A couple of recent reports by Hong Kong-based research and consulting firm Media Partners Asia (MPA) highlighted the state of Pay TV market in the Asia-Pacific and the strides that over-the-top (OTT) video streaming platforms have made in the region. In its latest edition of Pay TV Networks Channel Database, MPA talks of a decline in earnings and profits in 2018 of Pay TV Networks outside India. It says that the Pay TV market in Asia Pacific is entering a phase of “accelerated consolidation as subscriber growth and spend deteriorates across key territories". The report shows that aggregate revenues across 13 major Pay TV networks in Asia Pacific grew by just 1% in 2018, while the combined Ebitda fell by 5% in the same year.

The report adds that India stands alone as the last major buffer against the secular weakness in Pay TV in Asia “although new regulations threaten Pay TV subscription and advertising growth in India, too", at least in the near term. The new regulation here refers to the Trai’s New Tariff Order that lets viewers pay only for the TV channels they want to watch at the maximum retail prices set by broadcasters. Referring to the report findings, Vivek Couto, executive director, MPA, said that consumer demand for traditional Pay TV has been impacted by high-speed broadband, which is driving rapid increases in online video consumption, putting pressure on Asia’s Pay TV ecosystem. He added that Pay TV’s first big wave of consolidation, led by Disney buying Fox and AT&T buying branded networks from Turner and HBO, will play out across Asia Pacific over the next year.

“Future consolidation and rationalization will be defined by global moves and M&A possibilities involving large assets in India," he added. In fact, in a more recent report, MPA suggests that online video revenue in APAC will also double between 2019 and 2024, as mobile broadband connectivity drives digital growth and scalability across the region. MPA forecasts a 15% CAGR for online video advertising and subscription revenue in the Asia Pacific.

To be sure, the India market is still an exception as its Pay TV market growth is not under immediate threat. However, Jehil Thakkar, partner, Deloitte India, admits that the sector will face a bit of a challenge from OTT video streaming services such as Netflix, Amazon Prime and Hotstar, among others. “The effect will initially be restricted to certain TV genres and some consumer segments." Thakkar identifies the affluent, urban, socio-economic category A consumer segment that will shift to OTT first “because he behaves like the western consumer and is constrained for time." Among the TV genres that will first be affected by the growth in OTT are films and English language entertainment.

Since video streaming platforms are offering these genres, TV audiences may look to restrict the number of these channels in their bouquets after the implementation of the New Tariff Order. Others argue that the haphazard implementation of the New Tariff Order could also push cable TV subscribers towards OTT platforms, affecting the Pay TV market. In a survey on the impact of the Trai tariff order on broadcasting, research firm YouGov found that 49% of the people felt that the regulation will increase the amount of time they spend watching original content on OTT platforms.

OTT platforms will also have it good in India as a Deloitte study estimated the online video audience in the country to grow from 350 million in 2018 to 500 million by 2020. Citing the Statista report, a broadcast media executive said that over 70% of Indians with smartphones subscribe to one or more streaming apps already. Declining to be named, he added that the future of Pay TV will be challenging globally. “Especially, in countries like North America and Europe. In India, TV will definitely survive for the next 10 years. This means that both OTT and TV will live together and fight for audience attention, time and wallet. Like always, Indian audiences will remain spoilt for choice," he said.

Thakkar agreed that there was no short- to medium-term threat to Pay TV in India. However, when fibre-to-home reaches scale and consumers switch to smart TVs, the general entertainment channels may start getting affected. “This will take another 5-7 years until fibre-to-home gets a critical mass. There has been progress made by Airtel and Jio, but there has to be a revolution. Even now, people think about data limits and charges as video is data-heavy," he said. For now, OTT over Pay TV will be limited to a small sliver of the market.

Shuchi Bansal is Mint’s media, marketing and advertising editor. Ordinary Post will look at pressing issues related to all three. Or just fun stuff.

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