Digest Facts of the Malaysian Creative Industry

By Johan Ishak

www.kopihangtuah.blogspot.com

RESEARCH is an important element of any business. Research provides a clear vision of the industry that helps us strategise what we need to do now, or in the future, in response to, or in anticipation of, the current state of affairs, or some projected future possible scenario, for a given business venture, within the limitations of our scarce resources, regulatory landscape as well as technological disruptions. Notice how many commas are there in that sentence? This demonstrates how important research is as a component to the overall mechanism of a business venture. As how the Malays would put it, “Pergi merisik dulu sebelum melamar!” which means, “Recce first before proceeding”.

What sort of facts do we pursue to uncover from our research efforts? There are many aspects really. The professors in the universities have put it quite correctly when they preach about S.W.O.T Analysis, BCG Matrix, Maslow’s Hierarchy and 5 Forces Model. All these models are not merely academic. They are quite practical actually. We should research to find out what our strengths are, our inherent weaknesses, the opportunities in the market as well as emerging threats. We should know which products are with high growth requiring intense capital and which ones are already steadily generating cash with low capital requirements. We should know the needs of our audiences and what excites them. We should coordinate the relationships of the various inputs and outputs coming from or going to suppliers, customers, employees, regulators and competitors. These are all critical aspects. These are the bases of what governs our “gut feel” and not simply plugging ideas.

In the recent years we have seen so many industries meeting their death prematurely because they lack research that could have provided them with facts that are relevant for them to make critical business decisions. Kodak is a perfect example. Nobody could have imagined the death of the camera film industry in 2000, but yet, it eventually hit us when the digital camera spread across the world. In fact, Kodak was the inventor of the digital camera. They used Kodak to snap the first photograph of the planet Earth from the moon. Despite being the inventor of digital camera, they remained focused in their film business that had provided them 95% of their revenues. In the end, Kodak failed to realise consumers’ preference and their propensity to adapt new technologies. Kodak then had to file for bankruptcy.

Let us analyse a particular industry globally. Let us take filming as a start. The global box office for all films released in each country around the world reached USD36.4 billion in 2014, up 1% over 2013’s total. The growth was driven primarily by the Asia Pacific region (+12%). Chinese box office (USD4.8 billion) alone had increased by 34% in 2014, becoming the first international market to exceed USD4 billion in box office. Cinema screens increased by 6% worldwide in 2014 to over 142,000, due in large part to continued double digit growth in the Asia Pacific region (+15%). Over 90% of the world’s cinema screens are now digital. However, admissions, or tickets sold was at 1.27 billion with average tickets sold per person per screen of 3.7 which meant, a decline of 6% from 2013. This was compensated by increase in the average cinema ticket price by 4 cents that is less than the rate of inflation in the Asian economy. What does this suggest from the pure Demand and Supply explanation? Are we experiencing a glut?

PricewaterhouseCoopers’ Global Entertainment and Media Outlook research paper suggests that new multiplexes are driving admissions particularly in China. In China, it is expected that there will be 60,000 screens by 2020,more than 6 times the 2012 total, which will then drive box office spending in China by more than 20% compounded annually from2012 to 2020. Global box office spending is projected to grow at a 6.3% compound annual rate, while home video will be relatively flat, averaging only 0.5% growth compounded annually. Overall spending on film entertainment will rise at a 3.1% compound annual rate to USD100 billion by 2020 from USD85 billion in 2012.

In the past years, prior to the excellent performances of titles such as Polis Evo (1 and 2), The Journey, Khurafat, Munafik (1 and 2), Paskal and the Hantu Kak Limah series (together referred to as the “Malaysian Box Office Game Changer”), the Malaysian film industry did see an increase in cinema admissions from 50 million to 70 million garnering an increased gross collection from RM500 million to RM700 million per annum. This is on the back of the increase in cinemas from 100 to 140 giving an increase in screens from 600 to 800. The numbers of seats had also increase from 100,000 to 150,000. When analysed from local content supply perspective, the number of local films had increased from 50 titles a year to 80 titles a year with an increased average production cost from RM70 million per year to RM100 million per year.

Despite the increase in the number of titles, the number of admission for local films had decreased from 13 million to 6 million per annum resulting in the reduction in gross takings from RM120 million to RM70 million. This means the overall increase in admissions and collections were due to foreign titles such as those from Hollywood. The local film industry essentially consists of the Malay film industry that produces largely for the local Malay market. In recent years, however, a more Malaysian outlook has evolved with the emergence of a group of independent film makers whose low-budget productions are targeted at a wider international audience. Hence, the production of local movies has doubled whilst a noticeable decline in the average production costs by about 5.5% from RM1.3 million to RM1.2 million.

Local films face stiff competition from imported films. Hollywood films continues to dominate the local cinema industry holding a market share of over 66% every year. Tamil and Chinese movies also saw some growth during this period. In 2014, a basic survey was done on the profile of Hollywood movies. The top five grossing films in 2014 was used as a test case, namely, Guardians Of The Galaxy, Captain America: The Winter Solider, The Lego Movie, Transformers: Age of Extinction and The Hunger Games: Mockingjay Part 1. The first 4 movies attracted majority male audiences. The Hunger Games: Mockingjay Part 1 showed the strongest female attendance of the top 5 films, with 57% of box office revenue coming from women. Transformers Age of Extinction drew the most ethnically diverse audience: 38% are Caucasian; 22% are African-American; 26% are Hispanic; and 14% are Asian and other ethnicity. Similar studies should be done in Malaysia in order to gauge the market’s taste.

The local film industry also faces competition from the advent of home videos and Video onDemand (VOD) on the internet or illegal pirated android boxes. In addition, as mentioned earlier, box office collection from local movies had declined despite the gradual increase in the number of local Malay films produced and released in the market. Of course these were all before the so called “Malaysian Box Office Game Changer”. Our hope is that more of these “Malaysian Box Office Game Changer” titles can and will be produced in the future shifting the viewers’ attention from Hollywood to Malaysian titles.

In one of Malaysia’s growth regions, Iskandar Malaysia in Johor (adjacent to Singapore), Khazanah Nasional Berhad (the Government of Malaysia's strategic investment fund) and Pinewood Shepperton PLC have opened a USD120 million studio complex boosting its regional status as an international film production hub. The creative sector surrounding Pinewood Iskandar Malaysia Studios is expected to lead to spin-off investments of USD323 million and create 8,000 jobs over the years to come, as well as boost the local film entertainment market. Has this effort bear any fruits yet? So far, other than the famous Marco Polo television series, we have not yet heard any further success stories. Presumably such investment will require other incentives to help boost its usefulness. Amongst others is the Film in Malaysia Incentive (‘FIMI’) by Film Nasional (‘FINAS’). If FIMI is not enhanced to attract both local and foreign producers to use Pinewood Iskandar Malaysia Studios, then we may be facing another white elephant potential. The Malaysian Government must, without delay, create proper mandate and affirmative actions for the industry to kick start its engine vis-a-vis huge investments that have been made in the past.

