Under-Pressure Asian Pay-TV to Create Merger Opportunities, Says Report

Pay-TV in Asia is coming under ever greater competitive pressure, but the economic growth of the region means that there continue to be opportunities for flexible operators. That is the verdict of a study “Asia Pacific Pay-TV Distribution 2020,” published Monday.

Taking together subscription and advertising revenues, the report, put out by research house Media Partners Asia, showed that pay-TV revenue grew by 6% last year to reach $57 billion. But it forecast that to slow to just 3% as an average over the next five years to 2020. Streaming services and piracy remain the major brakes on pay-TV.

The report describes the Chinese pay-TV market as a “utility” and forecasts average growth of only 3%. More dynamic India, in contrast, is set for growth of 6% unless it is derailed by the implementation of new regulations. The markets are valued at $27 billion and $15 billion, respectively, by 2024. They are both larger and faster growing than South Korea ($8.3 billion) and Japan ($7 billion).

The rest of Asia – including Australia, New Zealand, Malaysia, Hong Kong, Singapore and Thailand where revenues are forecast to decline further after a year of record cord-cutting – is currently worth $23 billion of revenue. The report forecasts that total growing only to $25 billion by 2024.

“Business models remain dependent on the monetization of branded channels and sports rights in the pay-TV window. But the growth of legal online video services means that pay-TV operators and content providers are striving to distribute and monetize online. Inevitably, this strategy is being executed at a significant potential cost with the risk of cannibalization,” says the report’s author MPA executive director Vivek Couto.

For the multinational media players this implies a strategy of managing efficiency and strategic mergers and acquisition. Global and regional broadcasters are likely to focus more on licensing, studio / content production and direct to consumer strategies. Disney and WarnerMedia are expected retain relatively large scale branded channel businesses across Asia Pacific, though each will rationalize portfolios over time as they build up online.

Discovery has scaled up through its recent merger with Scripps. Sony has sold its channels business outside of India, and NBCU has ceased its channel operations. Viacom has merged with CBS.

“Key players (could) reaggregate new bundles of branded channels and OTT video. For others, long-term subscriber erosion is a reality with the emphasis on serving and retaining existing premium customers and managing content costs and where possible, entering into partnerships and M&A with telcos and broadband operators. Operators are increasingly (likely to be) focused on tighter bundles and packages, stronger brands and flexible options for customers, anchored to improved technology with online options,” the report says.

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