our focus on the core internet, e-commerce and TV businesses,” he said.
Recent consolidation in Hindi entertainment, coupled with decreasing investor appetites to fund expensive new TV startups, allows existing players to focus more of their resources on longer-term growth, while long-awaited dividends from internet investments should become more visible in the next one to two years, Chawla added. Digital and e-commerce revenues are on course to become the second-biggest contributor to Network18’s top line this year, from being the smallest of the group’s four revenue sectors in 2010.
Nonetheless, Chawla expects media battles for market share rather than profits to continue for the foreseeable future. True market transformation remains some way off, anchored around two major tipping points: the mass digitization of TV, which will allow broadcasters to build out their channel portfolios into new languages and new genres; and mass adoption of online media, most likely through mobile phones, as bandwidth and infrastructure improves.
The internet makes up about 3% of ad spend in India, versus around 85% for TV and print, but online still accounts for 85% of the conversations advertisers have with their agencies, pointed out Punitha Arumugam, CEO of media agency group Madison Media. This reflects the potential of mobile, even though most of India’s 550 million mobile subscribers only use their phones today for voice and SMS. “But, we are expecting mobile to drive the internet revolution in India,” Arumugam added. “About 50% of search volumes on Google are coming from mobile handsets in India. As 3G, 4G get launched we are hoping there will be an explosion of the internet on mobile. The internet will become the medium of the future through the mobile handset.”
The Asia Media Summit 2011 | 6
The internet will become the Despite the plethora of media choices available, most marketing plans today are geared “ “ towards mass markets rather than targeted audiences, Arumugam explained, which medium of the future through is why five major media houses attract more than 40% of total ad spend. Single TV the mobile handset households predominate, and audience differences between one big channel and another only tend to skew an audience by no more than 10% of the total base. However, this is set Punitha Arumugam, Madison Media Group to change as local and regional advertising become more prominent over the next four to five years, an area Network18 is also looking to move into.
“The percentage contribution of local advertisers will increase, but you will also see a lot of large national players operating like local companies,” Arumugam said. “You can’t talk in one language to one billion people, you need to create content for local dialects. In a way 100% of revenue will come from local advertisers: a combination of advertisers that are genuinely local and a combination of MNCs setting up local operations where they create copy and content for local markets.”
The Asia Media Summit 2011 | 7 News: The Upside-Down World of News Economics
The increasing consumption of news through social media and mobile is forcing an evolution in the way news companies are approaching the business. In an age where people can read the day’s breaking headlines on Facebook or Twitter, news organizations have to evaluate the best use of their resources to deliver content and create multiple touchpoints for consumers.
“Quite rightly, there are lots of places you can go and get the news,” said Financial Times APAC head Angela Mackay. “You can get it unofficially from Twitters and blogs and whatever but what we’re trying to do is news edit what we think is going to be useful to our readership. We present that in print, online, on any device you like, and we’ll interpret it and we’ll get pros and cons.”
Offering differentiated news analysis is critical to the FT, which still provides breaking
You’ve got to keep news, a key motivator for journalists, but has built a content strategy around sought-after “ analyses and commentary. A recently launched brand campaign for FT.com is designed to “ investing in the highlight content outside of its main news such as podcasts and blogs, and drive up user big stories appetite for these products. News organizations as large as CNN would rather focus on owning the big stories – Angela Mackay, Financial Times global issues with global resonance – than breaking news. “You can’t be distinctive in the
market anymore by bringing the basic fundamentals to the game – the typicals of who, what, when, where, why and being the first. We’ve moved on from that,” said Ellana Lee, CNN International’s managing editor and VP for Asia-Pacific.
CNN made some business decisions some years ago to invest in original content at the expense of third-party content. Some of these investments are already paying off, such as a four-year-old investment in a production center in Abu Dhabi. CNN has also evolved from its traditional focus on TV, where viewership only spikes in the mornings and evenings. The network now has an array of complementary other platforms – such as recently acquired iPad news app Zite – that has led to more tapered consumer activity.
“We want to make sure that when we deliver the news, we bring our viewers into what we call our CNN ecosystem. So wherever you get your news – television, online, mobile, iPad – you gain the news from us, you can experience us in very different ways.”