To be fair, the Malaysian Government, via its Ministry of Communication and Multimedia, has developed many incentives for content development specifically for film, television and other projects. It is anticipated that these incentives will encourage production activities and increase local skill sets to match those of international standards throughout the creative content industry. FIMI is expected to give up to 30% cash rebate on all Qualifying Malaysian Production Expenditure (‘QMPE’) incurred by both local and foreign producers. The scheme kicked off on 1 February 2013 and includes both production and post-production activities. It is good that Malaysia has started this, but like any efforts, the output needs to be measured against the input and a conclusion derived on its effectiveness and efficiency, particularly when it uses the tax payers’ money.

Let us look at the global home video trend. According to a research done by PricewaterhouseCoopers LLP and Wilkofsky Gruen Associates, in 2007, physical home video (i.e. VHS or DVD) used to garner USD50 billion revenues as opposed to less than a billion USD for digital home video. Now, with the growing demand for on-line streaming services, the position has switched. Digital home video platforms are garnering billions of revenues now with the physical method plunging 6 feet under with a tombstone on it. Obsolescence is the new disease now. Along with most of the rest of the region, the Malaysian home video market has seen a decline too.

With piracy as a concern for the region, much content makes its way onto the internet less than 24 hours after release. Thus, piracy remains one of videos biggest competitors, albeit its illegitimacy. Retail piracy in kiosks and malls, including pirated movies claiming to be in Blu-ray format, has notably cut into potential home video revenues. In fact, Blu-ray format has probably been sent 6 feet under as well. A team of Intellectual Property officers from Media Prima Berhad recently took a proactive (or rather reactive) action in pulling down hundreds of pirated on-line sites with the help of the Malaysian Ministry of Communication and Multimedia as well as the Malaysian Ministry of Domestic Trade and Consumerism. The sites that were pulled down are believed to have garnered up to 40 million to 60 million on-line views per month. This is a huge number equivalent to 50% of the views reached by the number 1 YouTube account in Malaysia, i.e. TV3Malaysia.

Let us move on to television (‘TV’) now since the physical home video method has now reside in the graveyard. There are currently 8 national, Free-to-Air (‘FTA’) terrestrial TV channels in Malaysia and two national pay subscription TV services. In addition, a 24-hour TV was introduced in Malaysia in 1989 (‘TV1’). Currently, analogue is the most widespread TV delivery standard in Malaysia. Analogue terrestrial transmissions have been scheduled to be switched off in phases as part of a digital switchover, expected to be completed in quarter 3 or 4 of 2019. The frequency of these digital switchovers has mostly been delayed to avoid signal jamming with TV stations in Thailand as well as Indonesia. In any case, we will not go too detail into the digital TV platform now as that will require a fresh train of thoughts. Let us concentrate on the traditional TV first.

With reference to Oxford Economics, it is estimated that the TV industry directly contributes an estimated RM1.64 billion to the Malaysian economy in Gross Domestic Product (GDP) in 2013. In the process, they directly supported approximately 4,548 jobs. Moreover, TV programming and broadcasting consist of 55% of the total film and TV industry. Today in 2019, huge portion of that RM1.64 billion, to be exact 50%, has migrated to Facebook and Google. I repeat, gone to the giants, Facebook and Google. The 2020 digital revenue forecast is expected to be flat but Facebook and Google are expected to record positive growth. With that much revenue lost (migrated from FTA TV), one might wonder how much longer can the 4,548 jobs be sustained. As it is, a few broadcasters have already embarked on efforts to right size their human resources structure by the hundreds of headcount.

The export market of film and TV exports is minor at present. Data from MSC Malaysia (Malaysia’s national ICT initiative) indicated that the creative multimedia industry as a whole (i.e. including animation, film, TV and video effects, as well as games, mobile and new media) accounted for only RM490 million in exports in the year 2012. The value of exports accounted for by film and TV would therefore be expected to be a sub-set of this figure. Exports from Malaysia typically find their way to Singapore, Brunei and Indonesia, although the Philippines, South Korea and South Africa broadcasters have also been recipients of Malaysian film and TV products.

Media Prima Berhad is the dominant FTA broadcaster, operating channels TV3, ntv7, 8TV and TV9. Its channels account for 38% of the TV viewing in Malaysia. The advertising market used to be resilient with Advertisement Expenditure (ADEX) growth of 1.5 times the GDP growth and up to 54% of the overall advertisement revenues goes to TV. Today, that connection has been broken. Not only 50% of the TV revenues have gone to digital platforms, the correlation to GDP growth is haywired. The economy can move in whatever direction but the TV industry continues to face digital disruptions. The holy multiplier of 1.5 times of GDP has disappeared. Media Prima Berhad has seen a gradual decline in its audience share over the past 2 decades as satellite Pay-TV services increase their bouquet of channels. It is a dilution game. A very damaging game to the industry as it offers downward spiralling of economic values. Facebook and Google’s entrance into the market further compounds the effect to the extent even Astro is seeing dents in its revenue.

FTA public broadcaster, RTM, is leading the transition from analogue transmission to digital terrestrial TV (‘DTT’) transmission. RTM conducted a “DVB - T2” trial transmission and started DTT services in early 2013. With such tests, the Government has finally announced that the Analogue Switch-Off (“ASO’) is set for quarter 3 or 4 in 2019. The platform began offering 15 channels from 2013, many of which airs High Definition (‘HD’) programming. It was deliberated that the local RTM channels should have the name RTM and the state name, for example “RTM Penang” in Penang. Each channel per state was to have its own schedule and broadcasting hours, and some channels relay programming from the national RTM1 and RTM2 (usually news programmes and Government programmes). Today, that has not yet happened. In the future, when the DTT platform has been fully implemented, we might see such variety in content offerings.

A Pay-TV satellite service provider, Astro, launched a free satellite TV service, NJOI, in February 2012. The service currently provides 18 TV channels and 19 radio stations, that include RTM's TV1 and TV2, TV3, TV9. ntv7, 8TV, TVi, CCTV-4, Bernama TV, Astro Prima, Astro Oasis, Astro Awani, Astro AEC, Astro Xiao Tai Yang, JiaYu, Astro Vaanavil, MakkalTV and all AMP Radio channels including hitz.fm, ERA and MY FM. An existing Astro customer can receive this service through a separate account. The set-up consists of a set-top box, out-door unit (‘ODU’) satellite dish, smartcard and a remote control unit, all available at RM288. As NJOI gains its market acceptance, the Pay-TV subscribers have been gradually migrating to it with the view of enjoying free of charge TV content like that of FTA. This means Astro is metamorphosising its Pay-TV business (or parts of it) to a FTA Satellite TV.

