StarHub – BT
What’s next, StarHub, after EPL blow?
LAST weekend saw the 6-1 drubbing of English Premiership minnow Hull City by soccer giant Liverpool. In a cruel coincidence played out yesterday in the local telco scene, the Reds landed an equally crushing blow on its archrival in a match that could tilt the balance of power in Singapore’s pay-television landscape.
Singapore Telecommunications (SingTel) yesterday outbid StarHub to score the coveted rights to broadcast the next three seasons of the English Premier League (EPL).
The victory breaks StarHub’s stranglehold on the event for nearly a decade. To add salt to injury, SingTel also prised away ESPN Star Sports, and with it StarHub’s claim to a bonanza of other sporting events including Formula One, Wimbledon and the US Open Golf Championship.
Bruised egos aside, the more worrying concern for StarHub is that the double-whammy could spark a mass defection among its 530,000-strong cable television TV subscribers. Investors appear equally unsettled and StarHub shares paid the price by sliding 6.5 per cent to $2.03 yesterday.
For local sports fans, the EPL is often the swing vote when deciding on a pay-TV bundle. To make it a complete no-brainer, SingTel went all out to wrestle other major sporting events away from StarHub so sports fanatics will naturally choose to see red and not green. This was the case in Hong Kong when iCable parted with a large portion of its customer base after ceding EPL broadcast rights to PCCW in the last auction.
In Singapore, the outcome could be a 20 to 30 per cent migration of StarHub’s sports group customers, according to DBS Vickers analyst Sachin Mittal.
This estimate (a conservative one) would spell a sizeable reduction in StarHub’s pay-TV sales, a segment which accounts for 19 per cent of its total revenue. StarHub’s average revenue per pay-TV user of $56 will also be thinned significantly as a result. To add to the blow, some mobile and broadband customers could also be enticed to switch if SingTel comes up with attractive pricing bundles.
StarHub is well aware of the allure of the EPL and sports in general, which was why it was willing to consistently price this genre of content below their actual costs. SingTel was equally cognisant of the fact, which was why it was willing to pay a heavy price this time around after failing to do so in 2007.
The blow, as crushing as it is, will not be a fatal one on StarHub’s pay-TV business. The company still has a strong arsenal of other content including news channels, lifestyle and entertainment programmes. These include BBC, Discovery, AXN, and popular Hong Kong TVB drama series.
The immediate priority now is to delineate from its sports heritage and come up with compelling packages for its remaining channels. After all, Singaporeans are fickle and price-sensitive, so a good bargain should keep them tuned in. The only hassle for the consumer is to have two separate set-up boxes, but this should be an acceptable compromise if the price is right.
In addition, the EPL deadweight has now been passed on to its biggest rival. StarHub has never made money from screening the premier league, neither has PCCW, and SingTel is unlikely to break the jinx.
While StarHub’s cable TV sales may drop, its content acquisition costs should be correspondingly reduced. It can now focus on exploiting more profitable channels instead of using them to cross-subsidise loss-making ones.
Vengeance can also be exacted if StarHub reclaims the EPL rights the next time round as SingTel’s investments may not be recouped within a three-year time frame. If nothing else, it could exact vengeance by bidding aggressively to drive up the costs for SingTel.
A good company can build on its success but, more importantly, it should be able to swiftly recover from setbacks. With the arrival of former M1 chief executive Neil Montefiore next year, coupled with the continued guidance of CEO Terry Clontz as company director, StarHub should be able to prove its mettle.