Supporting these big initiatives can be financially draining however, and it is integral for the news organization to open up new sources of income. CNN’s new content platforms have opened up new opportunities for advertising, which together with distribution comprise its main revenue streams. Unlike the FT, it has no immediate plans to charge for online content however.
The FT, which now draws 55% of its revenue from non-advertising sources, has made investments in several online businesses over the last few years. It recently sidestepped Apple’s attempt to take a cut of its subscription revenues by launching a new kind of app created with HTML5, the latest version of the software used to make webpages, bypassing the need to go through an app store.
The FT’s subscription-driven business model also makes it less imperative to pursue mobile advertising despite the growing consumption of news on the go. However, it does
We want viewers sell integrated ad campaigns. “ “ to experience us in “If news keeps going the way it does, you’ve got to keep on increasing the investment different ways for big stories,” Mackay said. “It’s very, very draining on the pocketbook, and that’s why we’ve got to make as much money as we possibly can via advertising or through content Ellana Lee, CNN International to try and support those platforms.”
The Asia Media Summit 2011 | 8 Indonesia: The Rise of an Entertainment Powerhouse
Hary Tanoesoedibjo, MNC Group Indonesia’s media landscape has already been transformed by one dramatic change: the surging growth of the commercial TV sector from its origins just over 20 years ago to become a US$1.2 billion industry today. Now advertisers and media owners are preparing for another: the way the internet will revolutionize how both brands and consumers use media. It’s a medium-term development with far-reaching consequences but the pace of change remains a matter for debate.
Today there is only one source of cheap easily available entertainment for most Indonesians - free-to-air TV. In a country where the vast majority of households only have one TV set, free-to-air remains an indispensable platform to help brands build awareness. However, in a predominantly young country where 70% of the population is under 40, matters might be very different in five to ten years’ time, suggested Ram Subramaniam, CEO of one of Indonesia’s largest media agency networks, Mediabrands. Indonesia already has 40 million Facebook users, making it home to the second-biggest Facebook population in
the world, and increasingly the internet is becoming a platform for people in large cities,
especially the under 25s, to sound out the opinion of their peers before buying products and services. “ “ It’s doable but you need capital. A lot of capital. Hary Tanoesoedibjo, MNC Group
Furthermore, with one million new ad spots appearing on Indonesian TV over the past five years, the noise advertisers have to cut through is steadily getting louder. This further accentuates TV inflation. Mediabrands is increasingly recommending that advertisers pay more to secure the first or second slots in a break and improve the chances of viewers noticing their ads. Indonesia’s economic growth also adds to the commercial clutter, as new brands stream onto TV.
The Asia Media Summit 2011 | 9 As use and penetration of digital media grows, the medium’s potential for interactivity and engagement will make it an increasingly attractive addition to the media mix, Subramaniam argued. “Advertisers need to start balancing awareness levels and advocacy levels, and therefore mix their media in a slightly different proportion,” he said.
The potential impact of online should not be underestimated said Hary Tanoesoedibjo, CEO of Indonesia’s largest integrated media company, MNC Group. MNC has its own portal, Vivanews, and is planning to unveil online TV services to support its terrestrial channels within the next few months. Although internet advertising will grow, revenues will remain small for the foreseeable future when compared with TV. “Basically the business model is more television,” Hary said. “In Indonesia, if you talk about the best advertising platform, it’s still television today and I still see that in the next five years.”
Advertisers will continue to direct budgets to national TV, encouraging broadcasters to
develop more TV content. “Hopefully they will create other segments other than the 6pm
to 10pm segment, which is where most of the money is spent,” Subramaniam said. “But “ five years from now, I think digital is going to be huge, especially how to manage social Advertisers need to balance media.” The challenge and opportunity facing Indonesia’s large media conglomerates is “ awareness and advocacy how to leverage investments made for television across other platforms, he added.
Ram Subramaniam, Mediabrands Indonesia “The key point is to look at how you manage your content across platforms, which is where the investment in studios and other things come in,” Subramaniam said. “How do you take that investment from free-to-air TV to digital, to mobile? Today we’re not even counting the number of people who access internet from mobile phones. We don’t know.”
