With less than 50 per cent penetration in most Asian markets — Taiwan is a notable exception — pay-TV stands as one of the few spaces in the industry with plenty of room to grow. This much was obvious during the recent bidding wars that took place across Asia for the English Premier League (EPL) broadcasting rights. But exactly how big is the pay-TV pie, and what shape will it take in coming years?
1A report from Citigroup estimated that Singapore's pay-TV market — which has been over 10 years in the making — was only worth S$300million (US$193.6 million). In fact, an analyst at IDG once described StarHub's cable offering as a marketing platform, rather than a viable revenue source. What pay-TV does offer telcos, however, is a compelling, value-adding service which creates brand stickiness.
2 The general rule is that consumers follow content, but paradoxically, it is a rule which has created one of the biggest problems for the industry, according to media agencies. The bids for content are raising operating costs and, consequently, subscription fees. Market estimates suggest that PCCW's Now TV paid US$205 to $256 million for its EPL rights, while StarHub is estimated to have paid $75 million.
3 As more media channels emerge in the form of IPTV or mobile TV players, exclusive content will become more important. But not just any kind: "Most content on cable is episodic, so you can get the entire story in one episode. There aren't enough quality serials to create audience loyalty," one media planner said.
4 Broadly speaking, however, media planners across the region are positive on the medium. They see it as the best way to hit mid- to upper-income brackets and targeted interest groups, and at a far lower cost. Jordan Lau at MindShare Hong Kong also sees creative opportunities beyond mere sponsorship and branded content, such as squeeze frames.
5 Even with pay-TV ad space costing less than half of that on terrestrial channels, clients are not rushing over. Not when most markets have terrestrial penetration rates of 90 to 95 per cent, and value-added services to boot. Singapore's MediaCorp is a case in point. With five channels — ranging from 24-hour news to children's programming — MediaCorp has strengthened its grasp by throwing production and creative services into its fold. Bottom line: until subscription rates drastically improve, clients will likely take a cautious approach towards cable channels, given the overwhelming preoccupation with reach.
6 Piracy is another issue. Casbaa recently reported that the practice cost the industry $1.13 billion in 2006 in potentially lost revenue, compared with $1.06 billion last year. But, according to media agencies, advertisers aren't overly concerned — after all, increased reach helps them. Ad-masking, on the other hand, may be more of a concern.
7 Ironically, piracy may pave the way for new technologies — PVR, mobile TV, IPTV to name a few — to emerge. Though mobile TV subscriber numbers fall behind pay-TV subscribers — five million compared to 200 million — the medium is expected to grow much faster: 25 million by the end of 2008, according to a report by the
e-Media Institute.
8Revenue models are another challenge. James Chadwick, regional insights director, MindShare Asia-Pacific, says while infrastructure and government regulations will improve over time, emerging revenue models like branded content are becoming more common. "Those business models which are based purely on subscription are making themselves vulnerable to savvy new players," he says.
9 There are also significant gains to be had in a pay-TV operator monetising its database, developing and leveraging consumer offers and effectively incentivising a ready-made band of existing customers. "They have a customer base that terrestrials don't have, but they're not utilising it to the full degree, simply because they may have underestimated how difficult it is," says Chadwick.