Opening the second part of the APOS Virtual Series, MPA’s Vivek Couto outlined key trends at play in the AsiaPac media sector, noting that content creators should brace for budgets to be impacted as the industry recalibrates amid the disruption accelerated by COVID-19.
“We are in a new video ecosystem,” said Couto, executive director of Media Partners Asia (MPA). “The world order has been reimagined. TV, free to air and pay television, across AsiaPac, has seen erosion in audience across premium, younger and aspirational demos. That’s been a consistent trend. More aspirational consumers are consuming more premium Asian and Hollywood entertainment. That is driving premium DTC subs. The next battleground is going to be local series. We’re seeing that in India, you’re going to see it in Southeast Asia. Advertising, the lifeblood of mass television, has deteriorated. OTT licensing, in the near to medium term, is not enough to offset that loss. In absolute terms, content investment will decline in key markets as TV has to recalibrate and while OTT increases investment, they will increasingly do so in a more balanced and sustainable mode in the new world. Content creators and storytellers have to be aware of bubbles. Sport rights holders have to be prepared to accept even more serious ground realities than ever before.”
Couto also highlighted the power of aggregation: “The streaming economy is here to stay, but future sustainability can’t just be about walled-garden content and distribution. It has to be about aggregation. The power of aggregation drives scale and eyeballs. It’s important in the OTT world to drive big-screen consumption for premium content across multiple genres, both live and on-demand, and to drive that long-term customer value and engagement. There’s a real need in our part of the world for OTT distribution to create Hulu- and Roku-type platforms.”
The second part of the APOS Virtual Series, which opened today, is set to feature 50-plus speakers, delivering more than 20 hours of live and on-demand content to more than 1,500 registered attendees. Couto’s opening presentation on the future of video in the Asia Pacific explored content consumption during lockdown, broader industry economics and a “Media Scorecard” on how companies have fared this year.
Across Southeast Asia, India, Korea and other key markets, TV ratings for free and pay are up this year. “Indonesia, Korea, Malaysia and India, ratings were up close to 10 percent,” Couto said. Growth was more moderate in the Philippines due to the closure of ABS-CBN’s free-to-air outlets. “At the same time, weaker consumer sentiment and lockdowns have meant that TV advertising numbers are considerably lower in most markets. Korea is significantly impacted, so are the strong free-to-air markets such as Indonesia and Thailand. Indonesia has started to show some recovery post-June. However, we do not project 2019 TV advertising revenue to be achieved again in most markets by 2025. The only exceptions are India and Indonesia.”
Weekly streaming minutes also surged in Southeast Asia, Couto said, rising from 2.4 billion pre-COVID-19 to 5.1 billion during lockdown. Post-lockdown, streaming kept its edge with 4.3 billion weekly streaming minutes. “Netflix and Viu lead in streaming minutes,” Couto said, with local platforms also showing gains. “The ecosystem is expected to thrive in Q4 2020,” Couto said. “The growth in streaming has triggered the adoption of SVOD across the Asia Pacific. But we’re still in the first innings, there’s a long way to go. There is some stickiness to this sector. In some of the key markets, this is expected to catch up to declining pay-TV subscription revenues over the next few years.”
In Indonesia, for example, SVOD revenues will be 1.3 times pay-TV revenues by 2025. In Thailand they will be 1.5 times. “In Singapore, the decline in pay TV continues and is significant,” Couto explained. “SVOD revenue will grow, but will not offset this decline. This raises all kinds of issues for the marketplace.”
Couto also highlighted what’s happening in China, which was the first country to deal with—and contain—the spread of the virus. “As people stayed at home, they spent much time consuming online video. As a result, we see a significant surge in monthly active users across the key OTT platforms in the first quarter. The outbreak caused much disruption to the production of new shows, especially movies and dramas. The scheduled launch of new shows has been delayed by three to four months on average. In the second quarter, the lack of fresh content has led to material declines in consumption at iQiyi, Tencent Video and Youku. At the same time, rising consumption on the competing short-form video platforms further amplified the effect in the second quarter. As a result, MAUs on iQiyi, Tencent Video and Youku dropped below the pre-COVID level.”
Smaller, more niche platforms, such as Hunan TV’s Mango TV and Bilibili, however, had more stable viewership levels.
