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April 22 2013

India & Southeast Asia To Drive Future Asia Pacific Pay-TV Growth; Australia, Japan and Korea To Remain Large Contributors To Sector Value

>> 626 mil. digital pay-TV homes forecast by 2020, driven by China and India
>> Revenues expected to double to US$86 bil. by 2020.
>> Technological change drives product innovation and value in mature markets
>> India remains the largest, most accessible growth opportunity for global media investors

(HONG KONG / SINGAPORE / MUMBAI, APRIL 22, 2013) Asia's pay-TV industry remains on a growth path. New projections from Media Partners Asia (MPA) indicate that total pay-TV subscribers will grow from 444 mil. in 2012 to 631 mil. by 2017 and 696 mil. by 2020. After adjusting for multiple connections in a household, the MPA forecasts indicate that pay-TV penetration will climb from 51% in 2012 to 68% by 2020.

Excluding the highly regulated and utility orienFted China market, Asia Pacific pay-TV subscriber growth is expected to be robust with 13-14 mil. new subscribers added every year between 2013 and 2016, moderating thereafter though still adding close to 7 mil. subscribers per year by 2020. Adjusting for multiple connections or homes, pay-TV penetration in Asia ex-China will grow from 53% in 2012 to 61% by 2020

The projections are published in a new report called Asia Pacific Pay-TV & Broadband Markets, an analysis of consumption, investment and revenue generation across pay-TV, broadband, digital TV and interactive value added services in 18 Asia Pacific markets.

Asia Pacific ended 2012 with 444 mil. pay-TV subs, equivalent to 51% penetration when adjusted for multiple connections in a household. Net new subscriber additions totaled 31 mil. in 2012, with year-on-year customer growth at 8%. Excluding China, new pay-TV subs came in at a somewhat milder 13.4 mil. in 2012, taking the overall Asia ex-China subscriber base to 211 mil. The growth in Southeast Asia was strong with 3.5 mil. new subs. India experienced a slowdown but managed to add close to 6 mil. new subs.

Going forward, China and India will contribute 66% and 21% respectively to Asia Pacific pay-TV subscriber growth between 2012 and 2020. China however discourages the growth of a bona fide pay-TV industry, as well as international investment in both distribution and content. In Asia ex-China, India accounts for a massive 63% of new subscriber growth between 2012 and 2020, underlining its huge importance to the pay-TV ecosystem, while Southeast Asia will contribute 16% (led by Indonesia at 7%).

Driven by digital TV (DTV) transition in China, India, Korea and Taiwan and the steady growth of DTV pay subs in Southeast Asia, MPA sees total digital subs growing from 257 mil. in 2012 to 539 mil. in 2017, and 626 mil. by 2020. Digital penetration of total pay-TV subs will grow from 58% in 2012 to 90% by 2020. Within this universe, HD pay-TV subs will rise exponentially, from 37 mil. subs in 2012 to 160 mil. by 2020, while DVR subs will grow from 6 mil. to 18 mil. over the same period. China will be the major contributor to HD growth, followed by India, Japan, Korea, Australia, Taiwan and Malaysia.

MPA forecasts indicate that Asia Pacific pay-TV industry revenues will grow at a 7.6% CAGR between 2012 and 2020, doubling from US$48 bil. to US$86 bil. Within this segment, subscription fees will grow at a 7.4% CAGR, rising from US$37 bil. to US$65 bil. over the same period while net advertising revenues, calculated after estimated discounts, will grow at 8.1% CAGR, reaching US$21 bil. in 2020 versus US$11 bil. in 2012.

MPA analysis shows that China and India will contribute 46% and 23% respectively to pay-TV industry revenue growth between 2012-20. Ex-China, India's contribution grows to 42%, followed by Korea and Japan at 12% and 13% respectively, and Australia at 7%. India's contribution reflects large volumes, a significant growth in accessible digital subscription revenues (distributed evenly across the value chain) and a large local advertising pie. In Southeast Asia, Malaysia leads with a 5.5% contribution to revenue growth driven by the growth of ARPUs and ad sales. Advertising revenues will also experience significant growth from a low base in key Southeast Asia markets such as Indonesia, Philippines, Thailand, and Vietnam.

Commenting on the findings, MPA director Vivek Couto said:

A steady growth in population and a young demographic, combined with a rising middle class and the spread of wealth amongst local groups, is driving strategic decisions and execution in the pay-TV industry. These factors, in turn, will help boost household formation and consumer spends. This will also help grow pay-TV consumption and investment. Subscriber growth and revenue generation will be driven by: (1) Continued investment in local content, and the growth of localization among global and regional brands; (2) Digitalization in emerging markets; and (3) The growth of HD, premium and on-demand services in more mature markets.

Significantly, the MPA report also notes:

The growth of mobility and broadband penetration (with fiber expected to play a larger role in the future) is also influencing pay-TV strategy, execution and consumption. Fragmentation of eyeballs is growing with the proliferation of multiple devices. This is also driving consumption of illegal online video in many territories. The response of pay-TV companies has been defensive and aggressive in equal measure. In 2012, TV Everywhere (TVE) type solutions with improved windows have been deployed across most of the region, largely authenticated to customers with a pay-TV connection. Arguably, the most aggressive responses have come from content powerhouses that own most of their IP with clear packaging and a commitment to product innovation.