Pay-TV broadcasters and content providers are carefully managing expectations and strategic plans as subscriber and revenue growth decelerates across Asia Pacific.

According to Media Partners Asia (MPA) research published today, the market for pay-TV & broadcasters in Asia-Pacific substantially slowed in 2014. 

Revenue growth decelerated from 9.8% in 2013 to 6.4% in 2014 as total sales reached US$19.5 billion. In Asia ex-China, the slowdown was even sharper as revenue grew only 4.9% (to US$14.8 billion) in 2014, versus a 9.4% increase in 2013. 

The pay-TV advertising market was soft in Australia, Japan and across much of Southeast Asia in 2014, with only India offering some respite. 

Subscription fees for pay-TV channels also moderated across the board with significant deceleration in Indonesia and Thailand. In general, prospects have been damaged by uneven macro fundamentals, structural dynamics and currency depreciation. 

MPA projections indicate that there will be an improvement and modest growth acceleration in 2016 and 2017, with a gradual deceleration thereafter. 

MPA forecasts suggest a 6% CAGR between 2014 and 2019, with pay-TV channel revenues reaching US$26.5 billion by 2019 and thereafter growing to top US$31 billion by 2023.

FOCUS ON OPPORTUNITY

There remains significant opportunity for existing pay-TV broadcasters and content providers in Australasia, India, Korea and parts of Southeast Asia, says MPA. 

However, the opportunity is also limited by: operator consolidation and investment in self-produced channels, over-fragmentation across key genres; and – in certain instances – prohibitive or restrictive regulations. 

The China market remains challenging because of continued regulation of the pay-TV industry but there are growing opportunities across on-demand windows for online video and digital pay-TV. Content owners such as Disney, Discovery, Fox and HBO amongst others have started to benefit. 

In Korea, a fiercely competitive market, the future offers decent profitable growth for players such as Fox and Turner. The market is dominated by CJ E&M, which has close to 35% share of pay-TV channel revenues. 

Since 2014, foreign broadcasters are allowed to own and operate Korean channels 100%. New acquisitions are expected in the channel space over the next one to two years.

In India, pay-TV channel prospects are growth-oriented but delays and lack of hygiene associated with digitalization have adversely impacted the market. MPA projections suggest a 12% CAGR in pay-TV channel revenue between 2014 and 2019. 

Such growth may help provide a foundation for new entrants and acquisitions in India across sports, regional entertainment and movies.

Taiwan and Japan offer scale but revenue growth is marginally above flat in both markets. Japan in particular is challenged by the growth of OTT.

THE LONG TERM

The largest and most growth-oriented markets for affiliate fee growth will be India, Australia and Korea. 

In Southeast Asia, Malaysia and the Philippines offer the most growth and scale. Content costs will rationalize quite significantly in Japan, Singapore and Thailand. 

Subscription fees across both branded channels and VOD will be robust in Australia and Korea, while digitalization will provide material upside for pay-TV channels in India. Japan will remain large but growth will be marginally below flat.

Over the long term, there are significant opportunities across subscription and advertising-based online video platforms, although these have yet to scale beyond Australia, China and Japan. 

With this future reality also comes the opportunity for broadcasters to reach out to consumers directly through centralized platforms, anchored to key brands, or through joint ventures with pay-TV and broadband operators.