“What is important actually from the perspective of a media player like us is to focus on growing because we have the platform,” Hary said. “We have free-to-air television, we have pay-TV, we have our own satellite, it’s just growing our content business. That’s important.”
Pay-TV remains a costly operation that would be challenging to build without the backing that free-to-air revenues provide. With competition in free-to-air pushing up the quality of content in Indonesia’s lively free-to-air market, winning over eyeballs to pay-TV in a cost-effective way is particularly tough. “You need to have more channels, you’ve got to be exclusive and you also need other services,” Hary said. “That’s why we are going to migrate to Mpeg-4 to be able to provide HD and then VOD and others. We now offer more than 100 channels. It’s not easy but it’s doable. You need capital, a lot of capital.”
The Asia Media Summit 2011 | 10 The Philippines: Ad Dynamics in a Fast-Growing Market
A concerted push by telecoms giant PLDT to overturn a long-running media duopoly in the Philippines looks set to change the market in more ways than one. It has already added competitive pressures on core free-to-air ad revenues enjoyed by the country’s two leading broadcasters, ABS-CBN and GMA Network, though at the same time it has started opening up new dynamics around content development that will become the main media battlefield in the future.
“Traditional industry boundaries between television, cable and telco are going to disappear in the digital environment,” said ABS-CBN CEO Eugenio ‘Gabby’ Lopez. “There will be several new business models. The entry of a telco into the content space is forcing us to think very carefully about what those business models are going to be.”
ABS-CBN already runs one of the two most popular free-to-air channels in the Philippines, Channel 2, as well as the country’s leading pay-TV network, SkyCable, though Lopez is also pushing ahead with investments in additional distribution channels. Even though full digital switchover for terrestrial TV is not likely to happen for another decade, these include test broadcasts for digital terrestrial channels scheduled for launch next year, aimed at consumers who can’t afford pay-TV but still with enough spending power to attract advertisers.
This will result in some cannibalization of existing revenues, but overall the channels will increase ABS-CBN’s overall market share and market position in the face of increasing competition, Lopez said. “DTT is going to create a good value proposition for us to aggregate and create more fragmented markets that we can use to pitch to our advertisers,” he explained. “The 30-second spot approach is more and more going to be a thing of the past. You have to bundle it around all the various things you’re doing.”
Other digital initiatives from ABS-CBN include a move into online-only content with bespoke made-for-web episodes to complement prime-time TV show Imortal. The
webisodes have captured 10 million views to date. “Digital content doesn’t have to be a
zero sum game against traditional revenue streams,” Lopez said. “You can create digital “ content which is accretive, which enhances your traditional revenue stream, and then you Advertisers want to be offer a value proposition to an advertiser which is unique.” “ in their comfort zone In an ad market dominated by free-to-air TV, agencies and advertisers in the Philippines Venus Navalta, ZenithOptimedia Philippines welcomed last year’s rise of PLDT‘s challenger channel, TV5. The channel failed to make
The Asia Media Summit 2011 | 11 the desired impact however, as fragmented audiences and lower viewership still left the incumbent networks in a position where they could raise their rates. “In terms of efficiency it was very bad for the industry,” recalled Venus Navalta, chairman of ZenithOptimedia, one of the top-billing media agencies in the country. “It got us to think really, really hard how we should be doing media. We had to review media planning guidelines to see whether fighting noise with more noise was more effective.”
Price pressures have stabilized since then but the high-growth ad market in the Philippines remains a tough one for brands, where commercial breaks are among the longest in Asia and stations don’t offer CPRP (cost-per-rating-point) deals which allow agencies to plan more effectively. One answer is more impactful media plans such as a recent celebration of Nestlé’s 100 years in the Philippines, which used cable, cinema and online as well as free TV in a cross-platform deal with ABS-CBN. “That was a good marriage of the different platforms of ABS-CBN with Nestlé,” Navalta said. “But these projects are done way ahead of time and we planned this last year. On a weekly or monthly basis, integrating all the platforms would be more difficult.”
