Digital terrestrial TV (DTT), a game-changing distribution platform set to reshape media economics across Southeast Asia, has arrived in Thailand.
Last December’s auction of 24 DTT licences, for an eye-watering US$1.6 billion, has allowed some of the Kingdom’s biggest and best-known businesses to enter a US$1.4 billion TV ad market long dominated by Channel 3 (run by BEC World) and Channel 7 (run by Bangkok Broadcasting).
It’s a high-stakes arena requiring heavy spend on content, especially for those without a library or existing TV infrastructure to fall back on.
One TV newcomer is Thai Rath, Thailand’s biggest newspaper, which has launched an entertainment channel after winning an HD DTT license.
“It’s the biggest investment in our history, with the total project costing around six billion baht [US$188 million],” says Vachara Vacharaphol, CEO of Thai Rath’s TV arm, Triple V Broadcast. “Before we stepped into this business, we were studying the market for about two years. We’ve come in with a clear picture of where we want to go, and where we want to be.”
It’s an integral part of a long-term business reorientation for Thai Rath, as print revenues slowly but inevitably weaken. Triple V works alongside Trend VG3, a smaller but older division geared to monetizing online media, but television – via DTT – offers Thai Rath larger and more immediate returns for the foreseeable future.
Nonetheless, the foray takes the 50-year-old newspaper into unfamiliar territory, where it faces experienced incumbents. Terrestrial frontrunners Channel 3 and Channel 7, as well as third-placed Channel 9, also secured variety licences, as did leading production companies such as GMM Grammy, RS and Workpoint Entertainment.
Kids, News And variety
In all, opening up the DTT spectrum paved the way for 24 commercial channels: 14 focused on variety (seven HD licences, and seven for SD), as well as seven news offerings, plus three channels for kids.
Licensing rules set DTT’s launch date soon after auction to discourage companies from sitting on frequencies, leaving winners little time to finalize content deals before going to air.
Channels that fared best in the initial few weeks were those that had already launched on free satellite or cable. DTT, which must be carried on all distribution platforms with a goal of national coverage within two years, helped accelerate coverage.
Vachara is cautious, anticipating Triple V to incur losses for up to seven years. Thai Rath has assembled a formidable in-house TV operation staffed by more than 500 people, helping it weather short-term spikes in content and talent costs as dozens of new channels launch in tandem.
Thai Rath also benefits from a readymade marketing platform, Thailand’s most widely read daily, to help it persuade people to tune in.
Nonetheless, deep pockets are crucial. “It will be rough for the first three years, then start to pick up,” Vachara says. “The old analog channels still hold licenses for another five to six years. In year six and seven there will be no analog. That will be the game-changer.”
For the moment however, Thai viewers tend to be more confused than excited by the prospect of extra channels to watch. Most new DTT offerings, pursuing the same mass-market audiences, are still tweaking programming and channel positioning, a process likely to continue for much of the year.
“Stations say they will fully program schedules around Q3 and Q4,” observes Rathakorn Surbsuk, trading partner for media buyer GroupM. “They don’t want to make big decisions too quickly.”
Most Thai households already have a wide selection of channels, Rathakorn adds. About 14.5 million of the country’s 23 million TV homes watch via free satellite. A further 6.5 million subscribe to pay-TV, mostly to cheap packages provided by local cable networks.
While DTT has triggered some shifts in daytime viewing, for millions of homes another two dozen channels looks like more of the same. Effective marketing will be key to take viewing and ad share from terrestrial incumbents.
Commercially, DTT channels had a tough start too, with civic unrest prompting marketers to rein in ad plans earlier in the year, while largely spending on channels they know. Ad campaigns are set to pick up following the army take-over, which helped stabilize markets and restart stalled infrastructure plans.
However, an army implemented regulatory overhaul added uncertainty to DTT’s future rollout, unnerving some new entrants. Speedy national coverage is key for DTT channels, banking on a greater share of advertising to recoup hefty investments in content.
For established players however, market uncertainty could be a boon. Production company RS, which is doing well with its DTT offering Channel 8, wants to build on its lead by reinvesting revenue in more differentiated shows.
“That expensive content should enable you to improve ratings further,” explains COO Pornpan Techarungchaikul. “It’s like an upward spiral. The sooner you are in the game, the sooner you get successful, the better.”
RS, which has been operating in Thailand for more than two decades, made its first move into the TV channel business four years ago, launching Channel 8 on free satellite on the back of heavy spend on content. The shows are popular with audiences outside Bangkok, a key segment for advertisers, helping move Channel 8 into the black last year.
RS will continue to run another entertainment offering, Channel 2, plus music channels Saibaidee and You, on free satellite. Free satellite has been classified as a pay channel by the military government, limiting the time that can be sold to advertisers, even if channels are still provided for free.
In Thailand, pay channels can sell up to six minutes per hour, or five minutes on average across the day, half the allowance of terrestrial, including DTT. Pornpan feels freesat channels will become more targeted, as the battle for mass audiences shifts to DTT.
In the meantime, Channel 8 will diversify its offering, adding news content, a new venture for RS, plus sports programming, possibly boxing, next year. The company had previously tried to monetize football through subscriptions, buying rights for Spain’s La Liga and the Fifa World Cup – a similar strategy to Grammy, which had launched its own pay-TV platform. Both are now refocusing on free.
PAY-TV UNDER Siege
In a market where direct competition between free and pay-TV is rising, free seems to have the upper hand, with free satellite and now DTT acting as a magnet for content and investment.
The country’s largest pay-TV operator TrueVisions, which also has a DTT license as well as a free satellite offering, has struggled to grow its pay base and maintain Arpu. True offers a good spread of international channels in HD for upscale subs but more Thai content could drive the next wave of growth.
Local studios are running at full tilt to support DTT, however. The chances of much more domestic fare going pay anytime soon look slim.
Meanwhile, attempts by aspiring MSO CTH to consolidate Thailand’s fragmented cable market have faltered, while new pay-TV platforms, such as from Grammy, have also failed to gain traction.
Long-term, there won’t be enough ad dollars to support all the new DTT channels. The market is in flux however, with rare opportunity opening up in free TV, and that’s where attention is focused for now.
Thailand’s leading freesat operator PSI, well placed to evolve into a pay-TV platform in the future, is also looking at HD to drive growth. The company has sold around 12 million SD boxes, and needs to give homes a reason to upgrade to sustain long-term sales, aiming to double its HD offering from 10 to 20 channels by the end of the year.
PSI already has tie-ups across many local channel and content providers, including paywalled offerings for premium football rights. The next step is more international channels, says MD Worasit Lee. The success of kids channel Boomerang from Turner, rapidly climbing to become Thailand’s most popular cabsat channel within months of launch, has energized interest in Thailand’s free TV market among players more comfortable in pay.
“It will be a huge market,” Worasit says. “We can prove we have at least 12 million boxes ready to watch their channel. Boomerang expected they could talk about ad rates after six months, but after three months they became number one.”
Turner is also looking to strengthen its footprint in both the free and pay segments in Thailand, expanding coverage for its kids channels ahead of the launch of a theme park later this year, while ramping up in entertainment, with Warner TV currently carried on CTH.
“We are keeping our options very open,” says Turner International’s APAC president Ricky Ow.
“It’s a market that really loves to watch drama series and movies in Thai,” Ow adds. “Local production standards are also very good, and some content travels very well outside Thailand, especially horror and humor. I see a lot of opportunity in this area.”
This article first appeared in Media Business Asia magazine, Q2 2014.