The rapid take-up of fixed and mobile broadband is among the key factors reshaping how platforms and content companies engage with consumers across Asia, attendees heard at the second-annual APOStech summit in Hong Kong.
Organized by Media Partners Asia (MPA), the team behind the annual APOS event in Bali, APOStech gathered executives from technology companies, platforms and channels at the Conrad hotel in Hong Kong this week.
Opening the session, Vivek Couto, executive director of MPA, noted that the conference is a reflection of how important technology, and the role of the CTO, is to companies operating in the media business. “We’re very fortunate to have with us today 30 platforms—cable, satellite, telecoms and also broadcasters—who reach out to 90 million households.”
Aravind Venugopal, VP of MPA, then took delegates through the findings of MPA’s latest industry research covering eight key markets in the region. Venugopal stressed the importance of next-generation broadband. “In the next five years, we forecast 30 million new next-gen broadband homes to be lit up.” About 45 percent will come from markets like India, and 9 million will be from Southeast Asia. “That’s 9 million new homes that will consume video services.” Much of that will come from the conversion of legacy networks, “but there will be new customers who’ve never had broadband in their life. That is an opportunity for video providers.”
Venugopal also pointed to strong gains expected in mobile broadband usage across the region, led by 4G deployments. “We are forecasting there will be 395 million new mobile broadband subscribers between 2017 and 2022, of which 150 million will be in Southeast Asia.”
By the end of this year, MPA forecasts just under 250 million pay-TV subscribers in AsiaPac, excluding China, of which 35 to 40 percent are in India. By the end of the decade, the base should grow to about 270 million. “Some markets are under pressure. It would be unwise to say that the pay-TV market is still very healthy. It is healthy in pockets but there are challenges in many parts of the region. Some of these markets will continue to grow off the back of bundled services.”
Greater gains are expected in SVOD subscriptions, albeit from a much smaller base. MPA forecasts an increase from 54 million to about 108 million in the next five years. “The key markets where that growth will come from are Australia, Japan, Korea, India and Indonesia.”
Venugopal went on to note that there is “significant” overlap between pay-TV usage and SVOD usage across the region—except in the Philippines and Indonesia.
Pay-TV revenues are expected to grow from $25 billion to about $40 billion in 2022. Free-to-air revenues will reach about $15 billion. Online video revenues are still small, and still mostly dominated by advertising, reaching about $10 billion by 2022. The biggest opportunity is in data revenues.
A big concern for video services bundled with telco packages is churn—subscribers, Venugopal said, tend to switch telco providers often in the search for better deals. Another big concern for the industry is piracy, especially when it comes to pirate set-top boxes. Venugopal also noted the issue of pricing models, with consumers citing cost as a key issue when churning away from online platforms.
India was among the key markets in the spotlight at APOStech, with a keynote from Harit Nagpal, managing director and CEO at Tata Sky, who offered a frank and insightful commentary on the challenges and opportunities of the local pay-TV landscape.
“From the outside you see a 1.3 billion population, you see 265 million, 270 million homes, and say, Wow, it’s a great big market,” Nagpal said in his keynote conversation with Couto. However, once you break up that 270 million into segments, based on income, you start to see the obstacles to making money in Indian pay TV. “The top 5 million customer homes are the ones who are willing to pay up to $10 a month for content. 100,000 of these would buy it at any price. The next slot is about 25 million homes who would be willing to pay anywhere from $5 to $10 a month for content. The bottom 100 million don’t have a television at home.”
The top echelons of the pyramid tend to be paid for the entire month, with many on annual plans. “The challenge is the big chunk of customers who are averaging $3 a month—they recharge for three days, four days, seven days at a time, and when the next recharge is due and they don’t have money in the pocket or have other priorities, they won’t recharge and my service [to them] goes off. I get 22, 23 days a month out of them.”
Couto asked Nagpal about Free Dish, which is accessible to that mass market. “Free Dish is something I welcome,” Nagpal said. “It’s very difficult for a person to think of buying a TV and committing to a subscription every month. Free Dish is the only ally I have who will convert the homes into buying a TV first. Once [people buy] a television, my job becomes easier to convert some of them into paying a subscription to me.”
The conference agenda also featured input from channel operators, including HBO Asia CEO Jonathan Spink. The premium business has been “remarkably robust,” Spink said. “We’re in the fortunate position that HBO has a very strong brand, a very good product, and it’s held up really well. I can’t say there aren’t clouds on the horizon [from] black box piracy, which is damaging the whole infrastructure. That’s the real threat we’re facing.”
On the prospects for OTT in Asia, Spink, whose HBO GO platform is offered to pay-TV subscribers in the region through affiliate partners, noted that some of the stand-alone services “are remarkably cheap. Pricing will be the real key issue for companies that do go direct to consumer. You have to have a price you can make some money on!”
Stand-alone OTT operators also took center stage at APOStech, with sessions featuring executives from HOOQ, iflix and Tribe.
“The business model still needs evolution,” said HOOQ CEO Peter Bithos. The platform recently added TVOD alongside its existing SVOD service. “One of the benefits we have is understanding how the customers operate and live their lives. In Southeast Asia, as soon as you get past today’s pay-TV base, it’s not just that the customer segment changes, it’s the way they live their lives, the payments they use, how cash flow comes to them, how cash flow goes out. The models that you see today in OTT don’t match that. We need to change for the customer. The customer isn’t going to change their lives for us. I don’t think a chunky monthly subscription is the only answer.”
Bithos noted that HOOQ was the first operator to launch a weekly subscription with Hollywood content. “We learned from that. Now we’re taking the next two, three, four iterations of that. It is about not just understanding what content customers want, but also, how do customers live their lives? When is money in their back pocket?”
Emmanuel Frenehard, chief technology officer at buzzy OTT upstart iflix, talked about the journey the company has been on in developing relationships with telcos to expand across Asia, the Middle East and Africa. Integration with a telco can take as little as 12 weeks and as long as 6 months.
In the next 6 to 12 months, iflix is focused on expanding the number of devices it’s available on, further experimentation with live events, as it’s done in Indonesia, and making sure that the customer “is finding more ways to connect with iflix,” Frenehard said. “We’re extremely focused on engagement.”
Iskandar Samad, CEO of Tribe, talked about the rollout of the fairly new service, which is owned by Malaysian pay-TV giant Astro. “Because of our pay-TV heritage, we offer a fair amount of linear channels in addition to VOD, so we’ve taken a slightly different approach.”