On the whole, advertisers in the Philippines remain risk-averse however, dampening the likelihood of dramatic changes in marketing strategy for the foreseeable future. “Even if you show them metrics that it was successful, there are still very few brave clients out there,” Navalta said. “They still want to be in their comfort zone, which is free TV.”
Consumer take-up of digital media may be more rapid however, Lopez argued. “I think “ the change that we’re going to see, and I’m paranoid about it, is not going to be a When a $100 tablet comes meandering linear line, it’s going to be a step function. I think when the tablet produced “ out of China, watch out out of China is $100, watch out. That’s going to change everything that we’re thinking about.” Eugenio Lopez III, ABS-CBN
The Asia Media Summit 2011 | 12 Korea: Fresh Horizons at Home and Abroad
CJ E&M, the result of a merger between Korean conglomerate CJ Group’s broadcast, movies, music and online gaming assets, already had a sizable international footprint when it first launched earlier this year. Music channel Mnet was on air in both the US and Japan, while an Asian version of its tvN (Total Variety Network) entertainment channel had been picked up by pay-TV operators in several Asian markets. Its parent wants more however, seeking to double CJ E&M’s revenues by 2015 while ramping up the contribution made by international revenues from around 10% today to somewhere between 30-40% over the same time.
Executives at CJ E&M are exploring several options to achieve this goal, looking at how they can leverage their existing international network in particular, both through CJ E&M and other sibling companies in the CJ Group as well as other companies they work with such as Fox International Channels, CJ’s JV partner for tvN Asia. “We want to leverage that knowledge and learn more about the market as we go, but sometimes we will test the waters by doing a block or just selling content,” explained Kenneth Kim, head of CJ E&M’s international business. “However, if we know it works and there’s a chance we can grab, then we’ll go strong.”
The most appealing short-term opportunities are expanding coverage in Japan, a large market where Mnet has limited coverage as a premium channel, as well as ramping up revenues in smaller markets such as Taiwan and Thailand, where CJ E&M already
has carriage deals for tvN Asia, as well as Indonesia, where current business is focused
on content sales. The group is also weighing up the merits of launching a radio station “ in Vietnam as a possible prelude to a TV channel, following the acquisition of a movie If it’s a good enough format, theater and distribution business there. “ we’ll pay for it CJ E&M also wants to develop its other business units, with movie production initiatives Kenneth Kim, CJ E&M in China and the US and plans to export online games from Korea. Its music business is especially attractive, offering additional revenue potential from live performances and digital content as well as from the Mnet channel, supported by the promise of reaching a bigger audience than other forms of Korean content. Last year’s Mnet Asia Music Awards, held in Macau, was broadcast in over 50 countries to about 1.5 million viewers, while this year’s event in Singapore is set to be even bigger. “K-pop is leading the way for the second generation of hallyu, or what we call Korean wave,” Kim said. “The first generation was Korean drama or K-drama, but K-pop crosses over into the western hemisphere as well.”
On the home front, CJ aims to build on its success with previously purchased formats such as Got Talent by creating a localized version of Saturday Night Live, amongst others. “If it’s a good enough format, we’ll pay for it, but put it in a way that works in our market,” Kim said. “We put in the right elements, where the viewers would participate and view it as a show that’s created locally.”
Meanwhile the imminent entry of Korea’s four biggest newspaper publishers into the domestic pay-TV market is also expected to make a big competitive impact at home. The publishers, licensed to launch general entertainment channels, are already busy poaching talent and sales people from other companies. “But there are opportunities for us here as well,” Kim said. “We may be able to sell content to these channels.”
The Asia Media Summit 2011 | 13 Sports: Rising Stakes, Rising Rewards
The dominance of key sports in different regions across Asia – cricket in South Asia, football in many Southeast Asian markets and baseball and basketball in East and North Asia – proved to be fertile territory for what Manu Sawhney, managing director at sports network ESPN Star Sports, calls the winner’s curse. It’s a phenomenon where the cost of the most popular properties are pushed so high that whoever succeeds in winning the bid is rewarded with an increasingly challenging task of making any money themselves. Demand is further heightened by sports’ appeal as a driver property for pay-TV, with operators willing to secure the most popular franchises as a loss leader to ramp up their own subscriber bases.
