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MUMBAI:
The revenue base of Asia Pacific's pay-TV and broadband industries
could climb at a CAGR of 11 per cent to reach $86 billion
by 2012, according to a report published by Hong Kong-based
Media Partners Asia (MPA).
According
to MPA, the revenues have grown at an average annual rate
of 22 per cent over the past five years, generating more than
$53 billion in sales in 2007.
Over
a longer time frame, MPA sees industry revenues growing at
a CAGR of eight per cent to approach $120 billion by 2017
as the sector continues to benefit from economic growth, investment
and competition in the region.
The report Asia Pacific Pay TV And Broadband Markets 2008,
measures the consumption and value of multi-channel video
and broadband services over multiple distribution networks,
including cable, satellite, fibre, ADSL and mobile, across
16 markets in Asia Pacific.
MPA
executive director Vivek Couto said: “Digitisation and
broadband penetration is growing rapidly in Asia, boosted
by growing economies of scale in platform operation; technological
change and lower equipment costs; and the availability of
wider programming options.
"Near-term
risks include softening economic growth as well as deteriorating
global credit conditions and equity markets, while longer
term risks converge around regulation. More encouragingly,
the broad fundamentals of the region in general, and markets
such as India in particular, are strong.”
According
to the report, lower economic growth could, in the near term,
limit the demand for pay-TV and broadband in mature markets,
as well as restrict the scope for advertising growth. At the
same time, global financial concerns will
limit the availability of capital in emerging markets. These
risks may be offset by robust levels of regional economic
growth, which should help bolster demand and advertising prospects
as well as financing options and M&A.
Regulation,
the report notes, remains the big concern as it continues
to constrain profitable growth and investment in key markets,
including China, India and Taiwan. The report says there is
scope for progressive change but that current
regulatory realities limit rewards and returns for media investors
and distributors whilst also increasing uncertainty over long-term
strategy.
Quantifying
Industry Growth : Pay-TV services will become a key driver
of value, with subscription and advertising climbing from
less than $25 billion in aggregate in 2007 to reach $46 billion
by 2012, and more than $65 billion by 2017.
Broadband
growth will be fuelled by the introduction of next-generation
services and multi-play bundling, which could boost revenues
from under $30 billion in 2007 to $43 billion by 2012 and
$52 billion by 2017.
Drivers
of pay-TV subscription include: (1) digitization, including
SDTV and HDTV; (2) the growth of value-added services, including
VOD and PVR; and (3) demand
for linear pay-TV channels. All of this will help grow audiences
and Arpus. At the same time, economic expansion and rising
penetration will help drive advertising.
India, China, Korea, and Taiwan will remain the largest markets
for advertising, though MPA also highlights upside in Australia,
Hong Kong and ASEAN markets such as Malaysia and Indonesia.
In
2007, regional pay-TV penetration reached 43 per cent. This
could grow to 52 per cent by 2012 and 55 per cent by 2017,
according to MPA, with digital penetration, at a low seven
per cent in 2007, climbing rapidly to 28 per cent by 2012,
and reaching 36 per cent by 2017.
This means that 56 per cent of pay-TV homes will have at least
one digital set-top box (STB) in the home by 2012, growing
to 67 per cent by 2017 versus 17 per cent in 2007.
India,
China to play a key role: Much of the region’s digital
growth will be driven by China and India, though India will
have a more significant impact for pay-TV distributors and
content suppliers.
The
report also highlights Korea, Japan, Australasia, Hong Kong
and key Asean markets as major drivers of future digital pay-TV
deployment. HDTV is likely to flourish more in North Asia
than elsewhere, led by Japan, Korea and China.
MPA sees broadband penetration growing from 16 per cent in
2007 to reach 26 per cent by 2012 and 31 per cent by 2017.
Penetration levels will peak in Korea, Japan, Taiwan, Hong
Kong and developed Asean markets, while China will lead emerging
markets.
Regional
broadband household penetration is benefiting from investment
in fibre and advanced cable networks, MPA says.
Next-generation
broadband access systems, including fibre and cable DOCSIS
3.0, will flourish in Korea, Japan, Taiwan and Singapore in
the near term, and spread to Australasia, China and a few
ASEAN markets over a longer time frame.
Consumer demand for higher speeds and connectivity will overtake
demand for low prices over the medium term, especially in
developed broadband markets, leading to ARPU stability and
significant revenue growth with fiber and DOCSIS 3.0 deployments.
By
2017, China ($39 billion), Japan ($27 billion) and India ($20
billion) will lead in pay-TV and broadband industry turnover.
Korea ($10 billion) and Australia ($7 billion) will follow.
Sectoral
revenues in China and Korea will be evenly split between broadband
and pay-TV by 2017. In India, pay-TV will still be contributing
more than 90 per cent to industry turnover. In Japan, partially
because of modest upside for advertising, pay-TV will have
less than 40 per cent of total sectoral revenues.
Net
pay-TV subscriber growth remains robust in key markets in
the region. MPA research indicates that Asia Pacific added
22.4 million net new pay-TV subscribers in 2007, with China
and India accounting for 90 per cent of this growth.
MPA sees net new additions scaling up to about 25 million
over the next three years, boosted by the growth of Indian
pay-TV in particular. By 2012, MPA forecasts show 392 million
subsribers, growing to 448 million by 2017.
MPA
forecasts also indicate that total digital pay-TV subsribers
will grow from 48 million in 2007 to 218 million by 2012,
and 298 million by 2017. This means that 52 per cent of pay-TV
homes will be digital subsribers by 2012, growing to 67 per
cent by 2017.
Much
of this growth will be driven by a government-funded transition
to digital in China, with utility cable TV as opposed to pay-TV
leading this transition. After taking this into account, MPA
projections show that only 36 per cent of regional pay-TV
homes will subscribe to digital pay-TV homes by 2017, as opposed
to 67 per cent with the inclusion of utility digital cable
in China.
