Mining OTT opportunities in Asia

16 Apr 2018

In 2017, 97 million subscribers paid to have access to over-the-top (OTT) video services in Asia-Pacific. This figure will grow to 200 million by 2021 according to Rethink Reports’ Asia Pacific OTT Video & TV Delivery Forecast 2017 to 2021. Despite what it sees as a fragmented market, the report predicts pure play SVOD (streaming video on demand) providers will dominate the market ahead of operator supplied services, generating revenue of $6.29 billion by 2021.

Analysys Mason estimates that paid-for OTT video service was worth $7.6 billion in 2017. The analysts expects this figure to grow to $21.3 billion by 2022. The analyst believes that China’s “massive OTT players including Alibaba, Baidu and Tencent” will compete against Youku in the country’s $1,198 million OTT SVOD space. With average revenue per user (ARPU) for SVOD at $23.72 in 2018, Statista forecasts China’s SVOD subscriber base to reach 88.9 million by 2022.

Telecom Asia spoke to Greg Armshaw (pictured), head of media, Asia, Brightcove, to identify where the market opportunities are for OTT service across Asia.

What is your view of OTT usage in Asia?

Greg Armshaw: In TV, OTT is a term that has been borrowed from the telecom industry and its meaning is slightly different. While they both mean services delivered over the internet, in telecoms the implication here is that telecom operators only generate revenues on the use of data. For pay TV organizations, OTT means they could be disintermediated entirely. Data suggest that the new reality of TV is OTT streaming - be it live or video on-demand (VOD) streaming.

In Asia, watching TV content on internet connected devices and mobile devices is proving to be quite popular and while some of the content is not streamed from formal legitimate sources the fact remains this is a valid route from the viewers’ point of view. Viewers have demonstrated that they are likely to access TV content by illegal means if they cannot find content from legitimate sources.

OTT usage in Asia is growing with global OTT players such as Netflix and Amazon and local players such as iFlix, Hotstar, Hooq all aiming to be the legitimate source for content streaming. In fact, the region’s OTT video sector is forecasted to triple in revenues from $8.27 billion today to $24.4 billion by 2022 (Digital TV Research 2017). OTT adoption in Asia still has room for tremendous growth, with only 27% of users in Hong Kong and 29% of users in Singapore currently subscribing to OTT services according to a YouGov OTT Research 2018 report. Around 50% of these users polled subscribe to at least one OTT streaming service.

Pay TV operators who are used to large profits are seeing a decline in pay TV subscriptions renewals, with users cutting the cord and opting to subscribe to OTT services for anywhere between $7-$15 per month. For pay TV operators offering OTT streaming options, the average bundle needs to be priced competitively in market where native OTT operators have priced their service at $10-15 levels.

For free to air TV networks, OTT provides an opportunity to reinvent themselves and some are already experimenting with AVOD and TVOD services.

What factors are contributing to this trend?

The speed and the cost of internet access is the key enabler in OTT adoption and usage. Combine high speed mobile internet access and low mobile data costs, the outcome is total transformation in the way mobile users access content on their mobile devices. As more and more OTT players enter markets with compelling and competitive priced offerings, it is driving OTT service sign-ups. In addition, users are becoming much savvier in the way they access TV content on mobile devices and are delighted with features such offline download to playback and continuous play feature that enables viewing to 'travel' seamlessly from device to device.

How should carriers respond to the challenges presented by OTT providers?

The biggest challenge for TV content owners is that aside from pay TV operators, content owners do not have experience of dealing directly with the viewer or end customer. When it comes to billing and churn management, this is where pay TV operators offer a real value to TV content owners.

Should telco operators choose to invest in launching their own OTT services, they will need to bring in TV/video specialists, and not just view this as another mobile VAS. Telco carriers have the opportunity to partner up with OTT providers to provide TV app services to mobile subscribers as well as be the next generation pay TV-like operators.

Do you expect the success of OTT to marginalize the role of carriers in the long term? If yes, what should be the strategy that carriers pursue with this future in the horizon?

Telecoms carriers tend to invest in ensuring a robust mobile network and broadband infrastructure, and should maintain that focus to be the best they can be at providing the best delivery and payment platforms, while partnering with the best TV content owners.

Asia is the region with the largest mobile subscriber base, and this is where TV content owners and telecoms carriers have a golden opportunity to form a symbiotic relationship. The success of one does not mean the demise of the other. Together they can add real value to the end customer and enjoy the joint benefits of growth.

TV content is the most exciting and desirable product in the world and internet delivery is going to be just as popular as broadcast distribution methods. Telecoms carriers that are not prepared to enable the streaming of the broadest range of content on their networks are likely to see an impact on their business.

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