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MPA: High cost for Asia's pay-TV growth

Posted: 16 May 2011 ?? ?Print Version ?Bookmark and Share

Keywords:pay-TV? free TV? broadband?

Growth drivers and the role of India

Favorable market and industry dynamics will drive future pay-TV industry growth. Economic growth is a key catalyst, reflected in a number of trends, (1) household growth and urbanization; (2) rising TV penetration; and (3) higher incomes and improved affordability.

MPA analysts also highlight a favorable industry landscape due to competition and investment. This is most notable in India, where the rise of direct-to-home (DTH) satellite TV is having a major impact; in Indonesia, where DTH platforms are helping boost pay-TV penetration from a very low base; and in Korea, Japan and Singapore, where IPTV platforms have contributed new growth to saturated marketplaces. At the same time, cable digitization is having a positive impact on industry value chain economics, most notably in North Asia, boosting consumer spend on pay-TV in particular. Significantly, Japan, China and Korea will also complete digital switchover during this decade.

Meanwhile, investment in content is at its optimal in markets such as Australia, Japan and Singapore, and growing in markets such as Malaysia and Korea, where pay-TV operators are investing in self-produced content and relevant turnaround channels to retain competitive advantage. However, content investment is poor in the largest markets, China and India.

The rise of India is particularly noteworthy as the country will overtake the United States as the world's largest DTH satellite pay-TV market by the end of 2012, and will surpass China as the largest market for pay-TV advertising after 2017. In general, revenues, costs and capital expenditures are all growing at an alarming rate in India due to various dynamics, including macro growth, competition and digitization.

Such is the extent of competition, cost and fragmentation in the Indian marketplace that profit margins remain low, even for market leaders. Margins and value chain economics will improve in the long term however, through digitization of cable networks, rising subscriber scale, improved cost control and strong advertising growth. Pricing power will still be modest however, as ARPU growth will remain under pressure due to competitive and regulatory dynamics.

Consumer-focused brands will thrive

Pay-TV and broadband distribution platforms positioned as consumer businesses will continue to prosper, especially as they invest further in product innovation, relevant content and new digital and broadband technologies. Operators that combine optimal networks with unique content assets, which they own or have rights to, are poised to benefit from the growth of fiber infrastructure. Notable examples include operators in Australia, Japan, Korea, Singapore, Malaysia and Taiwan, moving to IP- based platforms over the long term to capitalize on technological change.

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