Pay-TV primed for growth in emerging APAC despite challenges


The pay-TV and video markets of emerging Asia–Pacific (EMAP) follow one of two narratives. The first narrative involves strong infrastructure investment or a strong established infrastructure and is present in countries such as China, Indonesia and Malaysia. The second narrative is one of fragmentation, piracy and a lack of investment – factors that hinder the development of the TV and video markets in many countries in the region.

According to our recent report, Pay-TV services in emerging Asia–Pacific: trends and forecasts 2016–2021, bundling and infrastructure investment will drive a doubling of IPTV spend in the region in the next five years.

China, Indonesia and Malaysia are in the midst of significant fiber investment, which will enable IPTV services to be bundled with fixed broadband and offered to a wider audience than before. The resulting take-up will be high: we forecast that the number of IPTV connections in EMAP will almost double from 51.5 million at the end of 2015 to 98.4 million at the end of 2021.

In China, China Telecom and China Unicom are investing heavily in FTTx infrastructure. This will drive IPTV penetration to 23% of all pay-TV subscriptions by 2021, and traditional pay-TV subscription penetration of households will grow from 72% in 2015 to 80% in 2021.

In Indonesia, incumbent Telkom Indonesia is also in the middle of an ambitious FTTH build-out, and in early 2016, the company revealed plans to reach as many as 40 million homes by 2021. The operator’s FTTH service is available only as part of a triple-play, which will keep fixed broadband and TV services inextricably linked in the coming years.

In Malaysia, Telekom Malaysia (TM) is conducting the second phase of its national fibre construction project. This is increasing the availability of IPTV services for both TM and wholesale customers that use TM’s network. OTT providers such as iflix and Netflix will also benefit from the expanding broadband coverage in the country.

However, another key finding in the report is that offering affordable services and counteracting piracy and cable fragmentation will be difficult in the rest of the region.

Many countries in EMAP have “mobile-first” telecoms markets. Where fixed infrastructure exists, it may not be affordable. Where fixed infrastructure is affordable, it may enable illegal access to content, which limits the appeal of paid-for video services. Operators that are making significant fiber investments are often also focusing on triple-play products in order to ensure that high-speed broadband goes hand-in-hand with legitimate ways to monetize video content. Part of the appeal of illegal content is that consumers can access a broad array of content often with an image quality or user experience the same as, or better than, legal alternatives.

Income inequality creates tiered audiences for pay-TV services – those who can afford to take a legal route to consuming content and those who cannot. In countries such as Indonesia, the high price of pay-TV has restricted growth – pay-TV in Indonesia had an annual ASPU of $210 in 2015, compared with a GDP per capita of $3350.

A fragmented cable market in China and Thailand is also limiting growth potential for cable operators. The lack of scale can make it expensive on a per-customer basis to upgrade analogue infrastructure to digital.

Still, the overall forecast for pay-TV spending in EMAP is positive. Despite certain factors limiting pay-TV take-up in particular countries, the overall narrative for pay TV in the region remains positive.

Pay-TV and ASPU for traditional pay-TV, EMAP, 2013-2021. (Source: Analysys Mason)

Traditional pay-TV spend will increase from $26.9 billion in 2015 to $36.4 billion in 2021. This growth will be predominantly driven by IPTV and service bundling. OTT video service consumption will also grow considerably. We forecast that 3.3 million consumers in the region will pay for OTT video services to their TV set by 2021.

Written by Martin Scott, principal analyst at Analysys Mason

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