Asia-Pacific pay-TV operators face significant challenges from content piracy and low-cost OTT services, and will need to innovate and develop new business models to overcome those challenges.
Those were the overall findings from Pay-TV Innovation Forum 2017, a global research program led by Nagra and research/strategy consultancy MTM that looks at the Asia-Pacific pay-TV market and examines the state of pay-TV innovations and strategies that will drive the next phase of growth for the industry.
Service providers and content owners in the region participating in the program agreed that the Asia-Pacific pay-TV industry is entering a transitional period during which operators will need to adapt their business models and technology platforms in order to thrive in the changing environment. New offerings will have to reflect changing consumer demand for cheaper and more personalized content packages, including OTT services, to effectively expand the range of services at different price points.
Delivery infrastructure and technology platforms across APAC will also become much more IP-based, with content being increasingly delivered via both fixed-line and mobile broadband networks.
This need for change is being driven both by the persistent threat of content piracy and the increasing popularity of OTT services that are using aggressive pricing strategies to acquire customers.
Despite these challenges, pay-TV providers in Asia Pacific are investing in the future – continuing the steady roll-out of IP-connected set-top boxes (provided by 72% of providers in 2017, up from 66% in 2016), PVRs (63%, up from 56%), standalone OTT services (28%, up from 23%), and new adjacent services such as advanced advertising and smart home solutions (offered by 27%, up from 16%).
Industry experts highlight two urgent investment priorities to help service providers navigate the transforming video and TV services market:
1. Make a concerted approach to tackle content piracy
To limit illegal access to content, operators are calling for content owners to take their own independent actions to monitor, track and stop the distribution of illegal content, and for industry strategies that would bring together pay-TV operators, ISPs, content owners and industry associations to work with regulators and governments to take further legal action.
2. Develop more consumer-focused and diversified product portfolios
By embracing new business models, operators can develop new packages and offerings that appeal to changing consumer tastes at a wider range of price points, including skinny bundles, personalized offerings, seamless multiscreen “TV Everywhere” services and smart home solutions. Operators also cited potential opportunities for growth through new business-to-business services, including harnessing data with new analytics tools to offer enriched data services and support targeted advertising.
“The pay-TV industry in Asia Pacific is going through a challenging, transitional period. Traditional pay-TV revenues in many advanced Asian markets are under pressure, while emerging markets are growing, but delivering low ARPUs. The industry is being increasingly disrupted by content piracy, especially around live sports, and impacted by low-cost OTT offerings, making it harder for pay-TV companies to invest with confidence,” said Jon Watts, Managing Partner, MTM. “Pay-TV service providers in Asia-Pacific need to take stronger action against piracy to secure their future, while maintaining investment in new services and innovation.”
“There is a strong call to action across the pay-TV industry in Asia-Pacific to respond to these growing challenges,” said Simon Trudelle, senior director of product marketing at Nagra. “Operators and content owners need to be innovative in how they transform their technology and business models to respond to these pressures. The Forum’s research highlights that service providers not only recognize the problems they face from content pirates, but want to see actions taken limiting illegal access to premium content to maintain revenue and ensure quality content continues to be created. By working in partnership with vendors, operators can be more agile and better adapt to the fast-changing landscape.”