StarHub Ltd’s Pay TV Business Lost 38,000 Subscribers in 2016: Here’s What Management Said And Plans to Do

StarHub Ltd (SGX:CC3) lost 9,000 Pay TV subscribers in the fourth  quarter of 2016This comes after previous losses in prior quarters during the year.

In the first quarter of 2016, StarHub’s Pay TV segment saw 8,000 subscribers exit. Then came another 10,000 subscribers leaving in the second quarter, followed by a further 11,000 subscribers bidding goodbye. The aforementioned 9,000 subscriber losses in the final quarter brought the total subscriber losses for StarHub’s Pay TV segment to 38,000 for 2016.

This is summarised in the slide below:

2017-02-03 StarHub Pay TV Subscribers
Source: StarHub’s earnings presentation

StarHub’s chief marketing officer, Howie Lau, explained the reasons behind the decline in Pay TV subscribers during the company’s 2016 fourth quarter earnings briefing:

“This is due to the continued proliferation of alternative viewing means, as well as pirated content offers.”

Lau also pointed out that revenue for the Pay TV segment in the fourth quarter had increased compared to the third quarter:

“In terms of TV revenue and ARPU [average revenue per user], TV revenue you’ll find that from quarter 3 to quarter 4, there’s a slight increase. While we saw lower subscriber revenue, we did see a mitigation from higher ad sales revenue. The ARPU remains stable at $51 on a year-to-year compare.”

Lau’s mention of the ARPU is a key point. Increasingly, StarHub is focusing its efforts on keeping its high-ARPU Pay TV subscribers around. The company’s chief executive, Tan Tong Hai, shared his thoughts on the matter during the 2016 fourth quarter earnings briefing:

“We may have lost some subscribers, but this ARPU remains at $51, because it means that we still have I would say it’s the paying and loyal customers.

Today, the pay TV appeals to the higher-ARPU customers. There’s 498,000 subs. It’s not a small number, right? So I think you have to look at the trending this year, and I would say that in any business, you have 498,000 is a pretty sizable number.

You look at those entrants who are coming into the broadband space, you can check the new players, how many subscribers they have. Have they even hit 100,000? And they are in business. So StarHub with this 498,000, I think it’s still a pretty sizable number of subscribers, and our objective is to keep the high-value customers, and that is very important.”

Tan also said that holding on to the high-ARPU subscribers was a key element of StarHub’s Hubbing strategy. Beyond these, StarHub is also looking to manage its content and increase the availability of its Pay TV offering across platforms. Lau explained:

“So for us, it’s focused on two things.

One is keeping the content exciting and relevant, and then the second one is making sure that the platforms that the customers want to watch on, both on the traditional TV as well as on the go, is available to them.”

Tan said that StarHub may drop content where the viewership is too low or where piracy is left unchecked. StarHub will also be looking to renegotiate contracts with content providers:

“So in our new contracts with our content partners, we do want to include risk-share model, which means that if the subscriber drops, then they ought to also look at the cost of the content and reduce accordingly. So those are the things that we can try to incorporate in the contracts that we have with our content partners when we renew them.

I think there has to be a shared risk model and not a total, kind of like the risk is always the operator.”

It is worth noting that the absolute number of subscribers leaving StarHub’s Pay TV business has decreased from the 11,000 in the third quarter of 2016 to 9,000 in the fourth quarter. When the subscriber bleed stops, we may have an idea on what the business’s core customer base looks like.

We will have to see what the next few quarters bring for StarHub.

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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.