A broad recalibration in Asia Pacific pay-TV, triggered by the growth of broadband, has begun, according to Asia Pacific Pay-TV Distribution, a new report covering 17 markets in the region prepared by independent consulting and research provider Media Partners Asia (MPA). Pay-TV industry stakeholders are adjusting to competitive realities with technology upgrades that integrate online video services into pay-TV plans, as well as new bundles that package together pay-TV and broadband services. At the same time, pay-TV operators are stepping up investment in mass and premium content to differentiate themselves as well to cater to important customer segments.
“Cable and telecom operators are striving to reignite or sustain pay-TV customer growth by bundling pay-TV channels and on-demand services with broadband,” observed Vivek Couto, executive director, Media Partners Asia. “In Indonesia, Korea and Thailand for example, bundling has emerged as an important driver of net new pay-TV additions, underpinned by the rollout of high-speed fibre broadband. At the same time, pay-TV operators in Australia, Hong Kong, Japan, Malaysia, New Zealand and Singapore are adding more internet-based services, to revive a flagging consumer proposition,” Couto added.
“These services include cloud delivery, through new DVRs, as well as Android-enabled set-top boxes with strong internet functionality that incorporate online video services. These upgrades could limit cord cutting and while help combat piracy across key markets. A number of pay-TV operators in India, Japan, Korea and Southeast Asia are undertaking set-top box integration with various OTT platforms, to limit churn among premium customers as well as drive adoption among non-pay-TV customers.”
Content dynamics are also rebalancing in response to these changes. “Demand for premium Asian content, led by Korean entertainment, continues to grow, while premium sport still offers a vital lifeline for many pay-TV platforms,” Couto noted. “Hollywood and international content also remain vital, but the market for international pay channels, especially players focused on Hollywood series, is saturated and, in some cases, shrinking. Increasingly, this content is migrating online, with OTT operators bidding up the cost of popular franchises. While Hollywood movie channels, kids’ networks and Asian pay channels are in robust health, there is little demand for new pay channels outside India and Korea.”
Pay-TV in Asia Pacific still scalable, revenue-generative
Overall the Asia-Pacific pay-TV industry remains scalable and revenue-generative. Pay-TV industry revenue, comprised of subscription fees and local and regional ad sales, will still grow at a 5.0 per cent CAGR across the region between 2017 and 2022 to reach US$68.5 billion (€57.64bn) by 2022, according to MPA forecasts. Excluding China, a utility-oriented pay-TV market with limited access for commercial pay channels and international investors, industry revenues will trend at a 4 per cent CAGR between 2017-22 to reach ~US$40 billion by 2022.
Much of this growth will be powered by two of the region’s biggest pay-TV markets, India and Korea. Between them, India and Korea represent 77 per cent of pay-TV subs and almost 50 per cent of pay-TV revenue in the Asia Pacific region ex-China in 2017. Combined, both markets will contribute more than 80 per cent of incremental revenue growth for the Asia Pacific pay-TV industry ex-China between 2017 and 2022.
“While India’s pay-TV market remains highly regulated and ARPUs are relatively low, national cable digitalisation, customer growth and a robust ad market will help propel India’s pay-TV revenues to US$14 billion by 2022, a 7 per cent CAGR from 2017,” Couto said. “Korea’s pay-TV market is also highly-regulated and over-saturated, with almost all Korean homes subscribing to at least one pay-TV service. Nonetheless, telecom operators are driving pay-TV customer and ARPU growth in Korea, through broadband and IPTV bundles as well as innovative VOD services. Such dynamics will help drive Korean pay-TV industry revenues to US$6.8 billion by 2022 from US$5.5 billion in 2017, a 4.4 per cent CAGR.”
At the same time, Japan’s pay-TV market is scalable and profitable for most stakeholders, Couto observed. Even though pay-TV penetration is expected to remain relatively low in Japan, ARPUs are high while local ad sales represent a material opportunity. As a result, Japan will contribute 8 per cent to incremental pay-TV revenue across the region between 2017 and 2022.
The mature and relatively small pay-TV markets in Hong Kong, Singapore and Malaysia, however, are fundamentally challenged. Cord-cutting and shaving, along with piracy, have begun to accelerate in these markets, although pay-TV operators are countering these trends by buying and developing strong sports and entertainment content. This, combined with new products and packaging, could help maintain pricing power, although pay-TV platforms in these markets will still lose ~200,000 subs between them over 2017 and 2022, according to MPA estimates. The customer base could erode even further, if downside risks materialise.
Meanwhile, growth in emerging Southeast Asian markets, especially Indonesia and Thailand, is being driven by broadband bundles. Pressure is increasing on standalone DTH platforms in these markets, although DTH remains an important growth driver in the Philippines. Overall, Southeast Asia in aggregate will contribute 16 per cent of net new pay-TV subs to regional growth, excluding China, over 2017-22. At the same time, Southeast Asia will only contribute 9 per cent in incremental revenue, reflecting flat to declining ARPUs and limited prospects for local ad sales.
While still large and material, Australia’s pay-TV market has been disrupted by the growth of online video, with subscriber growth and ARPUs under significant pressure. As a result, MPA expects Australian pay-TV revenues to remain flat over 2017-22. Revenue growth in Taiwan will also be marginal but pay-TV penetration will hold steady, at ~84 per cent of TV homes in Taiwan over 2017-22.