It’s a challenging time for sports channels in Asia, who need to become increasingly inventive about monetizing sports rights as well as attracting viewers, though there are signs that the most extreme market distortions are starting to soften. “The good part is there is a lot of traction building up for other sports, whether that’s golf, whether that’s tennis, whether that’s motorsports,” Sawhney said. “And we’re seeing a lot more audiences now becoming multi-sports fans. That’s the growth potential that exists.”
Sawhney is also building out both revenues and consumer stickiness around live sports with new platforms, including digital media such as broadband and mobile as well as free-to-air TV in certain markets to help recoup rights costs. At the same time, he is
developing more content beyond live games, including a sports news channel which has
started to gain good traction since launch last year. “ At the same time, new dynamics are starting to take shape. The popularity of new We’re seeing a lot more people faster-paced cricket formats such as the Indian Premier League already seems to have “ becoming multi-sports fans recalibrated demand around cricket, evidenced by softer demand around recent rights bids such as the Asia Cup. “There’s going to be a movement towards quality,” Sawhney Manu Sawhney, ESPN Star Sports said. “I don’t think all the 10 cricket boards are going to get the same kind of valuations they were able to get in the last cycle.”
Monetizing sports rights has become a tricky balancing act, deciding when to partner with major domestic players and when to go it alone, when to invest in digital and local language extras, and when to invest in securing rights and when to create original programming. “We just acquired rights to La Liga across 21 countries. We just acquired rights to Moto GP,” Sawhney said. “It’s going to be a very fine evaluation of how much content is enough, how do you supplement that with a lot of good quality original content, and how are you able to build that in terms of interactivity and engagement for consumers.”
The Asia Media Summit 2011 | 14 Consumers and Media: The Future of Television
From left: Emerging from a sustained spell of channel launches, the focus for regional TV broadcaster Fox International Channels (FIC) has started to shift. “We are still launching Ward Platt, Fox International Channels new channels, and in many cases local channels in some markets, but at the same time Rob Hughes, Mindshare we’re very focused on making the strong performing channels we have better,” said Ward Platt, FIC’s president for APAC and the Middle East. This includes investing in better content – including local content, better rights and earlier windows – as well as interactive services, including a planned multi-device authenticated service due to launch in Asia later this year. “Advertising is very important, but at the same time we want to provide increased value to benefit pay-TV operators who are facing challenges from new media,” Platt said. “The first thing is to support the pay-TV operators on that front. Then we can use that to enhance the attractiveness from an advertising side.”
Fox is chasing broader audiences for its channels, investing in localization and dedicated feeds to build ratings to a level where advertisers become interested. Ad growth has been especially buoyant in the Philippines for example, where four Fox channels have dedicated feeds. “That’s given us optimism to launch more dedicated feeds and that’s happening now going into the Indonesia market,” Platt said. “In a lot of places that other channels are still considering, we’re pretty aggressive pushing the envelope on that front.”
TV is set to remain an advertising powerhouse for the foreseeable future, but the rising cost of ad space has media planners thinking up more effective ways to use the medium by extending buzz around key programs and genres, increasingly working with media owners on bespoke digital content for brands. “We’re looking for the connections between paid media and the cost of that media, the owned assets which media owners can help with, and the earned part of the equation,” said Rob Hughes, global managing partner for media agency Mindshare. “We’re still in the early days of articulating that well.”
As long as TV is able to attract large niche audiences who are passionate about the programs they watch, the future of TV is likely to remain bright, Hughes added. “In a sense, audiences are getting cultural messaging which is programs and we’re delivering advertising messaging. What we need to do is start bringing those together.” Persuading marketers to move away from the familiarity of traditional TV metrics remains a challenge, though Hughes feels evolving economics around audience fragmentation and TV advertising will make such forays increasingly attractive. “The danger for advertisers is that they’re staying in a comfort level but missing out versus their competition, who are being more creative and testing in that space.”
