AsiaPac OTTs to Up Content Spend

Media Partners Asia (MPA) projects that online video operators in the Asia Pacific will spend some $31.5 billion on content by 2023, up from $16.6 billion this year.

Online video content costs across Asia Pacific grew by 27 percent in 2017 to reach $13 billion, 85 percent of which came from China. Outside of China, the biggest investments will come from Australia, India, Japan and Korea.

Meanwhile, online video revenues from advertising and subscriptions in the Asia Pacific are set to rise to $48 billion in 2023, up from $21 billion this year, according to MPA.

That increase marks an 18 percent compound annual growth rate (CAGR), MPA notes in its new report, Asia Pacific Online Video & Broadband Distribution. About 60 percent of the total $48 billion pie will come from China, MPA says. China will also be home to a whopping 75 percent of all direct-to-consumer SVOD subscribers in the region by 2023. After China, the largest markets by revenue will be Japan, Australia, India, Korea and Taiwan.

“Online video monetization is starting to scale, supported by rising investment in premium entertainment and sports as well as the growth of broadband and digital payments,” notes Vivek Couto, executive director of MPA. “Strong digital ecosystems are emerging, especially in China, while telcos are also becoming important aggregators of video services in markets such as Australia, India and Southeast Asia. Advertising is a major revenue stream for online video across the region, while subscription is also key, especially in Australia, China and Japan, and growing from a low base in India, Southeast Asia, Korea and Taiwan. Different payment models are emerging across China, India and Southeast Asia incorporating, including TVOD and shorter time commitments, freemium tiers, bundles and loyalty programs tied to a broader mix of digital services.”

Couto notes that the online video sector is in the midst of “the early innings of an industry evolution;” one that will require “high levels of investment and strong balance sheets.” Couto adds, “For standalone players, there is no clear path to significant free cash generation in any market over the medium term, while integrated digital giants and large-scale TV players are subsidizing losses for their online video services, although operational breakeven is likely in the near to medium term for local platforms in Australia, China, India and Japan.”

Barriers to growth include online piracy and fragmented markets; outside of China, the top three players in any given territory have around 50 percent or more of online video subscription revenues. That leaves considerable scope for market consolidation, the report notes.

Online subscription revenues have seen strong growth in China, reaching about $5 billion this year from $850 million in 2015. Subscription revenues are “strong and increasingly scalable” in Australia and Japan, while India is benefiting from improved payment infrastructure and sports rights investments. In Southeast Asia, online video revenues from subscriptions are expected to hit $267 million this year and could grow to $724 million by 2023, led by Hong Kong, Indonesia and the Philippines.

On the advertising side, net revenues are forecast to reach $30 billion in 2023 from $13 billion this year. YouTube and—to a lesser extent—Facebook will remain the market leaders, accounting for 73 percent of online video spend ex-China. The biggest online video ad markets after China by 2023 will be Japan, Australia, India and Korea.