Digital TV (DTV) is reaching something of a tipping point in Asia Pacific as pay-TV distribution platforms aggressively install set-top boxes into consumer homes across Greater China and India and terrestrial broadcasters begin to brace themselves for analog switch off in Hong Kong, Japan and Southeast Asia. The key remains finding sustainable profitable business models around DTV, a number of which could be tied to next generation DTV services, including HDTV and PVR, which have yet to gain much traction beyond Australia and Japan. A new study published by industry analysts Media Partners Asia (MPA) says that digital pay-TV homes have grown from a low base of 8.5 million in 2003 to reach over 86 million by the end of last year, close to 30 percent penetration of total pay-TV homes and 12 percent of total TV households. With more than 50 million DTV homes, China represents the largest digital market in Asia Pacific, followed by India (13.4 million), Japan (6.8 million) and Korea (4.3 million). Japan and China, the study says, are the most advanced amongst the large Asian nations, in approaching analog switch off timelines (Japan by end-2010; China by 2015). Indonesia appears to be the slowest, and Taiwan the most frustrating; whilst amongst smaller markets, Hong Kong is leading the way in deployment – though demand for TVB’s HD and SD terrestrial services have been dampened by the economic downturn. DTV deployment over cable remains strong in China and Japan and is slowly picking up pace in India and Korea, says MPA. Digital direct-to-home (DTH) satellite has been given a huge boost in India where five operators are adding subs at an annual run rate of 1-2 million though there remains growing concern about the level of cash burn in the market. Australasia and Malaysia are also key markets for DTH while Japan and Korea, both large DTH opportunities, have seen value erode in recent years due to the growth of broadband DTV networks via cable and telecom carriers. IPTV deployment remains strong in Greater China and has decent prospects going forward in Korea, Japan and India. MPA forecasts indicate that total digital pay-TV subscribers will grow at an average annual rate of 26 percent to reach ~280 million by 2013 and scale up further to ~366 million by 2018. This means that ~80 percent of pay-TV homes will have at least one set-top box by 2018 while ~45 percent of TV households will subscribe to digital pay-TV services. DTH will have a 23 percent share of the DTV market by 2018 with IPTV at 8 percent while cable will remain dominant with 69 percent share. Funding issues There are a number of near-term concerns on DTV growth however, says MPA executive director Vivek Couto. “There are some short term worries about currency volatility, which is increasing the cost of STBs for pay-TV operators and limiting funding options for DTV operators in emerging markets such as China and India,” he says. “Future growth and profit in DTV will largely depend on the rollout of next generation systems,” adds Couto. “This will fuel the growth of high definition TV (HDTV), various on-demand services and personal video recorders (PVRs).” For mass DTV deployment, MPA reckons that volumes will continue to converge around China, India and Korea. As for high-end DTV transition with next generation capabilities, Australasia and Japan remain the big near-term opportunities especially as operators such as Foxtel, Austar, J:COM and going forward, Sky Perfect JSAT and NTT drive the growth of HD and PVR services. MPA however does however see significant HDTV and PVR deployment over the long term in Greater China, India and Korea, as well as key Southeast Asian markets. According to MPA, HDTV subs will grow from a low 3.5 million in 2008 to reach close to 50 million by 2018, driven largely by deployments in Greater China, India, Japan and Korea as well as decent growth in Australasia. PVR adoption on pay-TV networks will also grow exponentially, climbing from 1.3 million subscribers in 2008 to reach 7.7 million by 2013 and 16 million by 2018. China’s national will In China, MPA analyst Adrian Tong notes, “a strong national will, anchored to government incentives, will continue to fuel the growth of digital TV. As a result, we see the government mandate of 100 percent digital switchover by 2015 being achieved.” According to Tong, the key criteria for the Chinese DTV industry in the future is not digital TV switchover, but profiting from investments made in digital infrastructure through pay channel revenues, HDTV, and broadband digital value-added services. Because of the Beijing Olympics in August 2008 and a gathering downturn in Q4, DTV rollout moderated somewhat in 2008, but China still added 20.5 million net new digital cable subscribers for the full year, versus 15 million in 2007. To date, more than 100 cities in China have introduced DTV over cable networks, out of which 33 have completed digital migration. The government plans to rollout DTV in all major cities in the eastern and central regions of China by 2010, as well as the majority of cities in the