Over-The-Top Video in Asia Pacific

2020 the Asia Pacific region will see a sizeable growth, with 68.83 million households having a SVOD service, according to Digital TV Research, a London based TV market research firm in their latest report, Asia Pacific OTT TV and Video Forecast. SVOD services, such as Netflix and Amazon Prime Instant Video, offer unlimited access to their content libraries for a monthly subscription-fee.

Total internet delivered OTT (Over The Top) TV and video revenues in the Asia Pacific region will reach $11,293 million in 2020.

Asia Pacific SVOD homes to quadruple by 2020

Current active Asia-Pacific OTT video subscribers reached 594 million in 2014, with China accounting for more than 85% of the market size in 2014 but set to fall to 80% by 2020 as other Asia-Pacific nations add subscribers, according to a paper from Media Partners Asia (MPA), a Market Research and Consulting firm based in Hong Kong.

A seizable growth from the US$4.7 billion in net revenues in 2014, including video advertising. Advertising will contribute more than 80% to the online video pie by 2020 with the subscription revenue opportunity, largely driven by SVOD platforms, growing from less than US$700 million in 2014 to more than US$2.3 bil. by 2020.

“The combination of increasing internet speeds and ubiquity of connected devices provides consumers with the anytime, anywhere ability to enjoy their favourite TV shows and movies on the Netflix service”
Reed Hastings, CEO, Netflix

Land of the Rising Sun

Japan will remain the largest SVOD country. User penetration is at 5.86% in 2015 and is expected to hit 14.23% in 2020. Japan is the most developed market in the region when it comes to SVOD and TVOD (Transactional Video on Demand) offering to consumer. Players already deployed in Japan are Amazon, Apple, Google, GyaO, Tsutaya, Niconico Hulu and SVOD Start-ups and TV operators as well as Telcos & ISP operators. Netflix launched in September 2015.

Reed Hastings, CEO, Netflis (Reuters/Gonzalo Fuentes)

Kazu Shimura, of Tokyo Based, InfoCom Research, believes foreign OTT players will struggle to get a foothold in the Japanese market due to the plethora of current offers from local operators, that have locked their content to distribute themselves as SVOD, TVOD and Catch-up TV, as well as the crowded market place.

Japan’s Projected SVOD Market Growth

The Red Dragon & Uncle Sam

China will surpass South Korea and will be the second largest country by SVOD homes in 2020. China currently has a user penetration of 0.88% as off 2015 and is expected to hit 1.41% in 2020. A report by Pyramid Research reveals that SVOD will rise to 28.3 million users in China in 2016 alone. The market is one of fastest growing, and certainly the most lucrative, as OTT players secure exclusive rights to paid sports content such as English Premier League.

In October 2015, Lionsgate Entertainment, an American Canadian film production company announced a deal with Chinese online video platform iQIYI. The partnership covers SVOD and TVOD rights for films streaming on iQIYI’s platforms such as The Hunger Games: Mockingjay — Part 2, Divergent Series: Allegiant, Now You See Me 2, Deepwater Horizon, Sicario, Nerve,The Shack and LaLa Land.

“In my view, OTT players will replace the existing pay-television operators in Hong Kong within the next three to five years because they offer more choices and package content on a video-on-demand basis for consumers”
William Yeung Chu-kwong, CEO, HKBN

iQIYI, that was launched on April 22, 2010, is, as of 2015, China’s largest video site view more than 1.28 billion hours of TV shows and movies per month on it’s platform. The company was founded by China’s largest search engine, Baidu and Providence Equity Partners, an American global private equity investment firm focused on media, communications, education and information investments.

Another Chinese e-commerce local player, Alibaba, announced a deal with The Walt Disney Company. Content that Disney owns include Pixar as well as LucasFilm’s Star Wars franchise. “Disney and Alibaba share an ambition to exceed our audience’s expectations. DisneyLife directly connects us to China’s digital population and provides millions of kids and families the ability to explore and engage with Disney,” said Luke Kang, Managing Director, The Walt Disney Company, Greater China.

From the 51.63 million SVOD home additions between 2014 and 2020 across the region, China will supply 11.84 million, Japan 12.55 million and India 7.21 million.

China’s Projected SVOD Market Growth

SVOD will become the region’s largest OTT revenue source in 2018. SVOD revenues will increase from $1,032 million in 2014 and to $4,763 million in 2020. Japan will remain the SVOD revenue leader, with South Korea generating less than half its revenues by 2020.

The Pearl of The Orient

In Hong Kong, the Hong Kong Broadband Network (HKBN) is preparing to roll out more OTT streaming video services from major key partners. HKBN started out as a broadband service provider and has built one of the biggest fibre optic networks in Hong Kong. HKBN is backed by US Equity firm, CVC Partners, that has 24 offices around across the globe, including Brazil, where it open a new office in December 2015.

William Yeung Chu-kwong, CEO, HKBN

SVOD user penetration, in Hong kong, is at 7.32% in 2015 and is expected to grow 11.75% in 2020.

“In my view, OTT players will replace the existing pay-television operators in Hong Kong within the next three to five years because they offer more choices and package content on a video-on-demand basis for consumers,” HKBN chief executive William Yeung Chu-kwong told the South China Morning Post. “Our cooperation with OTT players will help us get closer to our target of 1 million broadband subscribers.”

