Digital tax to benefit media companies in TV, OTT

PETALING JAYA: The digital service tax, which comes into effect on Jan 1, 2020, might benefit media companies in the TV and over-the-top (OTT) segments such as Astro Holdings Bhd, Media Prima Bhd and Star Media Group Bhd as competition from OTT players such as Netflix has pressured subscription revenue and average revenue per user, according to AmInvestment Bank Research.

The digital tax has been set at a fixed rate of 6% per year with the annual threshold of RM500,000, following the passing of the Service Tax (Amendment) 2019 Bill in the Dewan Rakyat. Under the Bill, tax defaulters may be fined up to RM50,000 and/or imprisoned for up to three years upon conviction.

“However, we are cautiously optimistic on this development as it still remains to be seen the extent to which the tax will benefit local players as according to Deputy Finance Minister Datuk Amiruddin Hamzah, Malaysia’s digital tax rate sits lower compared with rates in New Zealand, Russia and Norway at 15%, 18% and 25% respectively. Furthermore, pricing alone might not deter customers from choosing preferred content provided by foreign OTT players,“ the research house said.

It maintained a “neutral” stance on the media sector due to its unexciting prospects amid a challenging operating environment following the structural shift from traditional media to digital platforms, coupled with the challenging monetisation of digital initiatives and a subdued advertising expenditure outlook for 2019.

AmInvestment Bank Research maintained its recommendations and fair values on Media Prima (hold, 42 sen), Media International Limited (hold, 24 sen) and Star Media (hold, 73 sen).

Its top pick for the sector is Astro Malaysia (hold, RM1.69) amid its positive prospects arising from its focus on vernacular content and TV household penetration rate of 77% in FY19, although it is fairly valued at the current price.

Source: The Sun Daily

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