The Asia-Pacific pay-TV industry will grow at a 5.8% average annual rate from 2016 to 2021, according to a new report, Asia Pacific PayTV & Broadband Markets, published today by leading industry analysts Media Partners Asia (MPA).
MPA projects pay-TV industry sales across 18 major markets in Asia Pacific to climb from US$54 billion in 2016 to US$72 billion by 2021, rising thereafter to US$81 billion by 2025. The pace of pay-TV subscriber and revenue growth is slowing however, weakened by an economic slowdown and increasing competition from both legal and illegal alternatives. PayTV subscriber growth declined or substantially decelerated in Hong Kong, Indonesia, Malaysia and Singapore in particular.
At the same time however, India and Korea remain two of the region’s largest and most scalable pay-TV opportunities. Revenue growth will also accelerate in Australia and the Philippines, largely thanks to subscriber growth.
However, MPA analysts have lowered subscriber growth forecasts across much of Southeast Asia, especially for Indonesia, Malaysia and Singapore, although ARPU (average revenue per user) should remain resilient in both Malaysia and Singapore.
The pay-TV industry in China, meanwhile, remains the largest in the region and is becoming increasingly digitalized. Pay-TV growth opportunities for broadcasters are limited however, due to increasing regulation as well as competition from free and paid online video services.
Elsewhere in the region, subscription-based video-on-demand (SVOD) services have had a negligible impact on pay-TV so far, despite the global launch of Netflix earlier this year, in addition to increasing competition among lower-priced regional and local SVOD services.
Most pay-TV subscribers downgrading or canceling pay-TV services are moving instead to illegal services, as well as to free, ad-supported options across both TV and online video.
At the same time, more pay-TV operators are rolling out connected set-top boxes that can incorporate OTT video services. In addition, some operators (telcos in particular) are aggressively hard-bundling video content, including pay-TV channels, with high-speed broadband. This is helping drive subscriber growth, especially in a number of Southeast Asian markets.
Commenting on the report, MPA executive director Vivek Couto said: “Pay-TV providers are increasingly focused on repackaging and repricing both linear and ondemand services. Local and regional Asian programming is also becoming increasingly important. At the same time, sports, kids, infotainment and Hollywood movies will remain mainstays of the pay-TV bundle, although channels offering Hollywood TV series are being disrupted by both legal and illegal OTT. Few pay-TV operators have been able to capture or monetize large-scale online video viewing so far, although early results in Hong Kong and Korea are encouraging. The goal is driving the next cycle of customer growth and consumer spend. Pay-TV user interfaces and data analytics are improving, although often too slowly to effectively compete with legal and illegal OTT rivals. Increasingly, viable pay-TV operators will become drivers and targets for M&A and consolidation, as the worlds of pay-TV, broadband and OTT collide and converge in the wider context of media and telecoms.”
Ex-China, which remains a utility-oriented and highly regulated pay-TV market, Asia Pacific added ~9.6 million net new pay-TV customers last year, the slowest pace of growth since 1997-98. MPA analysts project a spike to 10.4 million net additions ex-China this year, driven by government-mandated cable digitalization in India. Subscriber growth should decelerate again from next year onwards, moderating to between 4 million to 8 million net adds per annum between 2018 and 2022.
Including China, MPA sees total pay-TV subscribers in Asia Pacific growing from ~567 million in 2016 to ~764 million by 2025. Adjusted for multiple connections in a household, pay-TV penetration in Asia Pacific will grow from 55% of TV households in 2016 to 61% by 2025.
Digital pay-TV penetration in Asia Pacific will increase from 80% of pay-TV subs in 2016 to 91% by 2025, as pay-TV networks in most markets go 90-100% digital, with the exception of India (~70%) and Pakistan (32%) in the 18 markets covered in the report. HD penetration of digital pay-TV subs in Asia Pacific will grow from 30% in 2016 to 46% in 2025.
The fastest growing segment within the Asia Pacific pay-TV industry over 2016-21 will be value-added services (VAS), driven by VOD, as revenues climb at an 11 % CAGR over the next five years. Australia, China, Japan and Korea will be the biggest markets for VOD revenue growth. Malaysia will lead amongst smaller markets.
In standout pay-TV markets such as India and Korea, pay-TV subscription revenue growth will be driven by high volumes and a level of ARPU upside (partially offset by price competition). Higher yields will also boost subscription revenue growth in Hong Kong, Malaysia, the Philippines, Singapore and Vietnam.
Pay-TV advertising will expand from US$11.6 billion in spend in 2016 to US$16.2 billion by 2021, with growth driven by markets with high levels of pay-TV penetration such as India and Korea, along with China. Meanwhile, pay-TV ad spend in Australia, Japan and Taiwan will remain material, although growth in each of these markets will soften. Malaysia and the Philippines will remain the standout markets for pay-TV advertising in Southeast Asia.