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APOS: Virus Speeds Asia’s Shift From TV to Online Video, Prioritizes Local Content

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Cheyne Gateley for Variety

The video entertainment sector in Asia will shrink this year as the coronavirus and economic slowdowns weigh heavily on advertising revenues. Many countries will not see recovery to 2019 levels for several years.

The upheaval is accelerating the shift from the traditional TV and pay-TV sectors to over-the-top consumption and business that will increasingly go direct-to-consumer.

The tectonic shifts were outlined by Vivek Couto, executive director of Media Partners Asia, and organizer of the APOS conference that kicked off Tuesday in virtual form.

His “Playing Through the Pandemic” analysis forecasts Asia-Pacific video industry revenue dropping by 3%. The advertising decline, will only partly be offset by rising online video subscription.

“This pandemic has further exposed the TV advertising industry – we are losing $8 billion in value this year. TV in Asia Pacific will decline by 16% this year to $42 billion and TV advertising won’t really recover,” said Couto. “In India, the TV advertising market will take 34 months to revert to 2019 levels and Indonesia will take 70 months – these are the only markets we see recovering to 2019 levels.”

While advertising is lagging, the video industry in Asia is forecast to rebound and grow at an average of 12% over the next five years. Much of that will fall to local players.

Couto and MPA forecast an increase of 90 million net new subscription video customers by the end of the 2020 calendar year in Asia Pacific. China will account for more than half; India, 26%, Japan and Korea 10% combined, Australia & New Zealand 6% combined, Southeast Asia up to 7%.

He warned that growth is slowing as consumers get through the pandemic, burning up libraries and new productions are only slowly resuming.

“Next year, the net new paying customer additions will decelerate to 76 million, and there are significant changes in share due to launch of Disney Plus in key markets across Southeast Asia and the expansion of iQiyi and Tencent’s WeTV, new local platforms, and the expansion of Netflix, Amazon and Viu in respective geographies,” said Couto. He identified Stan in Australia and Vidio in Indonesia as probably the most robust local players. “Some legacy players have been consolidated or capitulated,” he said, notably in South East Asia.

In a region, where 90% of video content consumed is local language, this appears to be a potential boom time for local producers. “Commissioning of local content as well as acquisitions of premium rights continue. OTT (firms are) expected to invest $700 million in 2020. This will further scale up to $ 1.1 billion in 2022,” said Couto.

“We are seeing this trend in Korea, with Netflix leading the way substantially over 2020 and 2021 as it gains real traction. Healthy competition for movies in the main and some series, dramas and originals will drive Indonesia and Thailand as Disney Plus launches in both those markets over the next few months,” said Couto, pointing to WeTV, iQiyi and Viu, Vidio and RCTI Plus also increasing their spend.

“Given the uncertainty over the opening of the theatrical window, leading SVOD platforms in India are on a spree to acquire film rights,” said Couto. Disney Plus Hotstar, Amazon Prime Video, Netflix and Zee5, between them may grab more than 25 digital-first movie premieres. “This will help these platforms to win new subscribers as well as offset any delays in commissioned original programming,” said Couto.

“Despite the growth of streaming in APAC, we are now at an interesting stage as most global players remain underweight in some form or another in this region,” said Couto. “Netflix is likely to end the year at around 200 million customers (globally) with Asia Pacific less than 15% of subs and the revenue contribution will only be 8%.” He repeated his pre-COVID-19 forecast that Disney Plus Hotstar could reach 100 subscribers in the next five years, and $1 billion in revenues from India alone.

“Five years out, we see the China OTT majors will still have significant subscribers and revenues, though largely coming out of China, as their freemium and SVOD models in Southeast Asia and globally will take time to get scale.”

Couto finished with a gentle warning to those companies that don’t get involved in Asia’s local-language scene. “The future of TV across Asia is online but global brands overly reliant on export rather than immersing themselves in local content ecosystems risk capping their upside.”