Economic growth and multi-platform competition will fuel the consumption of pay-TV and broadband in Asia Pacific. But, says Media Partners Asia (MPA), this growth depends on investment in content, distribution and new technology, coming at a high cost for pay-TV channels and distributors.
In Asia Pacific Pay-TV & Broadband Markets 2011, MPA says the result is margin pressure for pay-TV providers in some key markets, predominantly India, as well as potentially in Japan, Korea and Malaysia.
Vivek Couto, executive director of MPA, said: “These trends will prevail over the medium term due to competitive intensity, well meaning but counter-productive regulation and industry fragmentation. Having said that, we already see operating leverage improving in a number of markets. Future growth also hinges on continued improvement in ground-level execution, talent and regulation, especially in India, China and Southeast Asia. Our research shows that the growth of broadband represents more of an opportunity than a threat for pay-TV companies; the key cross-sector competitive dynamic in most markets remains fierce competition from free TV. There is a bright future for pay-TV in Asia Pacific but it belongs to companies willing to invest and innovate, positioning themselves as consumer businesses.”
Pay-TV subscriptions in Asia Pacific grew by 9 per cent in 2010 to reach approximately 375 million by the end of the year, according to projections from MPA. With around 8 million households in the region subscribing to multiple pay-TV services, this means 367 million homes were subscribing to pay-TV in Asia Pacific at the end of 2010, almost half (48 per cent penetration) of all TV homes. This number is projected to grow to 57 per cent of TV homes or 486 million subscribers by 2015, and to 62 per cent of TV homes or 570 million subscribers by 2020.
The number of homes subscribing to digital pay-TV services, including multiple subscriptions, reached 148 million in 2010. Digital networks allow pay-TV operators to offer additional programming and high definition (HD) content as well as value- added services such as digital video recorders (DVRs) and video-on-demand (VOD) and interactive TV. As competition increases, these help operators grow revenues and strengthen subscriber loyalty. The number of homes subscribing to digital pay-TV services is expected to reach 362 million by 2015 and 483 million by 2020, driven by digitization of millions of homes in China and India as well as full-scale digital conversion for both free and pay-TV in Japan and Korea. This means that digital penetration of pay-TV homes will grow from 20 per cent in 2010 to 42 per cent by 2015, and 52 per cent by 2020.
MPA projections indicate that subscribers with high definition pay-TV reached 12.4 million in 2010, and will rise to 45 million by 2015 and 81 million by 2020. Excluding China and India, HD penetration of digital pay-TV subs across the region reached almost 30 per cent in 2010 and is likely to grow to approximately 60 per cent by 2020, driven by continued growth in Australia, Japan and Korea as well as new growth in Southeast Asia.
Revenues for the pay-TV industry in Asia Pacific, representing income from consumer subscriptions as well as advertising, increased by 14 per cent in 2010 to reach $38 billion. This was driven by healthy growth of ARPU (average revenue per subscriber) in mature markets and increases in subscriber volume in emerging markets, as well as strong local advertising growth. According to MPA, pay-TV advertising in Asia Pacific rebounded from only 4 per cent growth in 2009 to 15 per cent growth in 2010 to reach approximately $8 billion in net terms (i.e. including ratecard discounts). This represents about 25 per cent of total TV advertising in the region. Subscription revenues meanwhile grew by 14 per cent in 2010 to reach $30 billion, with consumer spends on pay-TV growing by 4 per cent on average.
MPA predicts pay-TV industry revenues in Asia Pacific will grow at a 10 per cent CAGR between 2010 and 2015 and at 8 per cent CAGR between 2010 and 2020, to reach $60 billion by 2015 and $78 billion by 2020 respectively. Boosted by digital growth and continued increases in basic pay-TV subscribers, total subscription revenues will climb from $30 billion in 2010 to reach $46 billion by 2015, and $60 billion by 2020. Subscriber volumes will grow substantially, while ARPUs will remain robust in high-value markets such as Australia though competition, and in certain cases regulation, will depress and limit ARPU growth in India, Japan and much of Southeast Asia. Local advertising will remain buoyant however, driven by economic growth and rising penetration, climbing from $8 billion in 2010 to reach $13 billion by 2015, and $18 billion by 2020.