Online platforms have now replaced the free-to-air and pay-TV sectors as the engine of video industry growth in the Asia-Pacific region. Both advertising-supported and subscription video are becoming more dominant.
The conclusions were presented as part of an opening address by Vivek Couto, managing partner at research firm Media Partners Asia, on the first session of the three-day APOS conference. But he sounded a note of caution on China, the single largest market in the region.
The company forecasts that the Chinese video industry will reach $70 billion in revenues by 2026, after achieving 4% average annual growth.
“The velocity of new regulations is concerning. It remains to be seen whether these are cyclical or secular, but they are limiting how platforms create and invest in content for AVOD and SVOD,” said Couto.
In the SVOD sector overall growth has slowed. Tencent Video is growing but iQIYI has softened and Alibaba-owned Youku has lost a major chunk of its customers. China’s ad economy continues to grow with AVOD significant.
In the rest of the Asia-Pacific region, “local and regional OTT platforms are expanding and most content is transitioning to IP delivery. The consumer wallet share has shifted irrevocably in the favor of SVOD in Australia with SVOD revenues also significant due to a wide range of premium entertainment and sports services online,” said Couto. The trend is maintained at different speeds and with national characteristics in other markets.
“Indonesia is following, though with much lower average revenue per user. SVOD is growing rapidly in Korea, but it is dependent on IPTV and telco partnerships. in Japan, the SVOD market has numerous players and subscription revenue scale is growing, in particular across services offered by Netflix, Prime Video, Hulu Japan and Unext today, and in the future Disney as it expands with Star and local content.”
Couto explained that global platforms Netflix (SVOD) and YouTube (mostly AVOD) will be equally sized by year-end, with YouTube’s growth outpacing Netflix globally, driven by its platforms such as YouTube Premium and YouTube music.”
YouTube is the largest video platform in the region with 50-80% of video content consumed. TikTok is also important, particularly in Southeast Asia, with 20-25% of video consumed.
The services are buoyed by Asian economies that are beginning to recover from the effects of the COVID-19 pandemic, but are being held back by a slower recovery in consumer spending.
Japan, India, Korea and Southeast Asia (led by Indonesia and Thailand), are growing scale in the video industry. Australia and New Zealand are considered as mature markets.
Over the next five years MPA forecasts India’s compound annual growth in video to average out at 9%. That includes pay-TV below trend at 6%, AVOD growing at 16% and SVOD at 19%. Korea’s 5% growth is “robust” due to the strength of telco IPTV and the scale up of SVOD and AVOD. In Southeast Asia, Indonesia is the largest market and leads at 7% annual growth and its SVOD & AVOD sectors both growing at 20%-plus over 2021-26.
Asia-Pacific accounts for 15-20% of global subscribers for the multinational platform companies, and typically 10-20% of their revenues. In the case of YouTube, Asia delivers nearly 20% of revenue, MPA forecasts. Netflix will earn just over 10% from the region this year.
Disney is a major exception. Asia represents over 30% of Disney’s total global base, in 2021 and 45% of Disney Plus subscriptions. In terms of revenue, however, Asia-Pacific will contribute little more than 5% to Disney OTT service revenue in CY 2021 due to the low average revenues of its Hotstar offerings in Southeast Asia and the slow rollout of Disney Plus in wealthier markets including Japan and Korea.