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Asia SVOD set for take-off

A raft of new local launches, as well as the arrival of the major international players will see the SVOD market more than double in value over the next five years. TBI takes an exclusive look at Digital TV Research’s forecasts, and identifies at the battles brewing between the local and international players

Netflix has moved into the Asia Pacific region, launching in a raft of countries as part of this year’s global rollout. Amazon is likely coming too, and is prepping its international launch. However, local players are fighting back, with existing pay TV operators and telcos getting into the streaming game. The activity at a local- and pan-regional level means there will be huge growth in the sector.

Asia Pacific SVOD revenues for 17 key countries will increase by US$4 billion, from US$3.34 billion in 2016, to US$7.31 billion in 2021. China will overtake Japan to become the SVOD revenue leader in 2017, according to Digital TV Research, which has just issued its Asia Pacific SVOD Forecasts. China alone will add US$1.69 billion in revenues between 2016 and 2021, with Japan up by US$708 million.

China alone will add US$1.69 billion in revenues between 2016 and 2021, with Japan up by US$708 million.

Netflix’s conundrum

It is not unusual that China, with its huge population and number TV homes, leads the way in terms of revenue forecasts in an Asia- Pac TV industry report. What is unusual is that, in an SVOD sector ordinarily dominated by Netflix, the US company won’t be part of the picture.

The Netflix-China story mirrors that of several other large media companies that have tried to muscle into the Chinese market, and like the earlier efforts of Disney and News Corp. (now 21st Century Fox), it has been a case of one step forwards, two steps back.

ASIA PACIFIC SVOD REVENUES BY COUNTRY (US$ MILLION)
ASIA PACIFIC SVOD REVENUES BY COUNTRY (US$ MILLION)

Earlier this year the Bloomberg wire service reported that, following CEO Reed Hastings assertion it was exploring its Chinese options, the US-listed company was talking to local partners including Wasu Media about a possible launch. More recent noises from the company suggest these plans are on ice.

“The regulatory environment for foreign digital content services in China has become challenging,” Netflix wrote in a letter to shareholders in October, noting it will focus on selling content into China rather than launching a full service. “We expect revenue from this licensing will be modest,” the company said. “We still have a long-term desire to serve the Chinese people directly, and hope to launch our service in China eventually.”

Netflix’s wider Asian prospects are much brighter, although most of the growth will come from the more developed, higher income countries. The pricing of the service in less affluent territories, meanwhile, is expected to hamper growth.

“Netflix is forecast to have 7.59 million subscribers in the region by 2021, up from 3.17 million at end-2016,” says Digital TV Research principal analyst Simon Murray. “ Australia, Japan, Korea and New Zealand will together account for nearly three-quarters of the total. Netflix is considered expensive in most other countries.”

Digital TV Research suggests that Netflix will be content to remain a high-end premium service with fewer subs, in many Asian markets, with its attention focused on a select few territories in the region.

“We believe that Netflix has already identified its key Asian markets,” Murray says. “Netflix is likely to remain the market leader in Australasia. It is adapting its offer in Japan and South Korea. We do not, however, expect the company to do much more in the rest of Asia.

“In fact, Netflix is not expected to ever launch as a standalone service in China, partly due to the government’s stance and partly due to the already well-established local players.”

Amazon’s Asia ambitions

Amazon rolled out its Prime service in India late July and the VOD component launched December, with local press tipping it to heavily undercut Netflix with extremely low annual fees (and an even cheaper introductory offer), versus a Netflix’s RS500-800 (US$7.40-US$11.80) monthly cost.

ASIA PACIFIC SVOD SUBSCRIBERS BY COUNTRY (000)

ASIA PACIFIC SVOD REVENUES BY COUNTRY (US$ MILLION)

The content acquisition strategy has been mostly focused on movies, with the e-commerce giant locking in deals with film producers and distributors V Creations, Vishesh Films, Dharmesh Productions and T Series among others.

Clearly Amazon is mindful of the importance of local content, with Netflix often criticised for being a US service programmed with American programming. The local players are, however, dismissive of the US companies’ prospects. A+E/TV18 boss Avinash Kaul recently told TBI: “Netflix doesn’t have the type of content people want and would need to produce to compete.”

Viacom18 boss Sudhanshu Vats agreed and added that local players will be reluctant to license programming to the US SVOD players. “We do 10,000 hours a year, and won’t give to an aggregator for a short-term gain,” he said.

Turner’s regional chief Siddarh Jain added: “Many broadcasters have started to hold back content for their own SVOD platforms and catch-up services.”

ASIA PACIFIC SVOD SUBSCRIBERS BY OPERATOR IN 2021

ASIA PACIFIC SVOD REVENUES BY COUNTRY (US$ MILLION)

Amazon, Netflix and other established players will grow strongly despite this, but still only account for a small piece of the overall streaming pie. “Although Netflix, Amazon, Iflix, HOOQ and Viu will enjoy rapid growth, they will collectively only account for 16% of the region’s SVOD subscribers by 2021,” says Murray.

Beyond the big 5

As in western Europe, there is ‘big five’ in Asia, comprising Australia, China, India, Japan and South Korea. Looking ahead, however, a large chunk of the regional SVOD growth will come from outside of this group.

The ‘other’ category, comprising territories outside of the big five, accounted for SVOD revenues of US$117 million last year, and will generate turnover of US$224 million this year. That total will increase five-fold to US$1.12 billion by 2021.

“It’s worth noting that the 12 countries outside the big five will add $896 million in revenues between 2016 and 2021,” says Murray.

“This will quintuple their total; showing that growth will be greater beyond the main countries.” Smartphones driving subs The Asia Pacific region will have 157.78 million SVOD subscribers by 2021, up from 41.68 million in 2015 and 76.12 million expected by end-2016. The total will nudge 100 million by end-2017.

Smartphones driving subs

Rapid smartphone subs growth means China will command 47% of the 2021 total – up from 38% in 2015. From the 82 million SVOD subs additions between now and 2021, China will supply 34 million, Japan nine million and India 15 million.

By 2021, 17.5% of the region’s TV households will subscribe to an SVOD platform, up from only 5.1% by end-2015 and 9.1% expected by end-2016. Penetration rates in 2021 will vary from 53.5% in Australia (with four of the region’s countries above 50%) to 8.0% in Pakistan.

Low credit card ownership stifles take-up, but operators are investing in pre-paid options to circumvent this.

This article was originally published in the November issue of Television Business International. For more visit tbivision.com

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