Broadbandindia Magazine

The media industry might be facing issues like advertising recession, fragmentation and increasing competition, but one area looks to be in good shape in Asia: subscription television. In uncertain times people find comfort with the familiar — on the couch, watching TV. That was the message at the annual Cable & Satellite Broadcasting Association of Asia (CASBAA) convention in Hong Kong. People are watching more TV than ever, on more devices, in high definition and on bigger flat-screen TVs. While there is much experimentation with new business models and delivery methods, the decades’ old subscription TV model has proven hard to dislodge. Even in a tough economy, the plug rarely gets pulled on the cable channel.

According to CASBAA estimates, digital pay- TV subscription households now account for over 115 million homes in Asia. China and India have spearheaded much of the growth, with India now having 19 million digital pay- TV households, while China represents 69 million digital video connections. Still, across Asia, the pay-TV landscape offers huge contrasts. Japan, as many would expect, is at the forefront of moves to high definition and digitalization. Again, much interest is focused on the two giants of the region, India and China, which serve up a contrast of feast versus famine from a content perspective.

India

India has seen an enormous and dynamic content industry develop in recent years and now boasts six direct-to-home (DTH) satellite TV operators serving up over  550 TV channels, including 120 foreign channels. This is great news for viewers, but the intense competition has left a lot of red ink in the industry, and some operators may be squeezed out. That was the view of Subbash Chandra, chairman of Zee Entertainment Enterprises Ltd., who said he expects survival of the  fittest to leave just four profitable DTH operators in the future — still more than most countries can support. Last year, the industry booked a collective loss of between $200 million to $500 million, he estimated.

A notable success story from India is the Indian Premier League, the hugely popular cricket league which is exciting cricket fans in the way that English Premier League has as the leading brand for soccer. This type of cricket, with cheerleaders and brazen commercialism, might upset traditionalists, although it has opened up a whole new fan base. The success of the league also shows Asian nations that the content business is not all one-way traffic from the West to East. Get it right, and they could be an exporter of lucrative content and sports rights.

China

China by contrast is suffering from a content famine due to ongoing restrictions on foreign broadcasters and the huge dominance of state-owned CCTV. Most  foreign channels can only access a limited audience in China, restricted to hotels of three stars and higher and to foreign residential compounds. Local channels largely serve up a mediocre fare of “me-too” general entertainment and repeats. To access a wider choice of content, most look to video streaming on the Web, where government controls are less severe. Tudou Wang, China’s equivalent of YouTube, serves us all sorts of content — some legal, some not — and claims its now has 150 million unique users a month and 28 million video clips on its database. It is making efforts to weed out copyright-infringing content and to produce and invest in its own content.

Still, questions remain over the business model, as Tudou (whose name means “potato”) has yet to make a profit. And how long will mainland Chinese viewers be happy watching low-resolution video on their PCs, especially as digital cable accelerates? The government has mandated an urgent upgrading of cable operators and plans to digitalize 150 million cable households by 2013. Meanwhile, a DTH service is scheduled to launch early next year. On the ground, Chinese households are certainly ready for better TV, going by how fast large HD flatscreen TVs are being snapped up. They are outstripping sales in the U.S., according to recent reports, at over 20 million a year. But will Chinese consumers get quality and varied content to watch on their latest kit? You would think at some stage, to square the circle, China will have to let its content industry catch up to its TV infrastructure. This will be worth watching for, but it could be a long wait.

Perspective… Pay-TV still has work to do to convince brands

In a year that has seen most ‘traditional’ media in meltdown, pay-TV has been steadily going about its business. Channels such as HBO and Discovery have been rolling out HD and ondemand services around Asia. Pay-TV platforms have shown huge growth in India, and may finally be ready to take off in Indonesia. The expansion of pay-TV in Asia is now inextricably linked with the spread of digital. There is still huge potential around the region for the ‘triple play’ of telephony, broadband and pay-TV. On one level that is heartening for content owners; they can count on a steadily expanding group of potential subscribers. On another level it is worrying.

Online piracy remains a huge issue in Asia, and online video sites such as Tudou are now aggressively moving into content production to offer alternative TV services. As pay-TV jumps on the digital bandwagon, one problem it will face is that people will use their lovely new broadband connections to access content that previously would have been available only on pay-TV. Basically, if you know what you’re doing, the internet is like a giant TiVo – time-shifted viewing of pretty much anything you’d want to watch. And however much institutions such as Casbaa lobby, that is not going to change in a hurry.

That’s one of the reasons why the pay-TV industry keeps coming back to advertising as an extra revenue stream. Yet here there are huge challenges ahead. Technology firms are not very good at giving advertisers what they want. Pay-TV is a bit like mobile; both have huge technological potential, and both can wheel out all sorts of data to support themselves, but both can leave advertisers cold. In Western markets, interactive TV via digital platforms was earlier this decade hailed as the future of TV advertising. It wasn’t. At a time when marketers are homing in on buzzwords like ‘engagement’ and ‘participation’, bolting on a few extra metrics to television ads feels a little, well, quaint. Pay-TV has plenty to be proud of, but also plenty of work to do.

Asian number overtakes the rest of the world

Subscriptions for TV services in the Asia-Pacific region have reached 326 million, up 26 million in 2009 alone, and have now overtaken the rest of the world combined. Of those 326 million, 115 million homes now have digital TV. Digital penetration stands at 35% across 14 markets.

China and India account for much of the growth, and for most of the subscriptions – 90% of all Asian pay-TV subscribers in 2009. India has 19 million digital pay-TV homes, while China has 69 million digital video connections. Growth has also been spurred by 18 new pay-TV platforms in the past 18 months. New operators, many of which are from the growing IPTV sector, are: Hikari TV (Japan); Korea Telecom and SK Telecom (Korea); Cignal (PLDT), G-Sat  (Global Destiny), PLDT/Smart (MyTV) (Philippines); Aora- TV and Okevision (Indonesia); Top Up TV (Next Step Co.) (Thailand); VSTV (VTV/Canal Overseas), VTC (HD channels), HTV (Ho Chi Minh TV), FPT Telecom and VNPT (Vietnam National Posts & Telecom) (Vietnam); Telecom Malaysia (Malaysia); Reliance, Videocon and Bharti Reliance (India).

Despite the good news, however, there remains a huge problem with piracy in the region. Growth in subscriptions as pay-TV becomes more attractive has meant a simultaneous increase in piracy. CASBAA’s annual piracy survey of 15 markets generated an updated estimate of US$1.94 billion in annual revenue losses across the region, up from US$1.75 billion last year. Lee Beasley, Director of Media & Entertainment, Origination & Client Coverage at Standard Chartered Bank, which partnered CASBAA for the research, said: “This estimate uses highly conservative assumptions; actual totals are likely to be much higher.”

As new markets open, previously hidden pockets of piracy have become apparent. Indonesia is one such territory, with local industry and government paying increasing attention to pay-TV signal theft in the last year. “Likewise, Vietnam is going through the same process,” said Beasley. But piracy in Hong Kong and Manila in the Philippines has declined as cable operators have deployed new digital transmission systems. Tax specialists at Pricewaterhouse Coopers claim that the revenue leakage from the legitimate pay- TV industry cost regional governments at least US$247 million in uncollected taxes. The biggest revenue losers were the governments in Thailand (US$76 million), Pakistan (US$56 million) and the Philippines (US$39 million).