Advanced Television

Study: APAC telcos invest in homegrown OTTs

February 16, 2023

Asia-Pacific multichannel operators have become hybrid providers, with both traditional multichannel and virtual multichannel or OTT subscription offerings launched in recent years, according to Kagan’s 2022 survey of OTT partnerships and virtual multichannel services.

The study, revealed in a Blog Post by Xiuxi Zhu, Associate Research Analyst at S&P Global Market Intelligence’s Kagan unit and Fed Mendoza, Research Associate for the Telecommunications, Media, and Technology (TMT) team within S&P Global Market Intelligence, also noted the increasing popularity of online video-streaming services and dwindling traditional pay-TV subscriptions. Many telcos without their own pay-TV services have also launched streaming video platforms to compete with both multichannel operators and third-party OTT providers.

As of November 2022, Kagan has identified 32 VMC or OTT services launched by telco or pay-TV operators across 15 markets in Asia-Pacific.

Slowing traditional pay-TV growth

Telco and pay TV operators’ active participation in the online streaming market is growing while many of the region’s top operators continue to lose traditional multichannel customers. Kagan’s market-level forecasts show the number of pay-TV subscribers will continue to plummet over the next 10 years across Asia-Pacific’s most advanced video markets, such as Australia, Hong Kong, Singapore, Japan and New Zealand. Meanwhile, India, Indonesia, Pakistan, the Philippines and Thailand – the major emerging markets in South and Southeast Asia – are expected to experience steady growth throughout the forecast period.

Telco and pay-TV operators can easily create synergy by offering their own OTT or VMC services as demand for streaming services continuously expands, suggests Kagan. Some mature multichannel markets, such as Singapore, Australia and New Zealand, have seen self-run online streaming businesses offset traditional TV losses, create new revenue streams and reduce subscriber churn.

Multichannel operators transition to streaming video in mature markets

Singaporean telco StarHub transformed its IPTV service TV+ and TV+ Pro into a VMC platform in September 2020, allowing users to watch streaming content and linear channels across TV, mobile and web without a requirement to use Starhub’s internet connection. The availability of linear channels and VoD content on all platforms helped attract more users to Starhub’s streaming business despite continuous losses of pay-TV users through the end of 2021.

As an early streaming adopter, Australian pay-TV and broadband operator Foxtel Cable Television launched two OTT platforms that cater to customers with different viewing preferences. Kayo, launched in November 2018, is a sports streaming service, whereas Binge, launched in May 2020, is a multi-genre entertainment service with movies, drama, reality shows, sitcoms and documentaries, among others.

In New Zealand, direct-to-home incumbent Sky Network Television streaming customer base spiked in the second quarter of 2020 following the company’s acquisition of Spark’s Lightbox service, which merged into Sky’s existing Neon OTT platform. As one of the pioneers of streaming video, Sky has benefited from the rapid growth of VMC/OTT services in recent years. As of the second quarter of 2022, Sky reported 436,388 streaming subscribers comprising users of Neon, Sky Sport Now, RugbyPass and retransmission.

OTT allows mobile operators to compete with pay-TV incumbents in emerging markets

The popularity of VMC indicates that viewers still want linear TV content when it is available but prefer more choices of streaming platforms. This trend gives telcos (including mobile operators) without pay-TV businesses a chance to step into the streaming market, especially in regions where fixed broadband, multichannel and online streaming penetrations are relatively low, such as India, Indonesia and Vietnam.

For example, India’s mobile penetration is estimated to reach 89 per cent in 2022 and over 100 per cent in 2031.

Telcos globalise local OTTs

While most pay-TV operators and telcos focus on their home markets and often bundle streaming services with their multichannel offers, South Korea carrier SK Telecom’s Wavve and Hong Kong telco PCCW’s Viu operate more independently from traditional businesses and aim for regional and global expansion with their pure OTT services.

Viu successfully gained viewers across Southeast Asian and Hong Kong markets with abundant offerings of South Korean content. Recently, it started to invest more in content production to strengthen its regional presence in competition with global players such as Netflix.

SK Telecom-backed Wavve, the second-most-popular streaming platform in South Korea after Netflix, hopes to grow further globally as well. It acquired the US-based South Korean content streaming portal Kocowa in December 2022 to start its global business through Kocowa’s distribution in more than 30 regions, including the US, Canada, Mexico and Brazil.

Other than releasing their own online streaming platforms, most telcos and multichannel providers have also agreed partnership deals with OTT business owners to tap into the emerging online streaming market, notes Kagan.

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