The Authoritative Guide to the Future of Broadband Digital Content,
Distribution & Technology in Asia
PRNewswire-Asia/ --
STRONG GROWTH FOR ASIA'S PAY-TV COMPANIES, BUT AT A HIGH
COST
-- Margin pressure to intensify; investment and innovation
key
for long-term health
-- Digitization unlocks future growth; number of homes with
digital
pay-TV to more than double by 2015
-- India set to overtake US as largest satellite market next
year;
will surpass China as largest pay-TV ad market by 2018
-- Content rights key, as fixed and mobile broadband networks
redefine the landscape
-- Bright prospects for some content providers; challenges for
others
Renewed economic dynamism and multi-platform competition are
fueling the consumption of pay-TV and broadband in Asia Pacific.
However, this growth depends on investment in content, distribution
and new technology, benefiting consumers but coming at a high cost
for pay-TV channels and distributors, according to Asia Pacific
Pay-TV & Broadband Markets 2011, a new report published by
leading industry analysts Media Partners Asia (MPA). The result is
margin pressure for pay-TV providers in some key markets,
predominantly India, as well as potentially in Japan, Korea and
Malaysia.
Vivek Couto, executive director of MPA, said: "These trends will
prevail over the medium term due to competitive intensity, well
meaning but counter-productive regulation and industry
fragmentation. Having said that, we already see operating leverage
improving in a number of markets. Future growth also hinges on
continued improvement in ground-level execution, talent and
regulation, especially in India, China and Southeast Asia. Our
research shows that the growth of broadband represents more of an
opportunity than a threat for pay-TV companies; the key
cross-sector competitive dynamic in most markets remains fierce
competition from free TV. There is a bright future for pay-TV in
Asia Pacific but it belongs to companies willing to invest and
innovate, positioning themselves as consumer businesses."
Pay-TV subscriptions in Asia Pacific grew by 9% in 2010 to reach
approximately 375 million by the end of the year, according to
projections from MPA. With around 8 million households in the
region subscribing to multiple pay-TV services, this means 367
million homes were subscribing to pay-TV in Asia Pacific at the end
of 2010, almost half (48% penetration) of all TV homes. This number
is projected to grow to 57% of TV homes or 486 million subscribers
by 2015, and to 62% of TV homes or 570 million subscribers by
2020.
DIGITIZATION KEY TO FUTURE PROSPERITY
The number of homes subscribing to digital pay-TV services,
including multiple subscriptions, reached 148 million in 2010.
Digital networks allow pay-TV operators to offer additional
programming and high definition (HD) content as well as value-
added services such as digital video recorders (DVRs) and
video-on-demand (VOD) and interactive TV. As competition increases,
these help operators grow revenues and strengthen subscriber
loyalty. The number of homes subscribing to digital pay-TV services
is expected to reach 362 million by 2015 and 483 million by 2020,
driven by digitization of millions of homes in China and India as
well as full-scale digital conversion for both free and pay-TV in
Japan and Korea. This means that digital penetration of pay-TV
homes will grow from 20% in 2010 to 42% by 2015, and 52% by
2020.
MPA projections indicate that subscribers with high definition
pay-TV reached 12.4 million in 2010, and will rise to 45 million by
2015 and 81 million by 2020. Excluding China and India, HD
penetration of digital pay-TV subs across the region reached almost
30% in 2010 and is likely to grow to approximately 60% by 2020,
driven by continued growth in Australia, Japan and Korea as well as
new growth in Southeast Asia.
Revenues for the pay-TV industry in Asia Pacific, representing
income from consumer subscriptions as well as advertising,
increased by 14% in 2010 to reach US$38 billion. This was driven by
healthy growth of ARPU (average revenue per subscriber) in mature
markets and increases in subscriber volume in emerging markets, as
well as strong local advertising growth. According to MPA, pay-TV
advertising in Asia Pacific rebounded from only 4% growth in 2009
to 15% growth in 2010 to reach approximately US$8 billion in net
terms (i.e. including ratecard discounts). This represents about
25% of total TV advertising in the region. Subscription revenues
meanwhile grew by 14% in 2010 to reach US$30 billion, with consumer
spends on pay-TV growing by 4% on average.
MPA predicts pay-TV industry revenues in Asia Pacific will grow
at a 10% CAGR between 2010 and 2015 and at 8% CAGR between 2010 and
2020, to reach US$60 billion by 2015 and US$78 billion by 2020
respectively. Boosted by digital growth and continued increases in
basic pay-TV subscribers, total subscription revenues will climb
from US$30 billion in 2010 to reach US$46 billion by 2015, and
US$60 billion by 2020. Subscriber volumes will grow substantially,
while ARPUs will remain robust in high-value markets such as
Australia though competition, and in certain cases regulation, will
depress and limit ARPU growth in India, Japan and much of Southeast
Asia. Local advertising will remain buoyant however, driven by
economic growth and rising penetration, climbing from US$8 billion
in 2010 to reach US$13 billion by 2015, and US$18 billion by
2020.
