Rohana Rozhan

This interview originally appeared in the MIPCOM 2013 issue of TV Asia Pacific.

Malaysia’s dominant pay-TV platform with a 50-plus penetration rate of TV homes, Astro is widely seen as Southeast Asia’s most technologically savvy operator. Over the past year the company has been rolling out high definition, DVRs and multiscreen capabilities to its customers while also investing in a host of local content. Rohana Rozhan, the CEO of Astro Malaysia, talks to TV Asia Pacific about innovation, driving pay-TV take-up and average revenue per user (ARPU) and offering flexible subscription packs to customers.

TV ASIA PACIFIC: Astro was one of the first pay-TV platforms in Asia to begin implementing a TV Everywhere strategy. Tell me about how you've transitioned your business so that you can deliver services like HD, DVRs and on-the-go access.
ROZHAN: We are still predominantly a DTH delivery company. That has, till today, put us in the best position within the Malaysian landscape. Using the satellite delivery technology, we are the only player in town who can actually reach the 6.7 million households within Malaysia. Malaysia is a very young country. The average age for the 30 million Malaysian people is about 26. We foresee that over the next five years, the number of households will grow from 6.7 million to 7.7 million. That gives us a good framework to continue to grow our customer base.

But, a couple of years ago we realized that while the satellite delivery technology is our key competitive strength, we needed to supplement and complement it with other technologies. There is a continuing hunger for bandwidth, there is the need for mobility and an increasing need for personalization. We did not have HD, we did not have PVR capabilities. We had to take a very committed decision to transition to the Astro B.yond platform, where the set-top box can continue to receive linear services through the satellite, and at the same time it can be IP connected or broadband connected. It can also deliver over-the-top service within the household. It was a big commitment for us to make. We were the market leader, but we had to reinvest in our technology so that when competition comes into play, our customers will still feel that we're relevant and we're positioned to give them choice and experience. We've had to go into everyone's homes and swap out their existing boxes. Each of those swap-outs costs about RM650 ($200), of which about RM350 ($108) is the cost of the hardware and the balance is the sales and installation cost. We have over 3 million customers we have to do it for. We're progressing really well in that swap-out exercise.

TV ASIA PACIFIC: And those enhancements have helped increase your ARPU?
ROZHAN: A couple of years ago, for every new customer we'd add of a lower ARPU, our average ARPU would go down. But now, while we are growing our customer base really strongly, our ARPU continues to go up. We have a very segmented approach to selling and marketing our services. When we swap out the [old] boxes, we go to the high net worth customers first and these people will have the propensity to want to buy the HD, PVR, broadband, video on demand, over-the-top and on-the-go services. It is extremely encouraging take up. As of April this year, of all the swapped-out boxes, about 64 percent are taking our HD services (60 percent are on the Superpack subscription and 40 percent pay RM20 ($6) per month) and about 350,000 customers are now taking PVR services. Superpack bundles are packaged by language segment, so there are bundles for the Malays, the Chinese, the international audience, the Indian audiences. We amalgamate the right service offerings, the HD functionality and the PVR functionality. That has been a phenomenal success. Just under 800,000 of our customers are taking a Superpack. The customer sees value, we see increased ARPU. Psychologically the customer adds up all the individual packages and the PVR and the HD and they come up to a big number. The Superpacks give them discounts on that total. They don't mind spending more if they see value in it. It's that kind of marketing that is doing really well. Our Astro First proposition of local movies being made available two weeks post cinema release has also been very successful with almost 6 million buys to date. We just recently launched Astro On-the-Go commercially and we've already received more than 500,000 downloads of the app. People can watch the channels they subscribe to in their living room anywhere they go within Malaysia. We have launched this overseas as well. Those are all the initiatives we have taken [to increase ARPU]. We are starting to see people take up all the services that we never had before.

TV ASIA PACIFIC: What does innovation mean for Astro, and how do you stay ahead of the technology curve?
ROZHAN: We try to be quite simple in our approach. We're about consumers, i.e. knowing them better and bringing them the right content proposition. We use best-in-class technology to do so. But first and foremost we are a content company. We're very different from some of the other pay-TV companies who are simply aggregators and distributors of channels. We create our own IP, so we're a true content company. We've got more than 170 channels—71 of them are local and these are the channels that underpin four out of every five hours of a customer's daily viewing.