Astro dominates Malaysia’s Pay-TVmarket via Direct-to-Home (DTH) platform. Its more than 5 million subscribers represent almost the entire local Pay-TV sector. However, as mentioned earlier, many have reverted to Astro’s free platform, NJOI. To date, it is believed that many of that 5 million subscribers have unsubscribed their Pay-TV account. Opportunities for rival Pay-TV companies are limited because Astro controls most of the popular content. It used to hold exclusive rights from the Malaysian Government to offer satellite TV broadcasting services in the country up until 2017. Although that exclusivity is no longer enforced, the barrier to entry (for competitors of Pay-TV) is still virtually in existence given their significant first mover advantage that was untouched for 2 decades or so.

Astro is more likely to show independent TV programmes and independent feature films given its less reliance on advertising revenue. TV3 and RTM is less likely to show such niche programmes as its advertisement revenue reliance model would mean that they prefer mass market content. While many of the networks do have in-house production arms, they still receive a notable amount of content from outside partners. In-house production typically produces non-drama and non-movie programming. For example, many channels will create their own reality shows along with licensing finished products (e.g. Idol, X-Factor, Project Runway, etc.) from foreign countries particularly Hollywood.

Malaysia’s primary language is Bahasa Malaysia with English Language as its secondary language. The country also features the second largest Chinese population after the mainland itself. Therefore, the country features many Chinese FTA channels as well as Pay-TV Chinese channels. The content on these channels typically does not come from Chinese companies only but also features programming from local Malaysia companies. Most of the product is sub-titled, though many in Malaysia are literate in both Mandarin and Cantonese.

Internet Protocol Television (IPTV) is the most likely challenger to Astro. Telekom Malaysia has conducted lengthy IPTV trials and launched its HyppTV service commercially in March 2010. It has since been rebranded into UnifiTV. There are several other IPTV platforms that aim at more niche markets such as the country’s Indian or Chinese populations but many did not survive. In Malaysia, the adoption of IPTV, mobile TV and Video on Demand (VOD) has been slow in the beginning. The first Over-the-Top (‘OTT’) or on-line video streaming to start its operation in Malaysia in 2009 was tonton.com.my ('Tonton'). Tonton operated on 2 levels, first being the simulcast of FTA TV live on-line and, second, VOD menu of a library of content.

It took quite a while for the other players to enter the market. It only started to show any growth over the past few years when Iflix and Netflix started their operations in Malaysia in 2016. Now we have VIU and Dim Sum joining the bandwagon. Whilst OTT services grew in the recent years, continued growth is expected in digital delivery through IPTV and Pay-TV operators such as Unifi TV and Astro. Astro had also launched its Astro First and Astro Best services that offer Hollywood and Asian movies as early as three months post any theatrical release and in HD where available. Titles are available for RM10 (USD2.50) each and are made available for 48 hours from the purchase point. Astro continues to work with international studios like The Walt Disney Company, Lionsgate, Sundance Channel, Animax, Fortune Star, CJ Media and Unitel Classica.

Astro has lower risks associated with the economic conditions (or at least less risky than FTA TV). The risk of impaired revenue earning capacity is somewhat mitigated as revenue from Pay-TV is predominant derived from subscription charges rather than from advertising money. Pay-TV and Government backed FTA TV would still have strong appetite to purchase content especially from overseas since these channels do not depend heavily on advertising revenue. Hence, RTM and Astro would still continue to purchase latest films despite any contractionary advertising industry during an economic crisis.

Let us move on to theatres rather quickly. Istana Budaya was built in 1995 with a cost of RM210 million on a 5.44 hectare land giving a built up floor area of 21,000 square metres. It is the first theatre in Asia that has sophisticated stage mechanism for theatre performance. Istana Budaya charges approximately RM15,000 per day. It attracts on average 150,000 attendees a year who buys tickets from an average of 25 local shows and 5 international shows a year garnering RM10 million revenue a year. This sub-industry provides jobs to a dozen of companies that employs about 100 to 200 workers per show at an average salary of RM5,000 to RM10,000. For a year, Istana Budaya alone can provide jobs on project basis to more than 4,000 people in total. Production costs for a show will depend on the creative treatment and can range from as cheap as RM500,000 to RM1 million inclusive of advertising and promotion budget of about RM200,000 for each show.

Creative content production companies should, therefore, consider theatre as a potential revenue stream. When an Intellectual Property (‘IP’) is created successfully, it should be pivoted from TV, to cinemas and finally the theatres. A good example would be Puteri Gunung Ledang where its success in the filming scene had led to multiple rounds of musical theatre productions at Istana Budaya.

One other fact that is quite delightful to the celebrities vis-a-vis their appearance on the screen would be the source of income from their involvement in advertising. This is a good opportunity not to be ignored. Some good examples are: Nora Danish (UniQlo, Mamee), Shaheizy Sam (Digi, Nescafe, Petronas, WeChat), Farid Kamil (Cleanpro, Cadbury, Downy), Mira Filzah (100 Plus), Nabilah Razalli (Samsung) and many more. Creative production houses should also diversify their roles to include talent management. After all, we do live in an era of 360 degrees diversification. If we do not arrest opportunities, then that ignorance will be the very reason for our demise as a creative production house. How would you make yourself aware of the opportunities to capitalise? Well, go back to the first word in the first paragraph of this article. I rest my case.

The Speech by the Chairman of myFreeview at the Digital TV Media Briefing Organised by MCMC on 24 May 2019

By Johan Ishak
www.kopihangtuah.blogspot.com

BROADCASTING in Malaysia has gone through a significant progression since it was first introduced way back in 1963. We started off watching movies and television (TV) programmes in black and white. Then there was the full colour transmission that was officially inaugurated in 1982. Since then the broadcasting industry, that was in analogue broadcast system, progressed in tandem with technological advancements. We have all grown up in the analogue broadcast era.

Our broadcasting system will soon experience a transition from analogue to digital broadcast system. This is a global progression in the broadcasting industry which began in 2006. The Government is currently working towards the progression to digital broadcast, that will be fully embraced by October this year (2019). In fact, today, the transmission of digital terrestrial radio wave is already completed at 100% coverage of the nation. This is of course from the hard work of the infrastructure owner, MYTV Broadcasting (MYTV). Under the analogue transmission, we are only able to reach 85% to 90% coverage.

To ensure that all Malaysians are able to experience the digital broadcast system when the analogue switch off happens, myFreeview was introduced. It is a brand name for Malaysia’s free Digital TV (DTV) Broadcasting services, i.e. Digital Terrestrial TV Broadcasting (DTTB). myFreeview is an alliance of Free-to-Air (FTA) TV broadcasters in Malaysia. It represents existing FTA TV operators such as Media Prima TV Networks (TV3, ntv7, 8TV and TV9); Radio Televisyen Malaysia (RTM); TV Al-Hijrah and Bernama News Channel. We also have new FTA TV operators, that consists of more than thirteen (13) Content Application Service Provider (CASP) license holders.

myFreeview is aimed at jointly promoting the FTA TV channels through a single or unified brand, i.e. myFreeview, over the DTV platform that is being operated by MYTV. It will also work closely with Malaysian Communication and Multimedia Commission (MCMC) to execute the education and awareness campaign on-air, on-ground, on-line and on social media. At this juncture, myFreeview would like to thank MCMC for the continuous and valuable support. In implementing the roll out of DTV, myFreeview will also constantly discuss common areas of concerns and challenges that all of its members are facing and hence, present suggestions and recommendations to regulators and stakeholders for the betterment of the FTA TV industry.

