Report Charts Strong Gains in Asia-Pac Pay-TV Subs, Revenues

HONG KONG: The pay-TV market in Asia, accounting for 48 percent of TV homes currently, will continue to see strong gains in the years ahead, according to Media Partners Asia—generating revenues of $78 billion by 2020—contingent upon investments being made in content, distribution and new technology.

While these investments will benefit consumers, they will come at a high cost for channels and platforms, resulting in strained profit margins on services in India, Japan, Korea and Malaysia. "These trends will prevail over the medium term due to competitive intensity, well meaning but counter-productive regulation and industry fragmentation," said Vivek Couto, executive director of MPA. "Having said that, we already see operating leverage improving in a number of markets. Future growth also hinges on continued improvement in ground-level execution, talent and regulation, especially in India, China and Southeast Asia. Our research shows that the growth of broadband represents more of an opportunity than a threat for pay-TV companies; the key cross-sector competitive dynamic in most markets remains fierce competition from free TV. There is a bright future for pay-TV in Asia Pacific but it belongs to companies willing to invest and innovate, positioning themselves as consumer businesses.”

The MPA report, Asia Pacific Pay-TV & Broadband Markets 2011, indicates that 367 million homes were subscribing to pay TV in the region at the end of of 2010, reflecting a 48-percent penetration. MPA estimates this will reach 486 million in 2015, 57 percent of TV homes, and 570 million in 2020, 62 percent of TV homes.

Digitization continues on pace, with the number of digital pay-TV subscriber homes reaching 148 million in 2010. The report sees this rising to 362 million by 2015 and 483 million by 2020, led by China and India, plus full digital conversion in Japan and Korea. Digital pay-TV penetration is expected to rise from 20 percent in 2010 to 42 percent in 2015 and 52 percent in 2020.

The region’s HD base was up to 12.4 million in 2010, on track to increase to 45 million by 2015 and 81 million by 2020. Excluding China and India, HD penetration of digital pay-TV subs is forecast to double from 30 percent to 60 percent by 2020.

Pay-TV revenues gained 14 percent in 2010 to $38 billion, led by ARPU growth in more developed markets and sub gains in emerging territories, combined with a rebounding ad market. Pay-TV advertising, which was up just 4 percent in 2009, saw a 15-percent jump in 2010 to reach $8 billion, 25 percent of the total TV ad pie. Sub revenues rose to $30 billion, a 14-percent hike. By 2015, MPA forecasts Asia-Pac pay-TV revenues will reach $60 billion, rising to $78 billion in 2020.

MPA notes in particular the tremendous gains expected for the Indian market. The country will become the world’s largest DTH pay market by end 2012, and will top China as the largest market for pay-TV advertising after 2017. Couto commented, "India remains Asia’s largest pay-TV market opportunity in which revenue, cost and capital expenditures are growing at an alarming rate due to various dynamics, including macro growth, competition and digitization. Encouragingly, revenue growth is trending at optimum levels due to a strong economy, a buoyant advertising market and the rapid growth of DTH. Yet, such is the extent of competition, cost and fragmentation that profit margins remain low, even for market leaders. We expect margins and value chain economics will improve in the long term, through digitization of cable networks, rising subscriber scale, improved cost control and strong advertising growth. Pricing power for pay-TV services will still be modest however, as ARPU growth will remain under pressure due to competitive and regulatory dynamics.