The rapid evolution of business models for online video and the fate of legacy pay-TV systems are among the key themes reshaping the Asian media business, VivekCouto, executive director and co-founder of Media Partners Asia, told delegates as APOS kicked off in Bali today.
In his opening remarks this morning, Couto noted that there are “more delegates and companies” at the eighth annual event focused on Asia’s video business, which is valued at $118 billion today, encompassing free and pay TV and online video. At a 6-percent compound annual growth rate, that value is expected to reach $160 billion in 2022. Free to air’s share of revenues will fall from 38 percent to 28 percent from now till then, pay TV’s will fall from 47 percent to 42 percent, while online video’s will double from 15 percent to 30 percent.
Of the additional $42 billion added to the industry over the next five years, 67 percent will come from digital, with 32 percent from pay TV and 1 percent from free TV. Excluding China, it’s $13 billion in incremental revenue, of which 54 percent is from pay TV and 40 percent from digital. Digital’s share of new dollars will vary heavily by market, from 20 percent in India up to 100 percent in Japan and Australia.
Couto highlighted wireless broadband’s “explosive growth,” with penetration in the region, excluding China, rising from 32 percent last year to 63 percent in 2022. Growth is slower for fixed broadband, but quality is improving.
Couto also discussed how the subscription ecosystem is rapidly transforming with the rise of online video. “Effectively you won’t have channels or OTT, you’ll just have content on different platforms.”
SVOD subs are set to continue to rise. Excluding China, by the end of this year there will be 37 million SVOD users. “We see that growing at a significant pace to around 80 million by 2022.” Japan and Australia are key drivers of that, while Southeast Asia is still in its infancy but growing at a rapid pace, especially Indonesia and the Philippines. “India is also growing at a decent pace.” Revenue growth, however, will still take time.
“As the SVOD business grows, there are certain concerns,” Couto noted, particularly the path to profitability for standalone platforms. Churn rates are also a concern.
Couto also discussed the rising prominence of telcos in the video business. “In this new world of telco-based distribution, the rules of engagement and the balance of power could have shifted a bit. Content owners are just another—albeit big—revenue stream for a telco.”
Another significant theme is the shift towards premium local and regional content, especially Korean, on OTT in Southeast Asia.
Online video advertising is a significant business in the region, Couto continued, led by YouTube and Facebook, but several local players are looking to take a greater percentage of that pie.
Discussing the key themes of the conference this week, Couto noted the “full transition to IP delivered video—it’s not a question of when and how, it’s how soon. Secondly, business and revenue models for online video are evolving at a rapid pace. Consumption trends change after 90 days. Netflix and Amazon are here, regional players are here, local incumbents are here, but there are heightened levels of cash burn and that is a concern, and the path to profitability for standalone models remains unclear. The traditional ecosystem—is it going to be replaced or augmented by a new ecosystem? It’s a competitive environment. You have new players who have no legacy costs. And finally, it’s the rise of local-language online video platforms. We think it’s going to be a growing category.”