Digital Leadership for Asian Pay TV

January 20, 2009 World Screen

December 2008

The global digitization of TV services is certainly benefiting the Asia Pacific pay-TV market, where there are now 71 million digital pay-TV households out of 300 million pay-TV connections.

December Indeed, the deployment of digital infrastructure is providing Asia Pacific pay-TV operators and cable channels the greatest opportunity to deliver sophisticated high-value pay-TV packages to consumers, including HDTV and interactive offerings. In many ways the increase in digital pay-TV market penetration is bringing the industry close to a tipping point in Asia. 

In the mega-markets of India and China, India now has 8.5 million digital pay-TV households, while China represents 34 million digital cable connections. The Indian digital market has been driven by the recent exceptional growth in the digital DTH market but, at last, with 1.7 million digital cable subscriptions, India is finally taking off.
While China’s most recent market growth was clearly driven by the Beijing Olympics, the next trick will be to enable new premium content to enter the market to encourage increased ARPU [average revenue per user] and to stimulate additional demand.
The increase comes as the $26-billion Asian pay-TV industry is booming, with subscribers increasing by 17 percent in the 12 months ended in June.  
Thanks to the Olympics in the third quarter, China also experienced a dramatic uptake in advertising revenues, which have extended well beyond China’s borders. Indeed, the economic fundamentals within Asia remain strong for the growth of all TMT [technology, media and telecommunications] markets.
Strong GDP growth and higher disposable income is driving strong growth in total advertising and consumer spending across the region. The good news extends beyond India and China into Indonesia and Vietnam. The prospect of a period of greater political stability following elections in Thailand and Taiwan also adds to a feeling of optimism, which should wash over the developed markets of Hong Kong and Singapore as well.
Thailand should see a burst of new revenue growth if, as per legislation, the pay-TV market is deregulated for pay-TV ad sales and regulated for subscription revenues (thanks to the long-awaited new licensing regime for cable and satellite services). 
However, as the product becomes more valuable, it is more prone to theft. The Cable & Satellite Broadcasting Association of Asia (CASBAA) estimates that the net cost of Asia Pacific pay-TV piracy will top $1.7 billion this year, up from $1.5 billion in 2007. Nevertheless, this is in line with market growth, while digital deployment should slow piracy as net subscriptions continue to grow.
CASBAA’s piracy estimate doesn’t account for losses related to Internet piracy, which could be high in Internet-savvy markets such as China and South Korea. The industry uses its estimate to lobby governments to adopt antipiracy measures and convince them that the problem costs them tax revenue. Digital-TV technology would be the best solution to address the problem, but the cost is always expensive.
Meanwhile, in emerging pay-TV markets such as Vietnam and Pakistan, industry growth remains strong. In Vietnam, the legitimate market has more than doubled this year, and Pakistan is now estimated by CASBAA to have up to 8 million connections to pay-TV services.
In some markets, technological advances have affected the level of revenue leakage. For instance, in urban Indonesia and the Philippines, ongoing conversions of analogue networks to digital have reduced individual household “line-tapping” [stolen cable connections].
Hong Kong’s increasing reliance on digital-TV systems has also made it more difficult for pirates to tap into pay-TV networks, with piracy now accounting for $20 million, down from $26 million last year. 
Pay-TV piracy in Asia seems set to stabilize in a digital world, even as the Asian market remains on track for growth.  
Though the world economy is experiencing its downturn, so far there are no signs of it hurting the pay-TV industry’s revenue in Asia. Certainly, this is going to be a challenging time for the industry, but the fundamentals for pay-TV growth remain solid. With more content, increasingly convergent technologies and newly deployed delivery platforms, the pay-TV markets can only keep growing. 
Finally, an increasing number of U.S. and European investors and pay-TV operators are now recognizing the enormous potential of the Asian opportunity, looking for new ways to take a larger slice of the market. This trend coincides with the growing CASBAA membership; these players account for almost half of our new members since January this year. The pay-TV market can only grow more vibrant by the day.
 
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Simon Twiston Davies is the CEO of the Cable & Satellite Broadcasting Association of Asia (CASBAA).