western region. The government also plans to continue subsidizing households to adopt digital cable services by waiving taxes on subscription fees for cable operators through to 2010. Estimates on the number of digital cable subs vary but the consensus points to an average of 45-53 million at in 2008. The growth of digital pay-TV services remains slow however. According to SARFT, there were only 4.5 million pay-TV subscribers on cable networks in 2008. Cable operators are under increasing pressure to monetize investments in digital infrastructure by developing HDTV, VAS (including VOD and PVR) and broadband access. At the same time, competition to cable is likely to grow from IPTV and DTH. The overall market for IPTV reached close to three million users in 2008/ DTH satellite is likely to launch in 2009. Indian cable households number more than 80 million but only two million have digital set top boxes, according to MPA. Cable digitization has slowed since Q1 2009, as MSOs are more cautious on capital expenditure because of currency issues (which are increasing STB costs) as well as big limitations on internal funding. New investment into cable MSOs during 2007-8 from various private equity funds has helped boost consolidation and digitization but much more is needed. “In the current environment, many investors remain wary about further commitment though financial investment in cable business models geared towards primary points and DTV deployments around these points (ie as shown by Hathway) is assured in the long-term,” says Couto. The market for DTH pay-TV in India experienced significant growth and competition during 2008 though growth has slowed since Q1. At the end of 2008, five DTH platforms had acquired more than 11.1 million subscribers, implying more than 7.5 million net new customers during the year. Much of this growth came with the rapid expansion of the Sun Direct TV platform, a joint venture between Sun TV and Astro, along with the 2H 2008 launches of Reliance’s Big TV and Bharti’s new services. At the same time, incumbent Dish TV has also upped growth levels to protect market share. Dish TV had 40 percent market share at Y/E 2008; Tata Sky, the JV between the Tatas, News Corp. and Temasek, 29 percent; Sun Direct, 20 percent; Big TV, 10 percent; and Bharti, 10 percent. However, MPA says that because of aggressive price competition and increased STB subsidies, subscriber acquisition costs have grown, monthly fees remain low and cash flow losses amongst DTH platforms remain high with the five platforms in the market losing close to US$450 mil. (in aggregate) in FYE March 2009. In Korea, a weak domestic economy, currency woes and limited earnings visibility are hurting DTV deployment. “Cable MSOs have generally chosen to slow DTV deployment as the threat of IPTV recedes with telcos struggling to acquire subscribers because of limited marketing and content,” says Couto. So far, cable operators have deployed DTV STBs into two million homes, but rollout has slowed in recent months because MSOs see a significant respite in competition from telcos. That said, cable digitization will continue to prove advantageous to MSOs over the long term, as it will continue to bolster ARPU growth from relatively low levels, drive revenue upside from HDTV (less than optimal so far on cable), VOD and PVR (poorly executed so far on cable), and generate higher margins through the adoption of bundled multi-play services. Both KT and SK Broadband built up expectations for IPTV with significant historical growth for its ‘pre-IPTV’ based VOD services. However, limited marketing and a dip in content availability has meant that churn on VOD has increased at an alarming rate. Much the same can be said for IPTV linear or real-time broadcasting, which has made a disappointing start. KT launched IPTV services under the Mega TV brand in November 2007. As of end-February 2009, MPA research indicates linear channel penetration of KT’s ~0.7 million VOD user base was running at ~20 percent. This implies about 140,000 users to its linear services. The disappointing take up has been due to relatively poor user-interfacing and limited marketing of the service. KT’s 23 percent-owned affiliate SkyLife continues to grow, but at a much lower pace. “The market for DTH appears to be reaching saturation and DTH is somewhat lost in the bundled multi-play battle between cable and telco players,” notes MPA’s Tong. SkyLife had 2.35 million subs at end-2009 and is targeting 2.52 million subs at end-2009 and hopes to launch a hybrid IP DTH set-top box in 2009.
Ad – Before Content
Related Articles
- Beta Group and Series Mania announce third edition of SERIESMAKERS and announce opening of Call for Submissions
- Tata Play and Amazon Prime Collaborate to Offer Prime Benefits to Viewers Across TV and OTT
- KC Global Media Focuses on Growth Channels
- Vidzemes TV Latvia Expands with PlayBox Neo Channel-in-a-Box Playout
- Caravan investigates Field of Vampires for PBS’s Secrets of the Dead
- Loud Minds explores VR/immersive opportunities in new partnership with White Spark Pictures