Now that you know who is myFreeview and its objective let us talk about its benefits. With myFreeview, viewers can watch their favourite channels in high quality and clear image, enjoy high quality sound, have various subtitles and gain access to Electronic Programme Guide (EPG) that provides programme details and synopsis. They can also watch content in High Definition (HD). With digital transmission, viewers can rest assured that they will not face any disruption in transmission due to bad weather conditions. Furthermore, myFreeview services will be offered without any monthly subscription charges.

With internet connection, viewers can watch more of their favorite content by pressing the Red Button on their remote controls. In our case, viewers can access online streaming channels such as tonton.com.my content on demand by pressing the red button. In addition, such internet capabilities, if connected via internet line or Wifi, can give users the access to various online content including video games and e-commerce. Under the current analogue transmission, not only we are missing such services, there is also limitations in offering more FTA TV channels due to the transmission spectrum congestion.

How do you get access to myFreeview channels? Basically there are two ways to do so – i.e. DTTB approved Set Top Box or via integrated Digital TV (iDTV or Smart TV) sets that are already with DTV tuner built-in. Consumers only need to purchase a decoder (Set Top Box) to enable their current analogue TV sets to receive the DTV channels, or, purchase an iDTV with a built-in decoder. They only have to plug in a Ultra High Frequency (UHF) antenna to receive DTV services. Most new flat screen Smart TV sets in the market have DTV decoders built-in today. Those who are buying DTV enabled equipment such as Set Top Boxes or iDTV sets should look out for the SIRIM certified DTTB logo. This is to ensure that they are getting the right Set Top Box or iDTV set that would give them access to myFreeview channels. We understand that to date there are twelve iDTV brands that are already SIRIM certified such as Samsung, Panasonic and Sony, to name a few.

To date, myFreeview has compelling content in the form of 15 television channels and six radio channels. We expect to add four more channels very soon. Four broadcasters have come on board, namely, RTM, Media Prima TV Networks, Al-Hijrah Media Corporation and Malaysian National News Agency (Bernama). As for Radio, we have RTM Radio stations across the nation that are now on this DTV platform. Currently, myFreeview is being led by Media Prima TV Networks' Chief Executive Officer (CEO), Johan Ishak, being the Chairman of myFreeview. We also have Cik Adiwati Zainuddin, the CEO of Borneo TV, as myFreeview's Deputy Chairperson.

As we get ready to migrate to digital broadcast system, we intend to offer more FTA DTV channels with quality content, that are appealing to our viewers. We also want to ensure that our viewers will be able to enjoy high quality viewing with crisp and clearer image quality and vibrant colors coupled with better quality audio with multi-channel and surround sound capabilities. In the future, we, myFreeview, hope to roll-out more channels with fresh content, interactive TV services including home shopping, sports, entertainment, video game, video on demand, and customised services as well as mobile and TV shopping. With more choices and better quality content without subscription, we believe that terrestrial TV will get a new lease of life, hence bringing back the glory days where TV is the central entertainment and communal device in the family unit. In an effort to ensure that Malaysians from all walk of life enjoy FTA TV and kept informed at all times, we will focus on offering free TV services, i.e. migrating our existing analogue TV channels on DTV platform. Currently, we have no plans to include Pay-TV channels on myFreeview. We may revisit the idea in future.

As we get closer towards the Analogue Switch Off (ASO), we want to attract viewers to myFreeview. We believe we are able to do so by offering free, new and latest content that is appealing and interesting for viewers of all ages. By offering myFreeview services free without monthly subscription charges, it will definitely be well received. We understand that there are some questions with regards to the difference between myFreeview and ASTRO. First and foremost, myFreeview is a brand that comprise of FTA TV channels that are subscription free and derives its income from advertising, while ASTRO is a pay TV that is subscription-based. In terms of transmission, ASTRO uses satellite while with myFreeview, the content is broadcasted to TV via transmitters in a digital format. This also enables mobile receivers (in-car and hand-held) to be used unlike ASTRO that requires fixed and non-mobile reception. Hence, we do not see ASTRO as a competitor. We believe that myFreeview will be very much accepted as it is subscription free and has lots to offer with the digital experience. As for the difference with ASTRO NJOI, myFreeview channel is broadcasted over DTTB platform, that is not affected by rain, while NJOI operates over ASTRO satellite platform that may be interrupted by weather conditions.

There will be areas, that will not be able to receive the DTV signals due to blockages and its location beyond the transmitter coverage areas. These areas will be serviced using satellite Direct-To-Home (DTH). To ensure that no one is left behind in this migration, my advice to the Rakyat (public) is to get the decoders and install it. Don’t wait until the ASO. They can purchase the DTTB decoders from electronic retailers and partners such as Pensonic and Seng Heng. Once the analogue transmission is switched off and viewers who have not purchased their decoders, they will not be able to watch their favourite programmes on the FTA channels. Decoders or Set Top Boxes mean the same as the term is used by the industry interchangeably. For the 2 million households that have received the decoders under the Bantuan Sara Hidup Rakyat (BSHR), please install them. It is time to experience DTV! For those who are not within the BSHR eligibility, please buy your DTTB Set Top Boxes that are only priced at RM187 and of course, you will need to incur some installation costs as well as the antenna cost if you do not have one already. Alternatively, it is better to get a new Smart TV or iDTV with DTTB capabilities.

There is a growing concern about the ability for the CASP license holders to make money. Basically, the revenue model for the channels under CASP is an Advertisement Revenue model (Adex). Adex is predominantly driven by viewership numbers. Viewership numbers are reported by third party independent TV viewership measurement consultant that broadcasters have to subscribe to. Currently, Nielsen is providing that measurement services. It is with pleasure that some good news have been reported by Nielsen as far as TV viewership is concerned. In the past year or so, we have seen a tremendous increase in FTA TV viewership. Media Prima TV Networks, for example, saw its TV3 achieving 28% audience share in 2019 as opposed to 21% in 2018.

Such good achievement is on the back of strong performances by TV programmes such as Buletin Utama that saw almost 100% increase from 1.5 million views to 3.0 million views per episode. Good Malay drama titles like Leftenan Zan reached an average viewers of 4 million during its last few episodes. This is a good indicator of people wanting to watch TV again. We have seen statistics that show Cord Nevers (Millennials who did not grow up watching TV) and Cord Cutters (Gen X who had earlier abandoned TV viewing) returning to FTA TV viewing habit. This is certainly a good sign, but, broadcasters must strive to give quality content that meets audiences' expectations. This is so because TV broadcasting should also benchmark the quality of its content to that offered by other platforms such as Pay-TV, on-line streaming services (Also known as Over-the-Top (OTT)) and the internet in general (e.g. YouTube and numerous other on-line video players).