Hong Kong’s Projected SVOD Market Growth

HKBN provides an extensive fibre-optic infrastructure across the city that supports 4K ultra-high-definition TV services. Its residential customers have fixed-line network connection speeds from 100 megabits per second to 1 gigabit per second. Making this the only preferred fixed line broadband partner for OTT streaming videos services in Hong Kong.

Taking advantage of this is Netflix who is expanding aggressively across Asia Pacific announced it will launch in Hong Kong in 2016. Netflix, recently launched in Japan and is planning to also enter the South Korea, Singapore and Taiwan market.

“The combination of increasing internet speeds and ubiquity of connected devices provides consumers with the anytime, anywhere ability to enjoy their favourite TV shows and movies on the Netflix service,” said chief executive officer Reed Hastings.

Charles Mok, Vice-Chairman, Professional Commons

Netflix will face a competitive market from local players such as Cable TV and Now TV, Richard Li, Tzar-kai’s PCCW-owned OTT service — both of which offer limited content online — and free-to-air broadcaster TVB, which provides the majority of its content for online viewing.

Netflix’s arrival was “definitely a positive”, said lawmaker Charles Mok, a Hong Kong-based Internet entrepreneur and IT advocate who serves on the Hong Kong Legislative Council. However, he expressed concern increased competition could “lead to a decline” in local Cantonese programming.

“Hong Kong people are willing to pay for good programming,” said Grace Leung Lai-kuen, a lecturer at Chinese University’s school of journalism and communication. Leung advised that local broadcasters may push the government to liberalise regulations. “It’s a bit unfair to those that pay the licence fee and have to follow guidelines,” she said.

“The market for the legal consumption of OTT services in Asia Pacific is at an early stage with monetization models nascent in most countries. […] though business models are not always scalable and issues such as piracy; content; and platform operation remain problematic.”
Vivek Couto, Executive Director, Media Partners Asia

The Sunburnt Country

Meanwhile Australia has has user penetration is at 6.24% in 2015 and is expected to hit 12.83% in 2020. A recent report from Australian Communications and Media Authority (ACMA) from December 6 of 2015 shows that Australian’s are rapidly adopting OTT services, with the following highlights,

  • 53 per cent of adult Australians (9.62 million people) watched professional online video content in the last six months at June 2015.
  • 34 per cent of Australian adults watched online television or online professionally-produced video content in a given week (at June 2015).
  • 11 per cent of Australian adults watched Netflix Australia in a given week, as at June 2015.
  • 4.9 million adult Australians accessed a VoIP service at June 2015.
  • 65 per cent of adult Australians used social networking and 42 per cent instant messaging, both increasing by four percentage points.
Stephen Langford, founder & CEO, Quickflix

The Australian market has three homegrown players, Quickflix, that start-off live as mail DVD subscription service back in 2003 and now has Nine Entertainment, an Australian publicly listed media company, as a major shareholder as well as being public traded in the ASX.

“I think to be a service in this market you need to have secured the content deals,” he said. “It’s multiple layers. You first have to, as we’ve invested significantly over the past few years, have a platform in place”
Stephen Langford, CEO, Quickflix

Presto, the second player is owned by Foxtel, which is a jointly owned by 20th Century Fox and Telstra, Australia’s main Telco as well as Seven West Media, a local TV operator.

The third SVOD service, which was launched in early 2015, Stan, is a joint venture, between Nine Enterainment and Fairfax, the largest media company in Australia and New Zealand.

Quickflix’s founder and CEO Stephen Langford, believes that to win in the OTT space, you need to have a robust platform as well as content deals. “I think to be a service in this market you need to have secured the content deals,” he said. “It’s multiple layers. You first have to, as we’ve invested significantly over the past few years, have a platform in place,” he said.

Australia’s Projected SVOD Market Growth

In terms of SVOD revenue across OTT platforms, the largest markets in Asia Pacific by 2020 will be Japan; China; Korea; and Australia. New Zealand and India will lead the next best placed group of geographies.

Although India has a sizable population of 1.2 Billion people, companies such as Direct-to-Home (DTH) satellite providers are offering VoD technology, subscriber growth has been very slow. OTT enablers are partnering with telecom operator and pay-TV operators for extending OTT/VoD services to subscribers through discounted pricing models, according to a 2014 report from Dataxis.

Projections uncovered in the Asia Pacific Online Video Distribution 2015, from MPA, indicates that total SVOD-based OTT revenues in Asia Pacific will grow at a CAGR of 16% between 2014 through to 2020, growing from US$953 mil. in 2014 to more than US$2.3 bil. by 2020.

However, piracy is still a major concern as well as identifying differentiated business models, right price points & offers and being able to scale at a sustainable pace, whilst able to secure quality international and local content.

MPA executive director Vivek Couto said: “The market for the legal consumption of OTT services in Asia Pacific is at an early stage with monetization models nascent in most countries. As barriers to entry reduce and broadband penetration increases, more disruptors are emerging and host of new platforms are proliferating, though business models are not always scalable and issues such as piracy; content; and platform operation remain problematic.”

Netflix & Amazon don’t require to be number one in Asia Pacific any time soon. Their strategy is to become truly global OTT platforms, and continue building their integrated content and delivery platform, slowly gaining an edge over local competitors to the position of number one as they have done in the US.

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