4 The Monopolization of Astro.

Is Astro still monopolizing the Pay TV industry?

Astro is the only satellite TV service in Malaysia. This makes Astro a monopoly as it is the only firm that provides satellite TV service in Malaysia and so it is the only firm in the industry.

Due to high barriers of entry, many new firms are discouraged to enter the industry. This is because Astro has made such a big name for themselves and has built strong brand recognition and brand loyalty to the point where the first thing that comes to Malaysian customer's mind when satellite TV is mentioned would be Astro. Without Astro, Malaysian citizens would not be able to watch certain shows and news as Astro provides channels that broadcast shows from around the world, from news to sports to entertainment. 

Besides so, with such advanced technology and features that Astro provides, new firms will feel challenged and it would be difficult for them to beat or even keep up to the level of service Astro for they have been in the industry for a long while. And so with that, they are very specialized with their field with their experience and are able to manage services, finance and marketing and thus providing good service to customers and increasing efficiency.

Other than that, Astro has large satellites such as the MEASAT satellites that are too large to be owned by a small producer or service provider. That is why there is no other satellite TV service provider but Astro.  

Due to Astro's monopolization of the Pay TV market, they are able to make supernormal profits as no other firms are competing away the profits that are being earned. This situation is showed in the diagram below. The blue shaded region shows the supernormal profits earned by Astro. This situation could continue to stay this way without the entry of new firms.

Unfortunately, there are cable TV networks rising in hopes to compete with Astro. They are not satellite-based transmitted but they are offering almost the same services that Astro offers; entertainment and television shows. This will change the market structure for Pay TV from monopoly to oligopoly. 

Oligopoly is where there are a few firms dominate the industry. The industry have quite a few firms but not very many and are offering homogenous or differentiated products.  In this case, the Pay TV market is of a few firms such as Astro, ABN and HyppTV offering differentiated product and services such as the TV channels offered, the way shows are being broadcasted (Satellite/Cable/IPTV), branding and etc. 

For example, ABN (Asian Broadcasting Network) is set to launch its services soon with features that are rumored to be better than Astro. For instance, ABN is offering more than 2000 channels and for a cheaper price than Astro. 

Since ABN has not launched its services yet,  Astro's other competitor would be HyppTv by TM Net. HyppTv is a new Pay TV service who started their services in 2004 which offers about 94 channels whereas Astro offers 156 TV channels.

Due to the existence of the new HyppTV in the Pay TV industry, the firm would take demand from Astro and thus Astro’s demand curve will shift to the left.  The demand for Astro will only decrease slightly as it is the dominant firm of the oligopoly, acting as a monopoly as it is the largest firm in the market. This is because Astro provides better service and is more well -known than HyppTV. 

This is showed in more detail in the diagram on the right.

Instead of a bigger margin of supernormal profit as shown in the blue area, Astro’s profit has decreased due to the existence of the new firm as shown in the purple area but it is still earning profits as it is still the largest firm in the industry.

Will Astro continue to become the largest firm in the industry and the dominant firm of the oligopoly market? 

As of now, Astro is leading the market with 3.1 million subscribers nationwide, which is more than 50% of the potential market in the peninsula. HyppTV is said that it has over 420,000 subscribers, slowly increasing over time. 

As you can see, Astro is still dominating the Pay TV market and is holding its spot as the dominant firm of the now oligopoly market. But as HyppTV is slowly rising up and threatening Astro's market, Astro has to start making strategies in order to secure its top spot. For example, Astro's recent partnership with Maxis to come up with a bigger and better IPTV (Internet Protocol Television) than HyppTv could help Astro to grow and increase its market volume and challenge HyppTV in the IPTV market.    

All in all, the Pay TV industry and the competition among firms is very interesting as the competitors rise up to compete with the existing firm. So far, the existing firm is still winning.. But we shall see ;)

Reference:
http://themalaysianreserve.com/main/index.php?option=com_content&view=article&id=2043:who-loses-in-astro-maxis-partnership&catid=36:corporate-malaysia&Itemid=120
http://www.astro.com.my/
http://www.hypp.tv/
http://en.wikipedia.org/wiki/Hypp.TV
http://en.wikipedia.org/wiki/Astro_%28Malaysian_satellite_television%29
http://biz.thestar.com.my/news/story.asp?file=/2012/2/18/business/10754896&sec=business
http://biz.thestar.com.my/news/story.asp?file=/2012/10/17/business/12182562&sec=business
http://mynewshub.my/2011/06/30/astro-does-not-understand-peoples-burden/
http://www.skmm.gov.my/commons/viewdetail.aspx?docid=432