Another important aspect of this industry that has not been mentioned yet is piracy. myFreeview and Communication and Multimedia Content Forum (CMCF) are working closely with the authorities such as MCMC and the Ministry of Domestic Trade and Consumerism (KPDNHEP) to battle piracy on many levels be it hardwares or content infringement. The Government agencies mentioned have eliminated many unnecessary procedures to ensure that they can react faster and even proactively address piracy. We urge everyone from viewers to content providers to help join us fight piracy. The impact of piracy to the economic well being of the industry is huge. Recently, many pirate sites were closed down in a space of one month and we discovered that that alone had 40 million views. Such number is indeed worrying. We need to fight this. Or else, it will become a cancer to our Broadcasting Industry, Content Industry as well as the Digital Industry making it impossible to grow economically.

Essentially, In a nut shell, the salient points to take away are: (a) DTV is ready at 100% transmission coverage by MyTV across the nation; (b) Do not wait until ASO in October 2019, but, instead, get your Set Top Boxes or iDTV now if you are not one of the 2 million BSHR Set Top Boxes recipients, and do not forget to also install UHF antennas; (c) Enjoy the variety of content that myFreeview channels will be offering free of charge (d) The existing CASP license holders should expedite the commencement of their channels on myFreeview; (e) We welcome more content owners to apply for CASP license and procure channels on myFreeview for better and variety offerings to the viewers as well as the chance to make money; and finally (f) Say no to piracy whether in the form of hardware (i.e. illegal android boxes) or content infringement activities on various platforms like Facebook, YouTube, web sites or even illegal Set Top Boxes. On that note, please embrace DTV and should you need further information, read more about this on the web site myfreeview.tv

Money Matters in the Creative Industry

By Johan Ishak
www.kopihangtuah.blogspot.com

MONEY is only a profit when your revenues are more than costs and expenses and when your cash inflow is greater than cash outflow over a particular period of time. Whilst that sounds like a mad accountant, it is a necessary madness if you are to run a business in the Creative Industry. Datuk Zang Toi once quoted, “In the fashion business, creativity only accounts for 10% of the effort; and the remaining 90% are all business acumen”. This is from an international creative practitioner and it is not merely an academic statement. It is a proven concept as evident in Zang Toi’s success stories.

One of the more controversial money issues is the royalties for creative content. This debate has been going on for decades particularly involving TV broadcasters and production houses. The basic concept to comprehend this issue is the understanding of equity stake mechanism for Intellectual Properties (‘IP’) and the relationship between risks and rewards. The party who puts in the investment should be the party that reaps the benefit. If any party to a deal wishes to reap the benefits of a particular IP, then that party should put their skin in the game, i.e. invest fully or partially. Let us use TV production as an example. Typically, a TV production can happen under two models: Commissioning or Licensing. The former is fully invested by the broadcaster and the latter by the production house. 

Under the Commissioning approach, a broadcaster puts in all the financial resources to a TV series and commissions a production house to produce it. The broadcaster owns the IP and any future economic benefits that can be derived subsequently goes to the broadcaster. On the flipside, a production house may put in all the financial resources to produce a particular TV series and upon completion (or partial completion), sells the right for broadcasting to broadcasters under licensing deals. Licensing deals normally have a limit to which extent a broadcaster is allowed to air the content on TV – either on a limited number of runs basis or within a particular licensing period (e.g. 2 years); or even both together. The production house must make this calculation and assess their business position. Are they in the position to earn lower licensing income and endure a longer runway to earn future income? Or, do they want to get all the money up front and not wait for any more in the future? Or, on a more balanced approach, share both revenues and costs with broadcasters.

Under the Commissioning method, the Malaysian broadcasters pay between RM45,000 to RM80,000 per episode depending on the treatment, crew, casting and storyline. So, a 20 episode series can earn revenues of RM900,000 to RM1.6 million for the hired production house but it stops there. Under the Licensing method, the production house incurs the production costs but each episode can only earn less than RM5,000 licensing income from the broadcasters. However, the production houses who are also the ownersof the IP, can get multiple licensing deals with multiple broadcasters and on-line streaming platforms. A sharing model cuts everything in the middle assuming a 50:50 sharing basis. In such cases, instead of the production houses incurring nil costs, the production houses incur RM22,500 to RM40,000 taking 50% of the broadcasters’ burden. Then, whatever revenue that can be derived is split 50:50 between the broadcasters and the production houses. This means, the production houses now bear the same risks as the broadcasters, i.e. the risk of inadequate revenues to recover the production costs.

Production houses need to be aware of all possible revenue windows if they are to invest in the production of creative content for which they retain the ownership of the IP for that particular content. What are the typical windows? For films, normally the first window would be the cinemas. When that is exhausted, they may choose to sell to Pay-TV operators such as Astro First or sell to Free-to-Air (‘FTA’) TV stations such as TV3, or both, one after the other. The fourth window can be the on-line video streaming platforms such as Netflix, Iflix, Viu, Dim Sum and many more. A decade ago, selling DVDs used to be a lucrative window. Today, that revenue stream can be considered extinct.

Whatever the windows may be, if the deal with the buyers involve prolonged exclusivity period, it can cause issues in the industry. Extreme exclusivity terms can cause a downward spiralling of the economic well being of the creative industry. It practically kills the production houses’ ability to maximise revenues. Exclusivity that goes to the extent of two years is not good. A better time frame would be six months. Of course, the price should be adjusted accordingly. Under the Astro First model, they used to be priced at a few hundreds of thousand Ringgits. However, with the expansion of various on-line streaming services (also known as Over-the-Top (‘OTT’)), the pricing benchmark has been disrupted and to date, no standard pricing has been established yet. 

What we can see is that, for the very first time in Malaysia, a local movie has been bought by Netflix, i.e. Pulang by Primeworks Studios in 2018. That deal opened the doors for more local movies to be on Netflix, namely Munafik 2, Hantu Kak Limah, Paskal and Crossroads One Two Jaga. The previous trend of local movies’ box office collection used to be quite gloomy. Although the cinema collections grew yearly, it is mostly fuelled by Hollywood titles. However, movies such as Khurafat and The Journey, that had collected RM10 million and RM17 million respectively, started a new encouraging local movie box office trend. In 2018, Munafik 2 reached RM47 million, Hantu Kak Limah at RM36 million and Paskal around RM20 million.

The windows of revenue would normally end with a small but recurring long tail of cash flow streams if the IP is successful. One good example would be old movies that kept on reappearing on TV even decades after its initial release. To name a few, Bukit Kepong and Matinya Seorang Patriot have managed to reappear even after the turn of the millennium. P. Ramlee movies would probably hold the record for Malaysian films that have the longest tail of cash inflow streams over so many decades and continue to do so today –Pendekar Bujang Lapok being the most popular one. An IP’s potential does not just stop at the content format. Some extended to earn other forms of licensing such as merchandising. This is evident in the case of Upin dan Ipin for which, its Stock Keeping Units (‘SKU’) spans across apparels, stationeries and even restaurants. In fact, the measure of success may even go beyond the local boundaries into other geographical regions.

