Online video revenue, comprising net ad spend and subscription fees, will grow at an 18% CAGR across Asia Pacific between 2018 and 2023, climbing from $21 bil. in 2018 to $48 bil. by 2023.
This is according to Asia Pacific Online Video & Broadband Distribution, a new report published today by Media Partners Asia (MPA). China will account for the lion’s share of industry value, with more than 60% of Asia Pacific online video revenue and more than 75% of direct-to-consumer SVOD subs by 2023. After China, the largest markets by revenue in 2023 will be Japan, Australia, India, Korea and Taiwan.
“Online video monetization is starting to scale, supported by rising investment in premium entertainment and sports as well as the growth of broadband and digital payments. Strong digital ecosystems are emerging, especially in China while telcos are also becoming important aggregators of video services in markets such as Australia, India and Southeast Asia,” said MPA executive director Vivek Couto said.
“Advertising is a major revenue stream for online video across the region, while subscription is also key, especially in Australia, China and Japan, and growing from a low base in India, Southeast Asia, Korea and Taiwan. Different payment models are emerging across China, India and Southeast Asia incorporating, including TVOD and shorter time commitments, freemium tiers, bundles and loyalty programs tied to a broader mix of digital services.
:We are in the early innings of an industry evolution which will require high levels of investment and strong balance sheets. For standalone players, there is no clear path to significant free cash generation in any market over the medium term, while integrated digital giants and large-scale TV players are subsidizing losses for their online video services, although operational breakeven is likely in the near-to-medium term for local platforms in Australia, China, India and Japan.”
There remain significant barriers to growth, led by high levels of online piracy, notes the report. Ex-China, many local players are also struggling to scale in fragmented marketplaces. The top three SVOD players in a market typically have ~50% or more of online video subscription revenues, according to MPA analysis, leaving scope for future consolidation.
The growth of online video subscription has been impressive in China, with fees rising from less than US$850 mil. in 2015 to a projected $5 bil. in 2018. The growth of online video subscription fees has also been strong and increasingly scalable in Australia and Japan, while meaningful opportunities are opening up in India, driven by the growth of payment infrastructure as well as investment in sports rights, local movies and series. By 2023, India will be Asia Pacific’s fourth-largest online video subscription opportunity after China, Australia and Japan. Online video sub fees in Southeast Asia (including Hong Kong) are relatively low, at a projected US$267 mil. in 2018. This could grow to $724 mil. by 2023, driven by greater momentum in Hong Kong, Indonesia and the Philippines.
Net online video ad spend in Asia Pacific will grow from $13 bil. in 2018 to $30 bil. by 2023. Ex-China, this opportunity equates to more than $11 bil. by 2023, versus $5 bil. in 2018. YouTube and to some extent Facebook will remain dominant, with 73% of online video ad spend ex-China by 2023, versus 78% in 2018. The biggest online video ad markets after China by 2023 will be Japan, Australia, India and Korea. Local players will gain share with India leading the way, although Southeast Asia will lag behind.
Content costs are a critical component of online video growth, especially original productions, local and Hollywood movies and entertainment, and sports rights. Online video content costs across Asia Pacific grew by 27% in 2017 to reach $13 bil., with China contributing 85%. Asia Pacific online video content costs will grow from US$16.6 bil. in 2018 to $31.5 bil. by 2023, a 14% CAGR, according to MPA. Ex-China, OTT video content costs will grow from $2.7 bil. to $5.9 bil. over 2018-23, a 16.5% CAGR, with Australia, India and Japan driving momentum, followed by Korea.
Advances in broadband will provide a significant boost to online video consumption, reach and monetization. Mobile broadband will continue to grow, including the first flowering of 5G in North Asia and Australia post-2020, alongside a slow but steady transition to next-generation fixed broadband. Mobile broadband penetration in Asia Pacific ex-China will reach 80% per capita by 2023 versus 57% in 2018, with some of the biggest growth coming from India, Indonesia and Thailand. With China included, average mobile broadband penetration in Asia Pacific will grow from 74% to 94% per capita over the 2018-23 period. Average fixed broadband penetration in Asia Pacific will grow steadily from 50% to 54% of households over 2018-23, with the focus increasingly on upgrading networks using fiber and next-generation cable technologies.