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Analysis

Pay TV: A part of industry shake-up

THE ARRIVAL of 24 commercial digital television stations is shaping and shaking the broadcasting industry across the board, and the Bt5-billion pay-TV business is no exception.

Advertising revenue via cable and satellite TV, including pay TV, is likely to shift to the new digital terrestrial channels, while local content producers are also turning their focus towards these new channels.

The Media Agency Association of Thailand says that by end of this year, advertising spending via cable and satellite TV will be slashed to Bt8.1 billion from Bt13.21 billion last year partly because of the birth of terrestrial-based digital television.

And Pathamawan Sathaporn, managing director of Mindshare, a media-investment company, said the pay-TV business would face difficulties in terms of both advertising revenue and subscribers, as had been seen during the transformation from analog to digital TV in many countries. Good content is likely to be produced for the new digital stations in order to attract audiences, while people will have more choice in free-to-air programming.

This trend seemed to become clearer after the third-largest pay-TV operator, CTH, announced a business partnership with GMM Grammy. , which signed an agreement on disposal of all its shares in GMM B, a pay-TV subsidiary of GMM Grammy, to CTH LCO.

CTH LCO will hold 100 per cent of GMM B shares while GMM Grammy holds 10 per cent of CTH. However, CTH will still be the main company operating its own pay-TV business and that of GMM B, commonly known as GMM Z Pay-TV.

For the past two years, GMM Z Pay-TV has seen the fastest growth in terms of subscribers and has become the country's second-largest subscription-based TV operator, with 180,000 subscribers of 2.5 million boxes, behind the market leader TrueVisions has about 500,000 premium subscribers and 2 million boxes.

Win-win deal

This deal appears to a win-win situation between the two.

Premon Pinskul, chief financial officer of GMM Grammy, said the company would benefit from cutting its pay-TV service under GMM B, which suffered a loss last year of about Bt1 billion. Having shares in CTH, the company would be able to earn indirect revenue from this pay-TV service.

Premon added that by leaving behind the intense competition in the pay-TV business, GMM Grammy would be able to manage its costs and resources more effectively for its two digital terrestrial TV channels - One HD and GMM Channel.

In addition to cost management, GMM Grammy, which is one of biggest clients of Thaicom with six satellite transponders, will share some of its slots, particularly in the C-band, with CTH to carry some exclusive content to a wider audience.

Premon added that his company was planning to close some satellite TV channels such as Fan TV, Green Channel and Act Channel, and it will integrate the resources into GMM Channel, a variety digital channel in standard definition.

By creating a deeper relationship with GMM Grammy, Chirdsak Kukiattinun, chairman of the executive committee at CTH, suggested that his company would gain a bigger customer base, totallingand a satellite TV platform beaming to more than 3.7 million viewers (2.7 million GMM Z boxes and 1 million CTH boxes). CTH's subscription base will be 1.28 million, including GMM Z subscribers.

Under this partnership, CTH will combine the strengths of the two companies in terms of content such as sports and entertainment. It will also be able to share the cost of acquiring new foreign content in the future.

CTH appears to be a cursed winner after spending billions of baht early last year to secure the broadcasting rights to the English Premier League (EPL) in Thailand, Cambodia and Laos for three seasons. Its financial results last year showed that CTH still suffered more than a Bt4-billion loss on just Bt730 million in revenue.

However, Chirdsak still believes that the merger will help the company have a greater marketing impact and reach about 5 million households by next year.

Besides bearing high costs for sports content, another challenge for CTH is that leading TV producers such as TV Burapha, Bang-Or and Sinchareon Brothers, which used to supply content for CTH, have turned to the digital terrestrial channels.

Chanawat Vachanonda, CTH senior vice president and chief programming and production officer, told The Nation that he acknowledged that those producers had stopped operating with CTH but said they would continue to create special projects for the company.

After losing the EPL, TrueVisions said it was happy with its base of about 500,000 premium customers and suffered very small churn rates of EPL fans to its rival.


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