The
bona-fide pay-TV number still corresponds to 160 million digital
homes by 2017, a significant number with India having a dominant
37 per cent share.
Broadband:
Fiber Will Become Pervasive
Consumer demand for higher broadband speeds, greater connectivity
and new applications will overtake demand for low prices,
especially in developed broadband markets. This is good news
for operators investing in telco fibre
networks and cable DOCSIS 3.0 systems that deliver speeds
in excess of 100 Mbps.
Genuine
high-speed markets, where fibre and Docsis 3.0 systems are
being deployed, include Japan, Korea, Singapore and, increasingly,
Taiwan and Hong Kong.
At
the same time, next-generation upgrades are anticipated in
Australasia and Asean, providing an additional foundation
for the growth of FTTx users.
MPA projections indicate that regional broadband household
penetration, based on fixed networks, will grow from 16 per
cent in 2007 to reach 26 per cent by 2012 and 31 per cent
by 2017. Penetration levels will peak in Korea, Japan, Taiwan
and developed Asean markets, while China will lead emerging
markets.
In
terms of size, China will remain the largest market for broadband
in the region with close to 195 million broadband users by
2017. India will also grow to a significant size (40 million)
by 2017, though penetration levels will remain very low (six
per cent versus 38 per cent for China) due to limited ADSL
potential and ongoing regulatory and network capacity issues.
Telco
fibre and ADSL networks will remain dominant in many Asean
markets, Hong Kong and in North Asia. There is also scope
for the profitable growth of cable broadband services in the
region.
MPA forecasts indicate that cable modem households will grow
from nine million in 2007 to reach 20 million by 2012 and
27 million by 2017. Key beneficiaries from advanced next-generation
cable broadband deployment include Japan, Korea, Singapore
and Taiwan.
In
terms of market share, cable broadband will remain competitive
in markets such as Singapore, India, Korea, Japan and, increasingly,
Taiwan.
Distribution
Platforms
According to MPA, distribution platforms can be divided into
three key categories:
1.
Cash-generative operators benefiting from high-end digital
transition and focusing on a multi-play value proposition
for consumers
2.
Emerging and green-field platforms that could benefit in the
future from volume-based digital migration
3.
Regulated but profitable operators whose upside is tied to
deregulation.
Leading
operators in category one can be found in Australasia, Japan
and, increasingly, Malaysia, Singapore and Hong Kong.
India
leads category two with both DTH and cable TV platforms aggressively
acquiring digital subs at a high capital cost, while certain
markets (i.e. Indonesia, the Philippines, Thailand and Vietnam)
also fall into this group but on a smaller scale.
Taiwan’s
leading cable operators define category three.
Key
near-term risks in distribution include: (1) near-term economic
softness limiting demand for digital pay-TV services for operators
in category one; (2) competition and growing subscriber acquisition
costs driving cash-burn for operators in group two (especially
India), while some (i.e. cable operators in the Philippines,
India) may suffer a negative impact on capital raising because
of the
current state of financial markets; and (3) limited scope
for regulatory upside crimping long-term cash-flow growth
for category three.
Broadcasting
and Content: In 2007, pay-TV channels and content providers
in Asia generated $10.6 billion. in advertising and subscription
revenues. This could almost double to $20 billion by 2011
and climb up towards $28 billion by 2017.
MPA
expects advertising to grow at a CAGR of 10 per cent over
the next decade to top $16 billion by 2017, driven by economic
expansion as well as growing pay-TV
penetration. The economics of channel distribution remain
very different outside of Japan and Australia, as subscription
fees are challenging due to relatively low pay-TV Arpus and
the limited penetration of digital pay-TV.
Revenue
composition is unlikely to significantly change in the future,
because of the strong pace of advertising growth and less
than optimal subscription in the near term.
However, MPA anticipates a big boost from digital deployment
in India, North Asia and Asean over the long term, with channel
fees climbing at a CAGR of 14 per cent to reach $11.4 billion
by 2017, versus $4.5 billion in 2007.
There
remains scope for earnings growth and investment activity
amongst leading regional and local broadcasters. Key markets
include: India, Greater China, North Asia, Asean and Australasia.
Sector fundamentals are likely to be supported by strong advertising
growth and growing subscription fees from the distribution
of programming over digital pipes, with India, China, Korea,
Japan and Indonesia emerging as key
beneficiaries in the future.
Specific
positives include:
1.
The Indian advertising market growing at more than 20% per
annum, with new digital distribution platforms emerging for
content suppliers
2.
China’s growing critical mass of digital subs raising
a sliver of opportunity for pay-TV broadcasters
3.
The proliferation of digital pay-TV distribution in Korea
and Japan
4.
Leading local broadcast groups in Indonesia realising gains
from terrestrial TV advertising and, for the first time, pay-TV
distribution.
Near-term
risks in the content space include:
1. Intensifying competition, costs and regulation in India
2. Regulatory barriers and potentially slow growth of actual
pay-TV in China
3. Soft macro conditions and regulatory constraints in Taiwan
4. The potential migration of ad dollars away from pay-TV
channels and onto online and digital sectors.
As
the report highlights, owners of brands and networks focused
on India as a key local proposition, and on Asia Pacific as
a viable regional proposition, will continue to do well.
The
report also indicates that there are significant local growth
opportunities in Japan and Korea. Going forward, more pay-TV
broadcasters from Korea, Japan and Asean are likely to emerge
as leading revenue generators.
Originators
of Indian and Chinese content will also continue to capitalise
on the growth of consumer media industries in both India and
Greater China, as well as the demand for Indian and Chinese-language
programming in Asia and the rest of the world.
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