MPA Research: Pay channel consolidation to accelerate in Asia Pacific

• MPA releases latest edition of Pay-TV Networks Channel Database
• Severe deterioration for earnings and profits ex-India in 2018
• Quest for synergies and scale will speed up consolidation

The pay-TV market in Asia Pacific is entering a phase of accelerated consolidation as subscriber growth and spend deteriorates across key territories, according to leading independent research & consulting group, Media Partners Asia (MPA). The latest edition of MPA’s Pay-TV Networks Channel Database, published today, shows that aggregate revenues across 13 major pay-TV networks in Asia Pacific grew by just 1% in 2018 to reach ~US$4.9 billion (after 5% growth in 2017), while combined Ebitda fell by 5% in 2018 to US$0.9 billion, approximately the same rate of decline as 2018, ramping up industry pressure. India stands alone as the last major buffer against secular weakness in pay-TV in Asia, although new regulations threaten pay-TV subscription and advertising growth in India too, at least in the near term. The 2018 fall in Ebitda steepens to an 8% drop to US$0.5 billion for the measured companies when Star India and Sony India are excluded.

Commenting on the key findings from MPA’s Pay-TV Networks Channel Database, executive director Vivek Couto said:“Consumer demand for traditional pay-TV has been impacted forever by high-speed broadband, which is driving rapid increases in online video consumption as well as piracy. These trends have intensified downward pressure across Asia’s pay-TV ecosystem, especially in Southeast Asia, led by Singapore and Malaysia, alongside secular shifts in Australia and New Zealand. This will accelerate consolidation as well as major shifts in how channels and content are marketed and sold. Pay-TV’s first big wave of consolidation, led by Disney buying Fox and AT&T buying branded networks from Turner and HBO, will play out with momentum across Asia Pacific over the next year. Future consolidation and rationalization will be defined by global moves and M&A possibilities involving large assets in India. Major players such as Discovery, CBS, Viacom, A+E, Sony and Universal are now competing for the consumer wallet with an increasingly scalable Disney and a newly integrated WarnerMedia within AT&T.”

MPA’s Pay-TV Networks Channel Database includes the following businesses: (1) Star India & Fox Networks, both now part of Disney, as well as Disney’s own branded channels; (2) WarnerMedia networks owned & operated by HBO and Turner; (3) Sony India (including Ten Sports) plus Sony’s ex-India branded networks business; (4) Discovery, including Scripps; (5) BeIN Media; (6) Viacom (excluding an unconsolidated 49% interest in Viacom18 India in 2018); (6) Universal; (7) A+E.

Across the 13 groups covered by the research, India accounted for 62% of Asia Pacific pay channel revenues in 2018, led by Star India (now owned by Disney) and Sony. If revenues from Star and Sony India are excluded, Southeast Asia leads, contributing 32% of revenue in 2018, driven by Disney (including Fox), WarnerMedia and BeIN. India would then contribute 18%, led by Disney, Discovery and WarnerMedia, followed by Japan with 16%, led by Disney, Discovery, WarnerMedia and Viacom. Hong Kong & Taiwan and Australia & New Zealand contribute 10% each in this scenario.

Meanwhile, factual & lifestyle channels had the biggest share of revenue by genre, excluding large local networks in India, with 21% in 2018, closely followed by kids channels (21%), then English GE (17%, a material decline from 19% in 2017), sports (15%, up from 14% in 2017), English Movies (12%, up from 11%); (6) Asian entertainment (9%, up from 8%), news (3%), and music (2%).

At the same time, Asia’s relatively young online video market continues to expand rapidly, fueled by advertising scale in particular. Ex-China, where internet video is a highly regulated domestic phenomenon, online video revenues in Asia Pacific grew 40% in 2018 to total ~US$8 billion, according to MPA. As part of this, online video advertising grew 36% to reach more than US$5 billion while subscription revenue grew 50% to surpass US$2.8 billion. Outside China, Google (YouTube), Facebook, Netflix and Amazon still dominate advertiser and wallet share, although local players are starting to emerge with scale, including Stan in Australia, Hotstar (now owned by Disney) in India, Hulu in Japan and Viu in Hong Kong and Southeast Asia. Pay-TV and telecom operators are also increasingly investing in platforms and technology to aggregate OTT services and provide more choice to their customers along with simpler packages of pay channels with digital rights.