Online video consumption and broadband distribution continues to grow rapidly across Asia Pacific with content monetization models steadily evolving, according to a new report published by Media Partners Asia (MPA). The report, entitled Asia Pacific Online Video & Broadband Distribution, indicates that online video revenues, including net advertising and subscription fees, will grow at a 21% CAGR across the region between 2017 and 2022, climbing from US$17.6 billion in 2017 to US$46 billion by 2022.
China will continue to contribute the lion’s share of customers and revenues to the online video industry in Asia Pacific, garnering 85% of SVOD customers and 78% of online video sector revenues by 2022. Such growth and scale reflects: (1) Wide-scale investment in original and acquired OTT content, including early and exclusive windows; (2) A weak market for traditional pay-TV, creating an opportunity for premium content distribution and monetization through online video; (3) Steady improvements in broadband reach and infrastructure, as well as increased adoption of smart TVs and set-top boxes; (4) Consumer adoption of seamless payment systems,developed by the owners of some of the most popular online video services, who are also leveraging data analytics and bundling to create new cohesive new ecosystems for content, commerce and communication. China’s online video market is largely ad-supported but with subscription’s share of revenue hitting 33% in 2017 (compared to 18% in 2015 and 26% in 2016), prospects for a demand-driven subscription model remain bright.
Japan, Australia, India, Korea and Taiwan will emerge as the markets ex-China with the most scale in online video revenues and distribution. This reflects robust payment infrastructure, including in India, along with the growth of advertising-funded platforms and the steady rise of premium, subscription-based platforms. Piracy and under-developedpayment infrastructure will continue to limit growth across much of Southeast Asia although increased broadband penetration (led by mobile connectivity) positions telcos as key partners to drive online video revenues. Online video advertising, in particular, remainsa scalable and vital opportunity in Southeast Asia while SVOD revenues will grow rapidly from a very low base.
Commenting on the report, MPA executive director VivekCouto said, “Advances in telecoms and payment infrastructure continue to point the way forward for the online video sector in Asia Pacific, although business models and regulations continue to evolve in a sector that’s still nascent in most territories. Key trends are emerging: (1) Services anchored to nimble, robust and sustainable business models – built around strong execution and scalable content consumption – are rising to the top; (2) Access to local and Asian content is increasingly essential in almost all markets, while demand for recent windows for franchise-based Hollywood product is also robust. Demand for original content along with movies, kidscontent and sports is also becomingmoreimportant; (3) Content curation, packaging and pricing remain critical, along with brand equity. Telecom operators, which have been focused on either paid conversion or mass reach to drive value, are increasingly moving to tighter payment per consumption models in pursuit of ROI across key video partnerships; (4) The value of branded destinations will increase rapidly within the online video ecosystem as platforms and operators forge partnerships with broadcasters and content players; (5) Leading local and regional players ex-China will start to capitalize on a massive online video advertising opportunity, hitherto dominated in the main by YouTube.”
According to MPA, the online video advertising pie in Asia Pacific will grow from under US$12 billion in 2017 to more than US$25 billion by 2022. Ex-China, this opportunity equates to US$7 billion by 2022 versus US$3 billion in 2017. YouTube and to some extent Facebook will remain dominant, with an average 75% market share of online video advertising between them ex-China by 2022, versus 85% in 2017. Japan, India and Australia, followed by Korea, will be the biggest online video ad markets after China over this period. In SVOD, consumer spend ex-China will accelerate from a low base as revenues reach ~US$3.1 billion in 2022 versus US$1.5 billion in 2017. Japan and Australia will account for a combined 55% of value by 2022 versus 68% in 2017. Southeast Asia’s contribution will climb rapidly from a mere 9% in 2017 to 15% by 2022. Indirect SVOD revenues, which reflect wholesale fees paid by telcos to online video platforms as part of bundling and integration agreements, will remain important in the medium term but become less significant longer-term. Even in the short-to-medium term, telecom operators are recalibrating their approach to ROI with a greater focus on payment per consumption models. Ex-China, SVOD indirect fees will grow from only US$110 million in 2017 to US$213 million by 2022. Average SVOD subscriber penetration of the populationwill only reach 9.8% in 2017. Thisshouldincrease to ~19% by 2022 as total SVOD subs, including direct and indirect connections, scale from 341 millionin 2017 to 676 million by 2022 (from 58 million to 102 million ex-China).
Exponential growth of mobile internet connectivity, combined with a slow but steady transition to next-generation fixed broadband, will provide a significant boost to online video consumption, reach and monetization. According to MPA, data revenues across fixed and mobile networks in Asia Pacific are sizable at US$236 billion in 2017. These will reach US$318 billion by 2022, with the ex-China market size at ~US$175 billion by 2022 versus US$126 billion in 2017. Average mobile broadband penetration will reach 73% per capita by 2022 versus 59% in 2017, with some of the biggest growth coming from India, Indonesia, the Philippines, Thailand and Vietnam. Average fixed broadband penetration will grow steadily from 44% to 52% of households over 2017-22, with the focus increasingly on upgrading high-speed networks using fiber and next-generation cable technologies.
