StarHub Ltd Loses Another 10,000 Pay TV Subscribers: Here’s What Investors Should Know

StarHub Ltd  (SGX: CC3) lost 10,000 Pay TV subscribers in the second-quarter of 2016.

This comes after StarHub’s Pay TV segment had recorded a loss of 6,000 subscribers in the first-quarter of 2016. Over the past 12 months, StarHub has seen a total of 27,000 Pay TV subscribers cancel their subscriptions. This is summarised in the slide below:

2016-08-09 StarHub Pay TV
Source: StarHub’s earnings presentation

The subscriber losses could be a cause for concern given that the Pay TV segment made up over 16% of StarHub’s total revenue in the second-quarter of 2016.

StarHub’s chief marketing officer Howie Lau discussed the reasons for the lower subscriber numbers during the company’s second-quarter earnings presentation:

“This lower TV subs is due to three reasons. (1) Is that we have a larger – out of contract customer base in quarter two. (2) We are no longer promoting our TV Lite offering. (3) We do recognise that there are more alternatives in terms of viewing options for our customers. We also do see a higher churn at 1% on quarter two.”

During its earnings briefing for 2016’s first-quarter results, StarHub said that alternate viewing options are likely to be complementary to its Pay TV segment. But, it appears that StarHub is currently seeing some customers leave for other options.

Meanwhile, StarHub has been looking to rationalise its Pay TV content. In other words, it has been looking at what content to keep and what content to remove. Lau explains:

“In terms of cost rationalisation, we take quite a straightforward approach because with the data and the insights we have in terms of viewing patterns and all that, we do recognise that within the – well, our overall TV and entertainment is in the bottom part of the Singapore diet.

Different groups of customers in different segments have different preferences for their diet. Because family with kids have certain interests – type of topics and type of channels that they want to watch. Youth, singles all have very different. So what we do is that we use the data – the viewership – to help us decide which are the content that we need to acquire, which are the content that we need to broadcast, at what time.

But by the same token, we shuffle channels and content that we need to sunset because if there is less viewership and less interest – and especially on a commercial viability – we use that as a basis to then help us decide what to add and what to reduce.”

In March this year, StarHub had acquired a stake in Singapore-based film producer mm2 Asia Ltd (SGX: 43D) to provide differentiated, local content. StarHub’s chief executive officer Tan Tong Hai added his thoughts on the move:

“With regards to the investment of mm2, it’s merely to improve our localisation efforts. Because if you look at right now we have a model of buying branded content. That’s one model.

Another one is that we also want to add on the local flavour and create our localised content with our international partners and localise a certain portion of it. So the mm2 allow us to be able to do more there. At the same time, because they also have overseas presence they may also be able to take the localised content overseas, and not just for the Singapore market alone.”

To be sure, StarHub’s Pay TV segment remains an important leg in the company’s overall Hubbing strategy. Tan also said:

“The pay TV, as an integral part of our hubbing strategy, will still be there. Certainly content is key and you notice how we have shared that with different groups of people.

So we have a wide variety of content to cater for children, all the way to the businessmen who watch news, the sports and also to the older generation, who enjoy watching the TV big dramas and all those.

So I would say that is still ready, but the ups and downs are kind of like when you have many out of contract base then, of course we will have higher churn rate and all those, but be rest assured that the way we run the pay TV business is really by analytics and also looking at really the consumption behaviour and adjust accordingly.

But it is still a very integral part in our overall hubbing strategy.”

The pace of subscriber losses in StarHub’s Pay TV segment has picked up over the last three quarters. It is likely that questions over the future of the segment may arise again if Starhub continues to lose Pay TV subscribers in the coming quarters.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.