Southeast Asia’s fiercest battle for consumer share of wallet is taking place in the Philippines, where the country’s leading media groups and telcos are staking out new competitive positions in a fast-changing distribution landscape.

The Philippines is already one of Southeast Asia's fastest growing markets for pay-TV, adding 291,000 net new subs last year.

These were mostly driven by an ascendant DTH service, Cignal, financially supported by the country’s largest telco, PLDT. Cignal is on course to reach 1 million DTH pay subs by the end of Q3 2015.

At the same time, new avenues for subscriber revenue are taking shape: broadband bundles and other value-added services for cable TV, spearheaded by dominant MSO SkyCable; mobile SVOD services backed by the country’s two top telcos, Globe and PLDT; and a DTT rollout, potentially leveraged to tap subscription revenue in addition to advertising.

Meanwhile, the national economic engine continues to whirr following three successive years of 6%+ GDP growth, steadily bulking up the size of the prize.

The way competitive dynamics play out, however, could depend on decisions taken by SkyCable’s parent, broadcast major ABS-CBN.

The company, which also runs leading free-to-air network Channel 2, is currently in pole position as the distribution landscape fragments, thanks to a steady pipeline of content that can be monetized across multiple platforms.

The only broadcaster so far to commercialize DTT services, ABS-CBN has been angling for a DTH license ahead of a planned new service later this year, which could be used to accelerate the reach of its DTT channels beyond major cities.

At the same time, a DTH license could also open the door for a low-Arpu paid service that can take the fight for subscriber growth back to Cignal, as well as other DTH operators rolling out low-Arpu packs such as GSat.

VOD Opens Up

Meanwhile, two mobile SVOD services that launched earlier this year, iFlix and Hooq – promoted in the Philippines by PLDT and Globe respectively – have started signing up paying subs at low US$2-3 Arpus.

Both have embarked on a long road to breakeven, starting life with mainly library content.

SVOD however represents a new business ecosystem spanning multiple price points and service offerings that early incumbents and new entrants will address over the medium term.

As mobile connectivity reframes the communications landscape, PLDT and Globe are emerging as the other two main players likely to shape the future video landscape alongside the current leader, ABS-CBN.

Earlier this month, PLDT added content from Fox International Channels for VOD, catch-up and live services across its fixed and mobile broadband networks.

OTT services for Cignal should follow, although the latter is also focused on potentially adjoining OTT to IPTV, creating a powerful bundle with PLDT’s fiber broadband services.

Such a bundle would give both parties significant differentiation and a chance to upsell customers to higher-Arpu offerings.

Globe, meanwhile, penned its own content and marketing deal with Disney earlier in the year.

Rumors abound meanwhile of a possible tie-up between Globe and number two broadcaster GMA Network, which has fallen behind ABS-CBN in the digital space.

In the past, GMA had also been courted assiduously by PLDT, which is still waiting in the wings.

Free TV, the largest ad segment in the Philippines, will continue to benefit from rising national prosperity for the foreseeable future.

PLDT’s current push for a slice of that market, via third-placed free-to-air channel TV5, seems to have stalled at a ~10% audience share.

While GMA looks threatened by ongoing fragmentation of viewing as a sole player, its choice of partner could tip the balance in the digital battles to come.

Economic tailwinds

At the same time, overall traditional pay-TV revenues will continue to surge forward on the back of the Philippines’ current economic buoyancy, via new subs signing up to cheaper packs, as well as sales of more premium services.

Over the next few years, industry Arpu will come under greater pressure; especially for DTH as operators continue to build up their reach, turning up the dial on competitive intensity.

Nonetheless, revenues per user may start to pick up again towards the end of the decade.

Cignal has been especially successful in tapping the lower end of the market, overtaking SkyCable in subscriber numbers last year.

This year, Cignal continues to race ahead, adding another 100,000 subs in the first half of 2015 and on course to add up to another 150,000 subs in the second half of the year, widening its lead.

SkyCable is expanding at a far slower pace, limited by the reach of its cable networks, although a new skinny pack, bundled with broadband, should help to bolster revenue.

Despite the increased competition, SkyCable is seeing little erosion among its loyal, high-Arpu base.

ABS-CBN’s production and programming prowess, which already provides a strong local content advantage in both cable and DTT, will also strengthen its possible DTH service.

Subsequent development as a freesat or paid platform could be the defining factor, as the market enters the next cycle of media competition.