In broadband, the growth of mobile and fiber infrastructure is
having a major impact. Mobile broadband networks are becoming
commonplace in Australia and Southeast Asia; increasingly important
in North Asia with the proliferation of smartphones and tablets;
and potentially vital in India in the future, with the anticipated
growth of 3G and next-generation LTE networks. At the same time,
broadband speeds are growing alongside demand in the fixed line
segment, due to infrastructure upgrades and attractive pricing from
telecom and cable networks. Broadband subscribers in Asia Pacific
grew at 26% in 2010 to reach 257 million, and are expected to
outnumber pay-TV subscribers by 2015, reaching 538 million and
thereafter climbing to 681 million by 2020. Regional per capita
penetration will climb from 7% in 2010 to 15% by 2015, and 18% by
2020. Fixed networks had an 83% share of the market in 2010, though
this will decline to 52% by 2020 due to the growth of mobile.
GROWTH DRIVERS & THE ROLE OF INDIA
Favorable market and industry dynamics will drive future pay-TV
industry growth. Economic growth is a key catalyst, reflected in a
number of trends: household growth and urbanization; rising TV
penetration; and higher incomes and improved affordability.
MPA analysts also highlight a favorable industry landscape due
to competition and investment. This is most notable in India, where
the rise of direct-to-home (DTH) satellite TV is having a major
impact; in Indonesia, where DTH platforms are helping boost pay-TV
penetration from a very low base; and in Korea, Japan and
Singapore, where IPTV platforms have contributed new growth to
saturated marketplaces. At the same time, cable digitization is
having a positive impact on industry value chain economics, most
notably in North Asia, boosting consumer spend on pay-TV in
particular. Significantly, Japan, China and Korea will also
complete digital switchover during this decade.
Meanwhile, investment in content is at its optimal in markets
such as Australia, Japan and Singapore, and growing in markets such
as Malaysia and Korea, where pay-TV operators are investing in
self-produced content and relevant turnaround channels to retain
competitive advantage. However, content investment is poor in the
largest markets, China and India.
The rise of India is particularly noteworthy as the country will
overtake the United States as the world's largest DTH satellite
pay-TV market by the end of 2012, and will surpass China as the
largest market for pay-TV advertising after 2017. In general,
revenues, costs and capital expenditures are all growing at an
alarming rate in India due to various dynamics, including macro
growth, competition and digitization.
Such is the extent of competition, cost and fragmentation in the
Indian marketplace that profit margins remain low, even for market
leaders. Margins and value chain economics will improve in the long
term however, through digitization of cable networks, rising
subscriber scale, improved cost control and strong advertising
growth. Pricing power will still be modest however, as ARPU growth
will remain under pressure due to competitive and regulatory
dynamics.
CONSUMER-FOCUSED BRANDS WILL THRIVE
Pay-TV and broadband distribution platforms positioned as
consumer businesses will continue to prosper, especially as they
invest further in product innovation, relevant content and new
digital and broadband technologies. Operators that combine optimal
networks with unique content assets, that they own or have rights
to, are poised to benefit from the growth of fiber infrastructure.
Notable examples include operators in Australia, Japan, Korea,
Singapore, Malaysia and Taiwan, moving to IP- based platforms over
the long term to capitalize on technological change.
MPA analysis indicates that the top 70 pay-TV distribution
platforms in Asia Pacific generated approximately US$21 billion in
sales during 2010, a 14.1% year-on-year growth, while EBITDA grew
23% to top US$6 billion, representing a 28.5% margin. While
operating margins remain solid in North Asia, running between
40-60% on average, margins are trending much lower or in negative
territory in Southeast Asia and India due to rising costs and
investment.
For broadcasters and content providers, companies that produce
and own most of their own content will typically be able to best
monetize and control their product in this decade of broadband
proliferation. Large producers of local content in India and
Southeast Asia are growing rapidly, while regional genres focused
on infotainment and family entertainment are showing significant
returns. However, uneven and in some cases declining consumption of
movie channels is a key issue for both operators and channel
suppliers, in Australia, Hong Kong, Malaysia and Singapore in
particular.
MPA research indicates that the top 20 pay-TV broadcast groups
in Asia Pacific generated US$7 billion in sales during 2010 with
EBITDA of US$1.3 billion, a 19% margin. Apart from India's Sun TV,
a virtual monopoly in its key markets, market leaders in India
(i.e. Zee, Star) are trending at 20-25% margins due to cost
inflation and competition, while in Korea, CJ E&M's TV business
margins are less than 10%. Regional networks from TVB, Discovery
and Fox International Channels are trending at more robust margins,
due to disciplined costs and revenue optimization across broad
portfolios.
Leading Asia Pacific Broadband Pay-TV Operators: Ranked by
EBITDA
COMPANY MARKET FISCAL YEAR- EBITDA (US$ MIL.)
END
Jupiter Japan Dec-10 1,740
Telecommunications
Foxtel Australia Jun-11 445
Sky Perfect JSAT Japan Mar-11 410
Astro All Asia Malaysia Jan-11 250
Networks
Tbroad Korea Dec-10 236
Sky Network New Zealand Jun-11 209
Television Ltd
Cable & Multimedia Korea Dec-10 207
(C&M) Communications
Source: MPA research estimates
Leading Asia Pacific Broadcasters: Ranked by EBITDA
BROADCAST GROUP KEY MARKETS FISCAL YEAR- EBITDA (US$ MIL.)
END
Sun TV India Mar-11 335
Zee Entertainment India Mar-11 165
Star India India Jun-11 130
Premier Media Group Australia Jun-11 130
TVB Pay Channels & Greater Dec-10 121
Licensing China, SEA,
Int'l
Fox International Regional Jun-11 115
Channels
Discovery Networks Regional Dec-10 115
Asia
Source: MPA research estimates
ABOUT MEDIA PARTNERS ASIA
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