If you think about our approach to innovation, we don't innovate for the sake of innovation. We look at the consumer, how they consume content and what they want more of, and then we use technology and creativity to provide that. In technology for instance, satellite delivery alone, although it is the most efficient, cost-effective way, once you have scale, to deliver content to the homes, has to be supplemented and complemented in order to keep your value proposition whole for the customers. That's why we need to also be a provider of broadband, we need to meet their needs to have content on their mobile devices, wherever they are. In content, innovation includes creating IP that not only resonates with mass audiences but also fills a market gap. Innovation includes the ability to understand consumers better, [that] enable us to provide a relevant value and experience proposition.

We try to embrace innovation in our everyday life in pursuit of serving our customers better.

TV ASIA PACIFIC: How do you balance being financially prudent while also delivering the best sports coverage to your customers?
ROZHAN: There's no easy answer. Sports prices are escalating every time there's a renewal. Astro is quite lucky in a few ways. Today we have 96-percent market share in Malaysian pay TV. We've got 3.6 million customers. And half of them are our sports customers. So we have the right scale. Whatever the price is on a per-unit basis, we'll be the most cost-effective provider of content. We're also the largest platform in Southeast Asia, which gives us some leverage. Our approach to sports, frankly, is no different to other content. We are about profitably packaging choice, value and experience for our customers, understanding what would truly differentiate us against alternatives in the marketplace. Today Astro is the destination for sports for all Malaysians. We have 14 international, regional and local sports channels, which can be viewed at home and over any device, anywhere, including for live content. We are producer, aggregator and distributor, so where it makes sense commercially we enter into carriage agreements for some our sports channels [with other platforms], or collaborate on sports rights.

TV ASIA PACIFIC: Many platforms worldwide are worried about over-the-top television providers siphoning off pay-TV customers. Is that a concern for Astro?
ROZHAN: Our core strength is that we have had a business for 17 years and we've built a relationship with 3.6 million households. It's four to five individuals in each household. Each one of them wants a different subset of content as part of that whole subscription to consume individually and on their personal devices. If you are a Superpack customer, for instance, we will enable two of your devices to watch any of the content you subscribe to in the main living room, anywhere in the household or outside the household, for free. If you want two more devices, knowing that a household is typically four or five people, it will cost you RM25 ($7). For that customer it becomes a good value proposition. It's not a new relationship, it's not a transactional in-and-out relationship, it's a continuous relationship that we build on and we provide value for. When we do this the household consumption of content actually grows.

TV ASIA PACIFIC: What are your main areas of focus for the next year?
ROZHAN:  [Our recent financial results showed] double-digit growth, and I don't see any reason why we don't maintain that. We will see growth coming from three things primarily: one is customer numbers. Second is ARPU, and that's a very segmented, targeted approach where the top-end customers will be our dream customers, taking not only the Superpacks but also broadband as well as the on-the-go as well as buying VOD titles from us. The mid customers will be those taking the Value packs and the lower-level broadband, etc. And then the new customers are coming in at the RM70 ($22) [per month subscription]. On a blended basis, our ARPU is trending upwards nicely. We hope for that to continue. The third element is advertising expenditure. Last year we outstripped the market—we grew at 9 percent while the market grew at 5 percent. This quarter's numbers are looking even better. There are three reasons for that. One is we're getting more customers on our service, so we're becoming more and more relevant to advertisers. Second is our own IP, which we create and produce ourselves and is exclusive to us. It is resonating extremely well with the consumer, generating viewership at about the 1 million mark, which by Malaysia's standards means it's almost at the same level as free to air. And the third element is the fact that Malaysia is still quite unique in the sense that print still has the bulk of advertising dollars, about 55 percent. The trend is [that is decreasing] and it's going to the pay-TV area. We've also got complementary media assets—TV, radio, publications, online—so we're able to bundle a very compelling proposition to media buyers.