The Asia Media Summit 2011 | 15 Financial Levers of the Future
From left: With hindsight, the investment by South African media company Naspers in China internet giant Tencent, then a fledgling company operating instant messaging services, stands out Tony Holt, Macquarie Capital Advisers as the best media deal made in Asia. After ten years, the stake in Tencent accounts for David Goldstein, Emtek Group around 70% of Naspers’ US$20 billion market cap. Other good deals are less obvious however, such as private equity investments in cable networks in Taiwan, where relatively Sander Hamersma, Barclays Capital low growth in the market masks the high returns investors can get by tapping local debt.
“When you speak to strategics about these kinds of private equity deals, it’s not immediately obvious why these deals are so great,” remarked Sander Hamersma, head of communications and media for investment bank Barclays Capital. “To understand the underlying returns on these assets, you have to understand how an LBO [leveraged buy- out] works. Without going into too much detail, you can buy an asset for a billion and sell it five years later for a billion, and make four times your money.”
Investors will become “ more discerning over “ the next 12 months
Tony Holt, Macquarie Capital Advisers
There’s no reason why private equity investors, and maybe in the future strategic investors as well, can’t continue to make investments like these in markets such as Taiwan and Korea where local bank debt is available, Hamersma added. Other attractive Asian opportunities include India’s fast-growing DTH sector, a capital-intensive business where only one of six players, Dish TV, has listed so far, growing its market cap from US$400 million to almost US$2 billion over the past four years. “I’d be pretty excited about any opportunity to invest in any of the other DTH platforms that may be a little bit behind Dish,” Hamersma said. “As a firm, we’re looking forward to spending quite a bit of time on that subsector in India.”
Investments in online media in China could also deliver mouthwatering returns over the next few years, in areas such as online video where there is potential for consolidation and scale, as well as e-commerce, which is starting to attract some big investors and big
The Asia Media Summit 2011 | 16 valuations. Despite an apparent cooling in the market, with some planned media IPOs put on hold, a backlog of about 170 China companies lined up to list abroad shows that the desire to access overseas markets hasn’t gone away. Going forward, investor sentiment will be tempered by a variable track record from China IPOs, as well as accounting scandals and concerns over China’s regulatory environment, particularly government scrutiny of VIE (variable interest entity) structures that non-Chinese investors use to gain access to the media market. However, these concerns are unlikely to take the shine off companies well positioned to capitalize on future trends, noted Tony Holt, an executive director for the telecommunications, media, entertainment and technology group within investment bank Macquarie Capital Advisers.
“The last 18 months were somewhat of a mixed bag in terms of quality, but leadership positions - whether in social media, in e-commerce, in video - will still be extraordinarily
The next challenge is attractive propositions to the capital market,” Holt said. “However, I think you’re going to “ find a more discerning approach amongst the investor community, certainly for the next six “ maintaining growth and to twelve months. There’s a mixture of reasons for that, accounting-related issues or issues profitability related to VIE structures, but the overriding concern is the mixture of quality. The leadership will clearly rise, and still be able to access capital markets in a very attractive way.”
David Goldstein, Emtek Group It’s not immediately “ “ obvious why these deals are so great
Sander Hamersma, Barclays Capital
Another high-growth market grabbing the headlines of late is Indonesia, although the road leading to these rewards has been a long one, noted David Goldstein, COO of local entertainment, content and technology group Emtek. “Now everything has come together; the growth is there,” Goldstein said. “We’re looking to launch pay-TV this month and we’ve finally closed the deal for a second free-to-air station. You wonder what the next challenge is, and it’s a bigger challenge of maintaining growth and maintaining profitability.”
Market consolidation, where three groups now control around 80% of TV viewing in Indonesia, has triggered new competitive dynamics around producing and owning content, as well as controlling talent and alternative pipes for distribution, including online and pay-TV channels. “You’re going to see a very healthy performance from us and you’re seeing a healthy performance from all the media players,” Goldstein said. “We’re a pure proxy for the consumer industry. If you believe in the discretionary spend of Indonesia, you have to believe in the media industry of Indonesia.”
The Asia Media Summit 2011 | 17 About us
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The Asia Media Summit 2011 | 18