As mentioned earlier, revenues need optimal costs to tango with before any profits can be derived at. Various aspects of production costs need to be managed up front in order for a viable decision making to be made. Questions such as which director to hire? Who would do the scriptwriting? profile of the casting; crew members selection; and many more. Typically, whilst the amount of time spent during pre-production is quite long, the costs incurred shouldn’t be too high. Pre-production activities that cost 10% of the entire production budget sounds fair. Meanwhile, 50% of the budget should go to the actual production and the remaining 40% on post-production activities that include colour grading, voice overs, music, sound effects, editing and of course, Computer Graphic Images (‘CGI’), if need be. In the case of an animation, one would probably push more percentages for CGI.

Costs do not stop at pre-production, production and post-production only. One important element that must not be forgotten is Advertising and Promotion (A and P). Many producers make the basic mistake of not spending fairly on A and P. What is the point of having a superior product or services when the intended consumers are not aware of it. Benchmarked against various projects, a fair quantum of A and P would probably be at a minimum of 30% of the entire Production budget. So, add up pre-production , production as well as post-production budgets and times that by 30%. That is your optimal marketing strength. There have been numerous examples of good content not achieving financial targets simply because of the reluctance on the producers’ side to incur marketing expenses –movies, theatre shows or even concerts are known to be loss making and most of the time it is because people (consumers) do not know its (creative products) existence.

Foreign players have shown really good examples of how marketing can really boost their sales. Netflix is known to have rented huge outdoor billboards at strategic traffic locations so that they catch the eye balls that are intended for their programmes. Netflix is naturally targeting the urban consumers. As such, they have chosen locations such as the Sprint Highway or Lebuhraya Damansara Puchong (‘LDP’). Whilst digital advertising is the first choice of medium for urban advertising, nothing beats the traditional and hard core ‘In Your Face’ billboards.

Maximising revenues and optimising costs achieve profitability but it does not necessarily put us in a positive cash flow position at the right time. The timing of revenue recognition is never the same as cash inflows. Likewise, the timing of costs incurrence is never the same as cash outflows. Cash collection from cinemas or even TV broadcasters can be late. In the case of cinemas, the box office collection normally requires weeks before a complete calculation is done to confirm the final numbers. When this happens, production houses will find themselves stuck in a situation where payments are due but cash is not yet in. Producers often pays their crew members, directors and casting upfront. This causes cash shortages and disrupts all other production within the company’s slate of projects in a particular time frame. More care must be taken when that slate of production involves multiple productions that happen at the same time or significantly overlapping for a good portion of the production runs for the multiple projects.

How do you then address that cash shortfall? For those with adequate cash, they will use their own money. Others may take loans from various Financial Institutions (‘FI’) although many FI’s are somewhat allergic to creative businesses. Some would give (loans) but charges expensive interest rates as high as 12%. The financial facilities obtained from the FI’s need to be standby facilities whereby production houses should only draw the loans when production has been confirmed and locked in. Having discussed the timing of cash inflow, we must not forget that the funding from the loans are meant to pay for the on-going production costs. When the actual revenue collection comes in, that cash must strictly be channelled back to the FI’s with the view of repaying back the loans drawn inclusive of the interest expenses that have been accrued on the loan amounts from the day it was drawn.

Many producers forget that they also need to pay fixed overheads. Not that they forget that they need to pay those costs but they forget to acknowledge that the profit margins from the various projects need to be enough to cover fixed expenses that recur on monthly basis. These are items that you will need to pay regardless of whether you have any projects in hand. Examples would be rental expenses, utilities, salaries of permanent staff, maintenance of equipment and of course, any interest expenses incurred as a result of loans taken to finance the company as a whole. The sum of all this is what investors normally refer to as the ‘Burn Rate’. When a potential investor asks, “What is your Burn Rate?”, it means that they want to gauge how much would you need as a basic before you can comfortably embark on the project itself. A healthy business should already have enough cash balance in the bank to fund its Burn Rate for a minimum period of 3 months. In fact, many investors prefer a longer period such as 6 months to a year.

In 2013, a well known American animation company, Rhythm and Hues, hired many Malaysians as their core workforce. They were big and highly skilled. However, given their Chapter 11 status (American bankruptcy regulatory status), the company had to be shut down leaving hundreds of staff unemployed. Had Rhythm and Hues preserve sufficient cash for their Burn Rate, a White Knight might have been able to complete its due diligence in time to inject funds for the continuation of the projects in hand. It was a ‘Chicken and Egg’ situation. The staff wouldn’t stay unless they were comforted with salary payment and the investors wouldn’t come in if they were not comforted with project delivery commitment. This demonstrates the importance of cash flow management. A company that records a huge profitability can still go bust when cash flow management is down the drain. The basic understanding to remember is that the timing of cash inflows must be adequate to cover committed cash outflows at the minimum rate of allowing continuous operations –a ‘Going Concern’ assumption.

The critical need to ensure cash flow viability warrants effective negotiating skills. Prices and timing of collection need to be negotiated with buyers. If the timing is prolonged, it is effectively suggesting that you (producers) are bearing the costs of financing on behalf of the buyers. This is because the ideal situation would be otherwise, i.e. Buyers drawdown loans with interest expense in order to pay producers. Hence producers would not have to take up loans to pay their suppliers. A healthy cash inflow level can be determined by ensuring adequate quantum, inclusive of some buffer, to cover production costs. Likewise the management of production costs, both incurrence as well as payment timing, will also need to consider the conditions of cash inflows. The difference between revenues and costs is the gross margin. Gross margin needs to be enough to cover the Burn Rate (or also known as overheads). However, this is only possible if that is reflected in the excess of cash inflows versus cash outflows.

At the end of the day, the company must make a profit. All revenues less all production costs and overheads as well as interest on loans should leave behind residual as Net Profit that is worthwhile. If not, all the efforts will be put to waste. The question is, “What is a worthwhile Net Profit?” A good measure for this is by comparing to other forms of profits. Had you invest the same amount of money (i.e. the sum of production costs, overheads and interest income) elsewhere, you would have earned a certain income such as dividends of 7% from unit trusts, or 3% interest income from a fixed deposit bank account. In fact, given the efforts being put into creative production projects, that 7% benchmark would probably need to be added with a premium making it reach 10% or higher. Generally, as a rule of thumb, any business needs to achieve a minimum Net Profit margin of 10% to 15%. Otherwise, you might as well close the business and put the money into money market instrument that earn passive income without having to put in a lot of effort, or any effort.

