Research: APAC pay-TV ‘significant challenges’
July 24, 2018
Findings from the 2018 Pay-TV Innovation Forum, the survey of pay-TV industry executives globally carried out by content protection and TV solutions specialist NAGRA, and MTM, an international research and strategy consultancy, suggest that the pay-TV industry in Asia Pacific is experiencing significant challenges, driven by the proliferation of high-quality OTT services and widespread piracy. In its third year, the research programme seeks to explore the challenges and opportunities facing the industry in a disruptive period.
Executives attending an event in Singapore noted that with consumers in both advanced and emerging countries in the region increasingly choosing streaming services, pay-TV providers expect to see a slowdown in growth and, in some mature markets, a decline in revenue from traditional pay-TV services, while demand for fixed and mobile connectivity services is expected to grow.
Conversely, OTT service providers in the region are becoming more optimistic about growth, with many now focusing on hybrid business models that balance free and paid offerings and rely on marketing partnerships with telcos. However, OTT providers in the region still face challenges – most are not yet breaking even, converting users into paying customers remains challenging, and the market is becoming more crowded and competitive. There are also concerns that recent progress has been driven by telco marketing and bundling initiatives, and may not be sustained in the long-term.
Piracy, fuelled by the widespread availability of illicit streaming devices, continues to be major problem in Asia-Pacific, and is widely seen as a genuine threat to the long-term sustainability of pay-TV and OTT businesses.
Pay-TV executives shared broadly positive yet sometimes reserved views about the growing adoption of Android TV across the region. While it is widely seen as a helpful way to reduce technology costs, open up the platform to partners and developers, provide access to an established app ecosystem, and roll out advanced features, such as voice control, executives noted that larger providers are concerned about giving up control of their platforms.
To adapt to the new competitive landscape, industry executives identified three key priorities for pay-TV providers in Asia-Pacific:
- Invest in the next generation of paid-for video services: Pay-TV providers need to offer a more diverse range of packages and services at a wider range of price-points and across different devices, leveraging existing pay-TV infrastructure and fixed and mobile broadband networks. Executives also noted that providers will have to address the growing consumer demand for flexible content pricing and packaging, low-cost offerings, a mix of global, regional and local content, and personalised user experiences that are available across multiple devices. This will enable pay-TV providers to compete against new entrants, with some also seeing an opportunity to become the central aggregators of choice, offering a wide range of content presented in an integrated and user-friendly experience.
- Re-think the relationship between pay-TV service providers and content owners: With content owners increasingly selling their assets to a wide range of service providers, the challenge for the pay-TV industry is to defend its value proposition against OTT operators and pirates. To do that, pay-TV providers and content owners need to re-think how they work together and move away from legacy business models to support a more diverse range of products and services, often at more attractive price points. This will involve more flexibility and give-and-take on both sides, as well as a willingness to share risks and rewards. It may also increase the importance of scale, with providers increasingly looking at joint-ventures, pan-regional alliances and mergers and acquisitions to support their businesses in the region.
- Combat streaming piracy: With continued consensus that the industry needs to do more to combat piracy, executives see further opportunities to work together to develop new approaches to monitor, track and stop the distribution of illegal content. By increasing investment in effective technological solutions, supporting anti-piracy initiatives, such as CASBAA’s Coalition Against Piracy (CAP), lobbying to improve legal frameworks and government enforcement, the industry believes that pirates can be effectively tackled. Alongside such activities, executives also argue that the industry can do more to offer affordable and user-friendly legitimate video services that appeal to consumers who currently choose pirate services.
“Asia-Pacific is a complex region for pay-TV, with advanced and emerging markets facing a multitude of challenges that can require specific solutions in each country,“ said Simon Trudelle, Senior Director, Product Marketing, NAGRA. “What is clear is that regardless of their market conditions and subscriber base, all service providers need to re-think how they face these challenges if they are to maintain growth. By working with content owners and third parties, they can effectively combat the dual pronged attack they face from OTT providers and pirates to offer consumers compelling experiences tailored to their individual requirements.”
“Since the Pay-TV Innovation Forum was launched in 2016, the Asia-Pacific pay-TV market has continued to face real challenges,” said Jon Watts, Managing Partner, MTM. “This year, we’ve seen pay-TV service providers taking important steps – to tackle piracy, respond to the rapid growth of OTT, and improve the underlying economics of offering pay-TV services. There’s no doubt that these activities are causing pressures, but it’s encouraging to see the industry investing in innovation, offering more choice and value to consumers, and taking a long-term view. It will be interesting to see whether there’s a drive for consolidation, as we’ve seen in the USA and Europe – especially as pan-regional OTT players continue to gain traction with consumers.”