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26 March 2020

High APAC forecasts mask big country differences

The great Asian tiger has been outstripping other regions for some time now and been celebrated by analysts as the region of fastest subs growth in video services over the next five years. Our peers at Digital TV Research are among the latest to highlight this growth in numbers, as is our research arm Rethink TV in its latest forecast, “How to survive the Set Top Box endgame.”

Digital TV noted that the region is home to half the world’s population at 4 billion with an implication being that streaming services, often ad-supported, will drive video through the many people who were unable to access services before for various reasons. Even with ARPUs chronically low across much of the region, affordability has been a constraint in some markets and AVoD promises to liberate that large hinterland of consumers.

Perhaps the first point to clear, before making any deductions about APAC as a whole, is that in reality it comprises five mini regions, all with strikingly different demographics and market dynamics. These regions are bracketed as a whole merely for convenience of geography and global market segmentation and have little overlap in many respects. These are China, India, SE Asia’s advanced nations, notably Japan, South Korea and Singapore, the big developing tropical nations such as Vietnam, Thailand, Indonesia and the Philippines, then finally Australia and New Zealand. Even within these mini groups there are considerable inter-country differences, but they have some coherence.

Rethink TV has for some time bracketed China separately from the rest of APAC for two reasons, firstly because it has different technologies and pay TV dynamics and secondly its huge numbers skew regional graphs, tending to obscure more subtle trends elsewhere. The country has also been a huge driver for IPTV, overtaking France as the world’s number one in that sector around 2012 and surging ahead since. Yet IPTV deployment is almost nonexistent in some Asian countries, including India, so an APAC-wide graph would be misleading and heavily distorted by China. As a whole, China is now a relatively saturated pay TV market and the rate of increase in subs is falling off dramatically after years of strong sustained growth. Rethink TV forecasts China’s pay TV total rising from 342.4 million in 2019 to 363.7 million in 2025, having stood at 195 million in 2010.

India, despite now having almost an identical population to China, has lagged behind and as a result is set to play catch up over the next few years and generate some big numbers, such that it too will pull more heavily on APAC trends and should also be regarded as a region of its own. We expect pay TV subs to rise there from 123.8 million in 2019 to 178.2 million in 2025. Some of these subscribers will also have subs to AVoD and/or SVoD services, but with less taking out multiple packages than in many developed nations, despite the much lower ARPUs.

The overall growth rate of SVoD and AVoD in India will be slightly higher than for pay TV, but not by as big a margin as in many countries, which in turn reflects the services all being on much the same page for ARPU. This contrasts starkly with the US, where increasingly precipitous churn has been driven by the big differential between bloated and overpriced pay TV packages and in that case mostly SVoD alternatives. In India, AVoD has been growing faster than SVoD so far, but the latter will come back to narrow the gap a little.

The next mini region comprising primarily Japan, South Korea, Hong Kong and Singapore is the most developed and as a result the most highly saturated of the five. This is reflected in subs flatlining or even declining in these countries, with Rethink TV forecasting a rise just from 25.9 million in 2019 to 26.6 million in 2025 for Japan. Hong Kong is on course to decline slightly from 2.12 million to 2.09 million over the period, while South Korea will enjoy the strongest growth of these from 32.6 million to 37.0 million.

Of the developing nations, Rethink TV anticipates the strongest growth in Indonesia where infrastructure investment and aggressive marketing of IPTV by PT Telcom in particular will drive a doubling of subs from 10.1 million in 2019 to 21.4 million in 2025. PT Telkom’s strong investment in broadband virtualization will provide a firm foundation for competitive IPTV services by cutting infrastructure costs while helping scale for growing numbers of subscribers.

Finally, we have Australia and New Zealand, both of course English speaking and sharing more in common with Europe and North America in terms of pay TV. This is especially true for New Zealand where Sky NZ, the country’s only significant pay TV operator is churning subs to OTT. In Australia, both the principal operators, Foxtel TV with IPTV and Fox TV, 65% owned by News Corp and 35% by Telstra, are on course for sustained growth over the next five years.

Digital TV has forecast subs in the region rising by 45 million over the period until 2025 and that 80% of the growth will come from China and India, but would not disclose the absolute totals. We can do better than that by citing 476 million for 2019 and 541.8 million for 2025 as China plus India totals, so we are indicating a bigger rise of almost 66 million subs. The discrepancy arises partly because they have China peaking in 2021 and declining slowly thereafter, while we see subscriber numbers continuing to rise very slowly there until 2025. After all, prices are low and affordable for the average Chinese household, while OTT and SVoD packages are only a little cheaper, so the pressure to churn is low while there is still some slack to take up. Even by 2025, pay TV penetration in China will stand at just below 80%.

It is worth noting that although India has a similar population to China, it has far fewer households, reflecting the relative size of families in the wake of China’s one child policy, which was only relaxed to two children from the start of 2016. Therefore, the difference in pay TV penetration between the two countries is smaller than that between the absolute numbers. India’s pay TV penetration had just passed 50% in 2018 and will increase steadily to over 70% by 2025. Rethink TV forecasts India will account for almost precisely half the total Asia Pacific subs growth of 126 million between 2018 and 2025, including China.