“All the top five platforms had significant gains in the first quarter [of paying subscribers]. However subscriber growth dropped off and was weaker in the second quarter. That is because of the lack of new premium shows. New releases are expected to peak in this third quarter. Average daily consumption on key platforms began normalizing in the second quarter. In July the average daily engagement, time spent per user, had fallen back to similar levels before the COVID outbreak.”
In India, meanwhile, TV viewership has been rising across most genres—most notably news and kids, while ad revenues have taken a hit, mostly in infotainment. Some of the SVOD majors fared well amid lockdown, especially those that had fresh content. “Paying subscribers for the top five SVOD services in India have increased to 31 million in June. Netflix recorded a significant increase, clocking in around 4 million pay subscribers at the end of the first half. Hotstar has reported steady growth with an absolute subscriber base of approximately 9 million. Amazon has had a robust slate of originals as well as digital-first movie releases and it’s part of the Prime ecosystem, so it’s taken that base of subscribers to 15 million for the same period. We believe India will have more than 50 million paying [SVOD] customers by the end of this year in absolute terms. That accounts for 6 percent of the total addressable broadband market. The operators and the content ecosystem have a long way to go to realize the market potential and really harness the reach and scale and monetization to match that of television.”
On broader industry economics, Couto said the total video industry revenue pie (free to air TV, pay TV and online video) is about $116 billion this year, down from $120 billion last year, recovering to $126 billion in 2021. Online video is driving gains, accounting for almost 25 percent of the second now, rising to 35 percent in 2025.
Overall video advertising will drop by 14 percent in 2020, with the bulk of that coming from losses in TV.
In terms of the overall subscription pie, online video’s share will rise to almost 35 percent in 2025, with pay TV falling from 75 percent to about 65 percent, Couto said. Major gains in online video share will be seen in Southeast Asia, rising from 18 percent to 36 percent. In Australia, online video will be at almost 70 percent of subscription revenues. As compared with India and Korea, where the split will still weight toward pay TV at 80 to 85 percent.
On the content front, Couto said “the decimation of advertising in some of the key markets is going to hurt content creators. The online window isn’t really going to fill the void. That’s a big risk going ahead and recalibration is required, certainly for rights owners and different players looking to monetize rights across the video ecosystem.”
Sports rights, in particular, will take a hit. “The pure economics of sports across the Asia Pacific has not been favorable. Sports has been a key genre for pay TV for a long, long time, to curate and bundle premium subscriptions and also as a launchpad for various broadcaster-led OTT consumer offerings. In the last three years, we’ve seen rights costs in markets with a strong appetite for international properties show a decline, while local properties have driven most of the growth in markets such as India, Australia and Japan. Before COVID, we estimated the gap between revenue generation and rights costs to reduce by 2022. However, due to COVID, operators have lost their premium sports subscribers and may never regain them. Sports OTT offerings are set to grow. Monetization via advertising and subscriber ARPUs may lag behind that of television. That is going to challenge the overall revenue generation. We have now revised our projections to estimate a negative 18 percent impact from COVID on sports revenue generation overall over the next five years, while rights costs will be impacted by only 7 percent. So a further reduction in sports rights costs may be necessary across the region to really sustain this vital lifeblood for fans, for consumers.”
MPA also delivered a “Media Scorecard,” taking a deep dive into the revenues of 45 key companies operating across free to air, pay TV and online video in AsiaPac. “These players account for more than 40 percent of the total video industry revenue.”
For these companies, overall revenues will be down 11 percent this year, with free to air down 22 percent and pay TV down 13 percent but online video rising by 14 percent.
Looking just at the top global media players—including Disney, WarnerMedia, ViacomCBS, Discovery, Lionsgate, AMC Networks and Netflix, “We project revenues will contract more than 8 percent for the group this year. Excluding Netflix, it’s around 11 percent. This reflects some of the struggles these groups are having with their legacy assets, pay networks and TV channels, and so forth, particularly in a COVID year. It also highlights the importance of DTC and streaming businesses.”
On the battle between the major global streamers in Asia, Couto said, “Netflix’s growth highlights a big opportunity in the region for the other key players that own great IP and have the ability to invest in content such as Disney+ Hotstar and HBO. Netflix’s share of revenues based on that pure video vertical has increased and edged above Disney and WarnerMedia this year.”