Fox Networks Group has exited its remaining exclusive channel deals in Malaysia, repositioning Southeast Asia’s largest regional broadcaster for broadband-oriented growth in Southeast Asia’s largest pay-TV market. The move echoes broader trends unfolding across the media and entertainment landscape.

An expanded relationship. In early Feb., Fox brought over ten more of its channels to Unifi TV, Telekom Malaysia’s IPTV platform, effectively completing a process that began in late 2016 when Fox’s sports channels became non-exclusive in the market. Unifi TV is the new name for HyppTV, rebranded by Telekom Malaysia (TM) in Jan. as part of a convergence push that unites the telco’s fixed, mobile and pay-TV businesses under a common identity. This latest deal with Fox includes cornerstone brands providing US early window film (Fox Movies, Fox Action Movies) and entertainment (Fox, Fox Life, FX) content, as well as factual (NatGeo, NatGeo Wild) and other programming that had been exclusive to Astro, Malaysia’s dominant pay-TV platform. Fox now distributes 20 linear channels through Unifi TV, compared with 15 on Astro.

The contract leaves Hong Kong as the only territory in Southeast Asia, Hong Kong and Taiwan where Fox has exclusive channel distribution, although that arrangement could also end soon, signalling the start of a new chapter in Fox’s Asian story. The broadcaster’s new footprint in Malaysia also sets the tone for future working relationships and growth trajectories across the market, with other major pay-TV contracts coming up for renewal this year.

At the same time, the move reflects evolving growth strategies from Malaysia’s incumbent pay-TV providers. Market leader Astro wants to broaden its reach by diversifying outside pay-TV while TM, far behind Astro in pay-TV, is consolidating its consumer proposition around broadband services.

Deal details. Unifi TV will provide all Fox channels to its subs on a trial basis until March 31. Subsequent tiering and packaging details will be announced by TM in due course, as part of its go-to-market plans for Unifi. The latest deal focuses on Fox’s linear channels and excludes Fox+, the broadcaster’s SVOD offering which has been offered to both pay-TV and broadband customers via telco deals in Hong Kong, the Philippines, Singapore and Taiwan.

A Challenging Marketplace

In common with other regional pay-TV broadcasters, Fox is banking on future revenue growth across Southeast Asia from bundled broadband and entertainment services, as streaming services reset consumer expectations around viewing options and delivery. Fox executives also believe they can eke out more from the existing ecosystem by emphasizing early window movies and live sports, two areas where pay-TV can still differentiate from online-only services. The company set up a new marketing unit two years ago to work with local distribution partners on areas such as subscriber acquisition and retention.

However, they will have to battle some challenging headwinds in Malaysia, where the pay-TV subs base has eroded over the last two years as economic growth slowed. Analysts from MPA project a modest pick-up in subs but one that still lags household expansion, with pay-TV penetration falling back below 50% of TV homes over the next one to two years. The growth story around pay-TV Arpu – the second-highest in Southeast Asia, Hong Kong and Taiwan (after Singapore) – is rosier, much of it anchored to price increases by Astro for premium entertainment and sports.

Malaysia’s broadband sector, meanwhile, is facing growth challenges of its own. Fixed broadband penetration, which lags pay-TV penetration, is expanding slowly, although existing subs are upgrading to high-speed fiber networks at a robust pace. Mobile broadband penetration also seems to be plateauing, at about 63% of the population for the foreseeable future, as operators engage in a costly price war.

For full analysis with charts and tables, please contact Lavina Bhojwani, VP, Client Services, Media Partners Asia