MPA: Revenue from Pay-TV, Broadband to Reach $86 Billion by 2012

HONG
KONG, April 21: According to a new report released by Media Partners Asia
(MPA), Asia’s pay-TV and broadband industries will continue to benefit from
economic growth, investment and competition, with revenue to climb at a
compound annual growth rate (CAGR) of 11 percent to reach $86 billion by 2012.

The
new report, Asia-Pacific Pay-TV and Broadband Markets 2008, measures the consumption and value of
multichannel video and broadband services over multiple distribution networks,
including cable, satellite, fiber, ADSL and mobile across 16 markets in the
Asia Pacific. Over the past five years, the region’s pay-TV and broadband
industries have grown at an average annual rate of 22 percent, generating more
than $53 billion in sales in 2007. MPA expects industry revenues to grow at a
CAGR of 8 percent to approach $120 billion by 2017.

Pay-TV
subscription and advertising will rise from less than $25 billion in aggregate
in 2007 to reach $46 billion by 2012 and more than $65 billion by 2017.
Broadband growth will be fuelled by the introduction of next-generation
services and multi-play bundling, which could boost revenues from under $30
billion in 2007 to $43 billion by 2012 and $52 billion by 2017.

Driving
pay-TV subscription are factors such as digitization, including SDTV and HDTV;
the growth of value-added services, including VOD and PVR; and demand for
linear pay-TV channels. MPA notes that India, China, Korea, and Taiwan will
remain the largest markets for advertising, though the company also highlights
the upside in Australia, Hong Kong and ASEAN markets such as Malaysia and
Indonesia.

In 2007, regional pay-TV
penetration reached 43 percent, which could grow to 52 percent by 2012 and 55
percent by 2017. Digital penetration, at a low 7 percent in 2007, will climb
rapidly to 28 percent by 2012, and reach 36 percent by 2017. This means that 56
percent of pay-TV homes will have at least one digital set-top box (STB) in the
home by 2012, growing to 67 percent by 2017 versus 17 percent in 2007. Much of
the region’s digital growth will be driven by China and India, though India
will have a more significant impact for pay-TV distributors and content
suppliers. The report also highlights Korea, Japan, Australasia, Hong Kong and
key ASEAN markets as major drivers of future digital pay-TV deployment. HDTV is
likely to flourish more in North Asia than elsewhere, led by Japan, Korea and
China.

Regional broadband
household penetration is benefiting from investment in fiber and advanced cable
networks, with broadband penetration growing from 16 percent in 2007 to reach
26 percent by 2012 and 31 percent by 2017. Penetration levels will peak in
Korea, Japan, Taiwan, Hong Kong and developed ASEAN markets, while China will
lead emerging markets. In terms of size, China will remain the largest market
for broadband in the region with close to 195 million broadband users by 2017.
India will also experience significant growth, reaching 40 million by 2017,
though penetration levels will remain very low (6 percent versus 38 percent for
China) due to limited ADSL potential and ongoing regulatory and network
capacity issues. Telco fiber and ADSL networks will remain dominant in many
ASEAN markets, Hong Kong and in North Asia. Cable broadband services are also
expected to grow in the region. MPA forecasts indicate that cable modem
households will grow from 9 million in 2007 to reach 20 million by 2012 and 27
million by 2017. Key beneficiaries from advanced next-generation cable
broadband deployment include Japan, Korea, Singapore and Taiwan. In terms of
market share, cable broadband will remain competitive in markets such as
Singapore, India, Korea, Japan and, increasingly, Taiwan.

By 2017, China ($39
billion), Japan ($27 billion) and India ($20 billion) will lead in pay-TV and
broadband industry turnover, followed by Korea ($10 billion) and Australia ($7
billion). Sectoral revenues in China and Korea will be evenly split between
broadband and pay-TV by 2017. In India, pay-TV will still be contributing more
than 90 percent to industry turnover. In Japan, partially because of modest
upside for advertising, pay-TV will have less than 40 percent of total sectoral
revenues.

According
to the MPA, the Asia Pacific added 22.4 million net new pay-TV subscriptions in
2007, with China and India accounting for 90 percent of this growth. MPA sees
net new additions scaling up to about 25 million over the next three years,
boosted by the growth of Indian pay-TV in particular. By 2012, MPA forecasts
show 392 million subscribers, growing to 448 million by 2017. MPA also predicts
that total digital pay-TV subscribers will grow from 48 million in 2007 to 218
million by 2012, and 298 million by 2017. This means that 52 percent of pay-TV
homes will be digital subscribers by 2012, growing to 67 percent by 2017. Much
of this growth will be driven by a government-funded transition to digital in
China, with utility cable TV as opposed to pay-TV leading this transition.
After taking this into account, MPA projections show that only 36 percent of
regional pay-TV homes will subscribe to digital pay-TV homes by 2017, as
opposed to 67 percent with the inclusion of utility digital cable in China. In
2007, pay-TV channels and content providers in Asia generated $10.6 billion in
advertising and subscription revenues. This could almost double to $20 billion
by 2011 and climb up towards $28 billion by 2017. MPA expects advertising to
grow at a CAGR of 10 percent over the next decade to top $16 billion by 2017,
driven by economic expansion as well as growing pay-TV penetration. MPA anticipates
a big boost from digital deployment in India, North Asia and ASEAN over the
long term, with channel fees climbing at a CAGR of 14 percent to reach $11.4
billion by 2017, versus $4.5 billion in 2007.

According to the report,
lower economic growth could, in the near term, limit the demand for pay-TV and
broadband in mature markets, as well as restrict the scope for advertising
growth. At the same time, global financial concerns will limit the availability
of capital in emerging markets. These risks may be offset by robust levels of
regional economic growth, which should help bolster demand and advertising
prospects as well as financing options and M&A. Regulation remains the big
concern, as it continues to constrain profitable growth and investment in key markets
such as China, India and Taiwan. The MPA notes that there is scope for
progressive change but that current regulatory realities limit rewards and
returns for media investors and distributors while also increasing uncertainty
over long-term strategy.

MPA’s executive director,
Vivek Couto, said: “Digitization and broadband penetration is growing rapidly
in Asia, boosted by growing economies of scale in platform operation;
technological change and lower equipment costs; and the availability of wider programming
options. Near-term risks include softening economic growth as well as
deteriorating global credit conditions and equity markets, while longer-term
risks converge around regulation. More encouragingly, the broad fundamentals of
the region in general, and markets such as India in particular, are strong.”

—By Irene Lew