In many respects, the pay-TV industry is a global success story, exceeding a billion subscribers and US$200 billion in global industry revenue earlier this decade, and widely expected to approach US$250 billion in global industry revenues by 2020. However, the industry is going through a period of change and development, with service providers in many markets facing a perfect storm of slowing growth, intensifying competition and business model disruption, driven by improving broadband quality and availability, and by disruptive new entrants. Asia-Pacific – which accounts for half of global TV households, but less than 20% of pay-TV revenues – is being affected by these trends unevenly. The pace of economic and technological development has not been evenly distributed across the region, resulting in a divide between Advanced Asia and Emerging Asia. Advanced Asia has a more highly developed pay- TV industry and higher penetration of broadband; consequently, it is more strongly affected by business model disruption and disruptive new entrants. Overall, the region is highly fragmented, given strong differences in wealth, demographics, geography, penetration of broadband and pay-TV, and content preferences.


Innovation is key to remain competitive


There is a strong consensus among the pay-TV industry executives that innovation – the development of viable new offerings – is becoming more important and more urgent for the pay-TV industry in Asia-Pacific. Growing competition from existing and emerging players are perceived to be the main reason for service providers’ increased focus on innovation in both Advanced and Emerging Asia. Industry executives emphasise that in order to innovate successfully pay-TV The pay-TV industry is going through period of change and development service providers will have to ensure that innovation is at the top of their senior management’s agenda and that customer needs are the core focus of their innovation programmes.


The state of innovation today: Major pay-TV operators and telcos in advanced Asia are the most advanced


Given this urgency, what is the state of innovation across the pay-TV industry in Asia-Pacific today? Pay- TV service providers in Asia-Pacific are at varying stages of developing and diversifying their product portfolios, ranging from the most advanced portfolios, mainly offered by major pay-TV operators and telcos in Advanced Asia to the most basic service offerings, usually offered by small-scale local pay-TV operators and, in some cases, major pay-TV operators in Emerging Asia. Convergence between pay-TV and telco service providers has played an important role in Advanced Asia, with around 50% of pay-TV service providers offering telco services compared to only 17% in Emerging Asia. The majority of pay-TV service providers are evolving their core pay-TV offer and moving into OTT services by providing standalone OTT and TV Everywhere services. However, the level pay-TV proposition development varies significantly between Advanced and Emerging Asia:


In Advanced Asia, 97% of pay-TV service providers offer IP-connected set-top boxes compared to only 42% in Emerging Asia.


+ Next-generation set-top box functionalities are much more widely deployed in Advanced Asia – for example, third-party applications on set-top boxes are offered by 60% of pay-TV service providers compared to only 14% in Emerging Asia, while 4K is offered by almost 50% of service providers in Advanced Asia compared to only 6% in Emerging Asia.


+ TV Everywhere services are wide spread across the region, with 80% of pay-TV service providers in Advanced Asia offering these services compared to 53% in Emerging Asia.


+ Standalone OTT services are less widely available, with 30% of pay-TV service providers in Advanced Asia having launched these services compared to 22% in Emerging Asia. Diversification into adjacent business areas is less common. In most cases, it is pursued by well-funded innovation leaders in Advanced Asia that offer telco services:


+ 30% of pay-TV service providers in Advanced Asia offer products and services in adjacent business areas, such as business-to-business services (e.g. advanced advertising and technology white-labelling) and Internet of Things solutions, compared to only 3% in Emerging Asia.


+ Smart Home solutions are the most common type of adjacent business areas in, with 30% of service providers in Advanced Asia currently offering home security and 10% offering home automation services.


+ Business-to-business services are significantly less developed, with only a single service pay-TV service provider offering advanced advertising services across the region.



Looking ahead: OTT distribution, seamless user experience and smart home among investment priorities

 What are the main innovation opportunities and priorities for the Asia-Pacific pay-TV industry?

With further convergence in the market, industry executives see substantial scope for innovation across the industry over the next five years. Although investment priorities will vary across the different markets, the key areas for innovation will be in pricing and packaging of content (particularly bundling video and data products), standalone OTT services, Smart Home solutions (particularly for telcos in Advanced Asia), and advanced set top box functionalities. Over the next five years, pay-TV service providers will focus predominantly on strengthening and differentiating their core pay-TV and OTT propositions. In Advanced Asia, the focus will be on ensuring a seamless video experience across all consumer devices and making content discovery as easy as possible, with IP-based, cloud and data technologies playing an important part in enabling these next generation features.


In Emerging Asia, pay-TV service providers are expected to focus on delivering value-added services such as HD video quality and PVR functionality – and slowly transition towards hybrid settop boxes. Multiscreen TV Everywhere services are seen as an integral element of the next-generation TV experience, while standalone OTT services should help pay-TV service providers differentiate their offerings and attract new customers outside their existing geographical footprints. Although the emergence of new technology and software solutions has made innovation easier and, in some cases, cheaper for pay-TV service providers, many innovation challenges still remain. Pay-TV executives in Asia- Pacific suggest that dependency on content suppliers, limited funding for innovation projects, limited business scale and risk avoidance are still important barriers to innovation across the industry.


As pressures to innovate continue to mount, pay-TV service providers will have to find new approaches to innovation in order to accelerate new product delivery and create more value for their customers. In many respects, the pay-TV industry is a global success story – experiencing a long period of sustained growth and development around the world, exceeding a billion subscribers and US$200 billion in global revenues earlier this decade, and widely expected to reach US$250 billion in global industry revenues by 2020.


Historically, pay-TV operators have pursued a distinctive business model, featuring end-to-end distribution platforms, consumer premises equipment, sophisticated conditional access systems, licensed third-party video content and monthly household-level subscriptions. Importantly, the industry has been distinctively collaborative, with pay-TV enterprises distributing content from a wide range of content providers and relying strongly upon a wide range of technology suppliers, many of whom have played a strong and central role in supporting the development and deployment of new offerings.