“Broad Recalibration” for AsiaPac Pay TV

Companies operating in the Asia-Pacific’s pay-TV industry are stepping up their efforts to integrate online video into their offerings and focusing in on premium content as they face a new wave of competition, Media Partners Asia says in its new report.

Asia Pacific Pay-TV Distribution covers 17 markets across the region. It projects 5 percent annual growth in pay-TV revenues from 2017 to 2022, reaching $68.5 billion. India and Korea will drive that growth, MPA says, with the two markets representing 77 percent of pay-TV subscribers and 50 percent of revenues for the region, excluding China. Together, they will contribute more than 80 percent of the incremental growth revenue in the region, excluding China, in the forecast period.

“Cable and telecom operators are striving to reignite or sustain pay-TV customer growth by bundling pay-TV channels and on-demand services with broadband,” reports Vivek Couto, the executive director of Media Partners Asia. “In Indonesia, Korea and Thailand for example, bundling has emerged as an important driver of net new pay-TV additions, underpinned by the rollout of high-speed fiber broadband. At the same time, pay-TV operators in Australia, Hong Kong, Japan, Malaysia, New Zealand and Singapore are adding more internet-based services, to revive a flagging consumer proposition. These services include cloud delivery, through new DVRs, as well as Android-enabled set-top boxes with strong internet functionality that incorporate online video services. These upgrades could limit cord-cutting and [also] help combat piracy across key markets. A number of pay-TV operators in India, Japan, Korea and Southeast Asia are undertaking set-top box integration with various OTT platforms to limit churn among premium customers as well as drive adoption among non-pay-TV customers.”

Couto also points to shifting content strategies as interest in premium Asian programming, notably Korean series, continues to rise. In addition, “premium sports still offers a vital lifeline for many pay-TV platforms.” Hollywood and other international fare is still vital, Couto continues, “but the market for international pay channels, especially players focused on Hollywood series, is saturated and, in some cases, shrinking. Increasingly, this content is migrating online, with OTT operators bidding up the cost of popular franchises. While Hollywood movie channels, kids’ networks and Asian pay channels are in robust health, there is little demand for new pay channels outside India and Korea.”

India is still highly regulated with low ARPU, but cable digitalization across the country, a growth in the customer base and a strong ad market will fuel gains in that market, with revenues set to rise to $14 billion by 2022. “Korea’s pay-TV market is also highly regulated and also over-saturated, with almost all Korean homes subscribing to at least one pay-TV service,” Couto says.

“Nonetheless, telecom operators are driving pay-TV customer and ARPU growth in Korea, through broadband and IPTV bundles as well as innovative VOD services. Such dynamics will help drive Korean pay-TV industry revenues to $6.8 billion by 2022 from $5.5 billion in 2017, a 4.4 percent CAGR.”

Couto says that the Japanese pay-TV sector is scalable and profitable, even though pay-TV penetration remains low. ARPUs are high and MPA sees potential for increased local ad sales. The market is expected to contribute 8 percent to incremental pay-TV revenue across the region between 2017 and 2022.

MPA sees the smaller markets of Hong Kong, Singapore and Malaysia as being “fundamentally challenged” with an acceleration in cord-cutting, cord-shaving and piracy. Pay-TV platforms are looking to counter those headwinds with strong entertainment and sports lineups and new products and packaging. Nevertheless, these markets will shed about 200,000 subs over the forecast period, potentially more.

In Southeast Asia, notably Indonesia and Thailand, the key strategy for operators is broadband bundles. Overall, Southeast Asia will contribute 16 percent of net new pay-TV subs to regional growth, excluding China, over 2017-22, but only 9 percent in incremental revenues.

Australia has seen significant disruption from online video, with MPA forecasting that revenues will remain flat in the period. In Taiwan, meanwhile, revenue increases are expected to be marginal but the pay-TV base should remain steady at about 84 percent of TV homes.