Managing Creative Content Production Optimally

By Johan Ishak

www.kopihangtuah.blogspot.com

PRODUCTION management is an important function to any creative businesses. Not only it embeds both the right brain and the left brain, it is also a crucial determinant for profitability on par with revenue generation. Many production houses make the mistake of not planning their production activities and have taken the 'cowboy' or 'langgar' (‘Just Do It’ approach) attitude. It is this mind set that often destroys the financial viability of a creative project be it a movie, TV series, theatre production or even animation. Planning is the key mantra for management. Imagine if there was no planning done for the runways at the airports for the planes to land. Imagine if there was no set of programmes applied to the traffic lights on the criss-crosses of roads in a city. Imagine if a baby is born without parents. You do not want your creative business to crumble. Do your planning. Manage your production.

Let us start with the question "Do you have the necessary equipment?" This is a function of many things such as what kind of production, size of your budget, expectations of the intended audience or buyers as well as the state of technology. Broadcasting production for football games for instance, will require outdoor broadcasting vans (‘OB Vans’), satellite feed and possibly a crew of 10 cameramen scattered around a football field. Do you buy or do you rent such equipment? A production that predominantly uses indoor studios may not need such extensive set of equipment. A live event can have a more robust set of production equipment than a mere recorded production. For example, Anugerah Juara Lagu (‘AJL’) requires bird’s eyes view that moves across an indoor stadium. Such shot requires a ‘Jimmy Jeep’ camera extension. Audience at home watching TV may prefer to have some form of Augmented Reality (‘AR’) happening on their screens such as that done with Altimet’s performance in AJL in 2018 where the word Amboi! Amboi! Amboi! was popping up and down on the screen. AR requires equipment such as VISRT. So, whether or not the production is live, scripted, indoor or outdoor; a careful consideration is required to ensure adequate and not excessive money is spent for capital expenditure or rental of equipment.

One important thing to not be missed is that, production cost becomes cheaper overtime as technological advancement progress disruptively. Although investing in new technology can be expensive, but the subsequent periods will benefit cost savings. This includes Computer Generated Images (‘CGI’), sound effects, colourgrading, dubbing or voice overs, subtitling, music overlays and a whole suite of post-production gadgets. Now, TV and Film production is done via High Definition (‘HD’) that is far more superior compared to the Standard Definition (‘SD’). In fact, the hype of 4K has now moved on to 8K and miniaturisation like GoPro. Digitalisation of processes is the talk of the day. Everything is done digitally from recording, editing, file transferring, ingesting, transmitting and what not? Many broadcasters spend millions of funds to convert their library of content from the traditional tapes into digital files. In Media Prima for instance, their 30 years worth of content amounting to almost 100,000 hours had undergone massive digitalisation conversion that costs a bomb. In the end, 50% could be saved and the rest not useable due to physical damages relating to the inferior medium preservation quality of those tapes.

Whilst cost saving is the benefit of new technologies, it does present financial burden. Obviously, those without cash or credit facilities from the financial institutions will not be able to embark on such capital expenditure. Rental may be expensive due to scarcity of the equipment in the market. What is worse is that, even if you have the money, the impact on your Profit and Loss may be detrimental without you realising it. For example, the old broadcasting technology for managing 4 TV stations using a broadcasting equipment set that occupies a 3,000 square feet room had technological and commercial useful life of 10 years. If you spend RM50 million in some broadcasting equipment (those days), that RM50 million will be depreciated over 10 years at the rate of RM5 million a year. A new digitally enhanced broadcasting equipment that only uses a stacker of electronic components occupying 9 square feet of the floor can now cost you RM20 million. However, that technology will be obsolete in no time as evident in many digital products. In the end, you may have to depreciate it across 2 years at an annual rate of RM10 million. Not only will you incur higher depreciation, you will now require to fork out huge amounts of cash to invest in the technology at the inception. Therefore, as a businessman, creative producers need to strike a balance between renting or buying those technology, be calculative in financial benefits such as efficiency that saves staff cost, rental cost, utility cost and storage cost as well as consider the output of applying those technology.

Earlier it was noted that planning is important for production. Good planning during pre-production stage can be a crucial determinant to cost savings during the production stage. Securing the story, Intellectual Properties (‘IP’), scripts, directors, casting and crew for instance may take up quite considerable amount of time. As long as the bill has not yet start ticking, planning for all these will make life easier later on. Some content requires a long gestation of research particularly periodic movies like history adapted stories. Puteri Gunung Ledang for example, had a detailed research on Hang Tuah from both Malaysian and Indonesian sources.

Securing funds to finance any particular production can also be painful. In Hollywood, many production houses would not start their production unless 70% of the budget has been backed by confirmed sources of funds. Some may even get the distributors to finance the remaining 30%. In such cases, the producers must be willing to dilute its equity share in the production to allow attractive Return on Investment (‘ROI’) to the financiers. Source of funds may also incur finance cost if they are in debt instrument formats. In such cases, time is of essence. From the day you start borrowing to the day you complete the production, the clock ticks non-stop accumulating interest expense daily. In fact, it continues to tick even if you have completed the production because then, you will need the throughput time of releasing the content to the cinemas, TV and on-line platforms and wait for collection to come in. So, another mantra worth remembering apart from ‘Planning’ is "Delays in production loses your money".

One obvious determinant of production cost is the location. Earlier we had touched on the subject matter of live versus studio and indoor versus outdoor. Now, the geographical location also makes a lot of difference. Shooting at home (Malaysia) versus shooting overseas will obviously have significant differences in the cost structure. Anna and the King was not shot in Thailand. It was shot in Malaysia. Star Wars Episode 1 was shot in Australia. Lord of the Rings was shot in New Zealand. When that happens, the entire production crew will have to be transported to the different countries. This may also include transportation of the equipment. In the case of The Lord of the Rings, the production that had taken years to complete, was required to also incur costs of living for the casting and their families that joined them in foreign countries. Careful planning of the production is necessary because, as mentioned earlier, "Delays in production loses your money".

Agility and nimbleness is the attitude any producer should have. They need to be fast, efficient, in and out smoothly. They need to capitalise on all opportunities and not do things too many times. Creative process is not absent in this mindset because in the end, it is the creativity of the content that will sell. This means flexibility in amending story lines or scripts to suit current requirement. In the United States (the ‘US’), TV series productions are known to make ad hoc decisions based on the popularity of the characters. They will kill any particular character when such character has no traction. For example, Star Wars was quite fast in limiting the character Jar Jar Binks. Synergising multiple shots per location saves a lot of money. The Lord of the Rings has many shots taken during the first movie that had been used later on in the second and third sequels. Another similar cunningness would be the use of the same props over multiple productions. Puteri Gunung Ledang theatre musical adaptation uses the same props over many rounds of shows across 10 years. This is obviously cost efficient rather than a single shot of an exploding car – or many takes that involves many explosions, and many cars too. Cinematography of a particular production needs to balance between shots and costs, because, again, "Delays in production loses your money".

Different formats of production requires different styles and what is more important is that, regardless of those styles of productions, all crew members must work together. The skills set, equipment, budgets, length of time and depth of creative processes vary depending on whether you are shooting films, telemovies, TV series, live shows or documentaries. Films are more expensive than Telemovies. Documentaries are more expensive than TV series. Animation can be expensive than any of the above at times. When there are physical production constraints as well as financial constraints, a production house may want to negotiate delivery terms. In the TV business, it is known that production house deliver partial series, like episodes 1 to 7, first, in order to get half of the payment from the broadcasters. The delivery of the remaining episodes 8 to 14 concludes the deal with a final payment. This helps ease the burden of working capital constraint and hence, producers are able to pay their crew, casting members, directors, writers as well as financiers on a more timely and favourable manner.

Titles that are closely associated to certain events may have its own unique time requirement. For example, the movie Santa Claus presumably has to be ready for the cinemas just before the Christmas festive season. In Malaysia, many entertainment programmesare shot and completed in time for its airing on TV during Hari Raya Aidilfitri. When time is of an essence, everything else is affected. Editing requires careful creative touch. Imagine that you have shot 3 hours worth of recordings and you will now have to edit and slice and dice it into a 2 hour programme - editing with such position has the risk of producing a disconnected series of scenes in a story line. What is worse is that, the resources utilisedin producing the unused portions has now gone to waste. Such wastes must be reduced to an optimal level, if not eliminated. In a live show, we do not have that luxury. Everything must be at a zero error rate. A couple of years back, AJL had fire issues during a commercial break. Being a live show on TV, the crew worked at a miraculous speed to extinguish the fire and repair the stage in time for the new set to be installed for live session to resume its direct telecast on the TV screen. This is a bit too thin for a live show but shit happens. Of course, such errors are costly as it causes delays. Again, "Delays in production loses your money".

Props management is an element worth dissecting for the purposes of cost optimisation. In a TV broadcasting environment, there are various frequencies to the different programmes. Some are dailies like talk shows (eg. Malaysia Hari Ini (‘MHI’) and news and current affair programmes (eg.  Buletin Utama). Some are weekly programmes like documentaries (eg. Majalah 3 and 999) and entertainment programmes (eg. Muzik Muzik and Mentor). In any case, careful consideration is required in determining the types of prop. A daily programme runs for 365 days a year making it worthwhile to invest in permanent and slightly more expensive props. The less frequent ones may need props that are accommodating such as transformable props that can be converted from one look to another or the use of various electronic displays that can easily change its images. Some studios are known to have different settings for different walls in the same studio.

Editing between long formats and short formats can uncover opportunities especially in this digitally disrupted era. Many broadcasters have now opted to also produce short content that has better traction on-line. A research done by an international consultant on the subject ‘TV audience versus On-line audience’ revealed that the attention span of the millennials are worse than that of a gold fish in the glass bowl. If we are to put that gold fish in the bowl in front of a TV set, that gold fish will probably watch TV at a longer duration than a 12 year old kid. Some short formats are the derivatives of the long formats. For example, a half and hour entertainment programmelike Melody can have its own short format like Mbuzz. Short formats can also be produced on its own bearing the function of testing the waters on-line. When good traction appears, a long format becomes the derivative of the short format.

Formats are not just about duration. It is also about the mode of the content. In 2009, TV3 produced a series called Nurkasih that became very popular. The producers were in dilemma on whether they should produce the second series on TV or a movie. After much consideration, they had decided to produce a movie sequel to the series a few years subsequently. Fast forward to 2019, TV3 had commissioned Radius One to do a sequel TV series, Nur 2, to continue the saga of  the successful first season, Nur. In fact, they may also toy with the idea of producing a movie as its third sequel. On another title, Pujaan Hati Kanda, also a successful TV series, instead of doing a sequel series or movie, TV3 had decided to do a Hari Raya special telemovie. All these opportunities must be identified swiftly and actions taken nimbly. The producers of Hantu Kak Limah did not take long to realise that that IP has potential and wallah! They now have a portfolio of what they call the Banana Village movies (Kampung Pisang) that consists of Zombie Kampung Pisang, Hantu Kak Limah Balik Kampung and Hantu Kak Limah. Hantu Kak Limah happens to be in top 5 of the Malaysian record for box office collection of around RM30 milion plus in 2018.

Co-production with other companies are beneficial as it allows the pooling of funds into a bigger sum that allows better production. This also limits the risk of financial loss as the participating production houses share both revenues as well as costs. In 2019, Media Prima, Astro, MM2 and Infinitus joined force to produce the movie Sangkar. On the TV side, MediaCorp and Media Prima had also joined force to produce various Chinese dramas that are aired in both Singapore and Malaysia. The beauty of such partnership is that all participating partners have their own strengths that can now be synergised and combined to create a favourable outcome. Astro, Media Prima and MediaCorp, of which all three are TV broadcasters, offer valuable media inventory for the promotion of those movies. This helps save approximately 30% of a typical production budget. What is more compelling is that those broadcasters do not even have to incur cash outflow for the media inventory as they can easily use unutilised commercial airtime that would have been perished anyways had it not been used. For this, it is always optimal to partner with others who have strengths that you do not have. The mindset of ’Indie’ production that embrace some form of arrogance sugar coated as independence will not enjoy this.

Illustrating a hypothetical example, a RM6 million movie production should typically incur about 30% of that production cost, i.e. RM2 million, as its Advertising and Promotion (‘A and P’). This is a huge amount of money. Many production houses rather spend that money in enhancing the quality of the programme. By doing this, they have failed to embed the commercial aspect of the production. Commercial viability of any particular programme does not solely rely on the quality of the programme. It must also take into account the awareness of its existence in the eyes of the audience. Of course this presumes that the programme has been created for its intended audience, if not, your production will be a white elephant. Producers must have in mind the tastes of its intended audience. They cannot be stuck in a self indulgence mode (‘Syiok Sendiri’) of satisfying their own creativity need only. 

Back to the A and P, RM2 million is a big sum of money. Why do you need to incur cash for that when you can get broadcasters to spare unutilised airtime that does not even require cash outlays. What it means is that, you will have to dilute your equity share in the movie to the broadcasters. Although financially, on the surface, you may feel that it is a loss, but you may not even get the revenue in the first place had you not do the A and P in a mass manner. In the end, the success of the movie, financially, may give you a positive net position after deducting the lost of revenues carved out as a result of the dilution of the equity stake. This is all sensible economics. In a small market like Malaysia, partnerships produce the best outcome. If not, why would two giant nemesis, such as Media Prima and Astro, go to bed together? The answer is, maximising their economic benefits. Maximising economic benefits is of course, driven primarily from revenue generation, but, one must not forget that cost optimisation is equally critical in determining economic benefits for what is the point of generating revenues when the bottom line is a small margin, or worse, negative margins.

In the context of production cost optimisation, the presence of the synergy between the right brain and left brain is very relevant. Whilst you strive to ensure the best of creative content, you must not lose focus on the objective of it all, that is, to make money. Creative content should never be myopically viewed as arts and culture only. It must be reimagined into an industry - An economy - A ’Creative Economy’.