13 June 2014: The entire Asia Pacific pay television ecosystem added 26 million net new customers in 2013, the lowest annual growth since 2007, according to Media Partners Asia's (MPA) latest annual research, released at the end of May. Slow downs in China and India and softer growth in Southeast Asia are being blamed, with Thailand dubbed "the big weak link in Southeast Asia," MPA executive director, Vivek Couto, said during MPA's fifth annual APOS event in Bali at the end of April. MPA says net new pay-TV additions will accelerate in Asia Pacific over 2015-16. This is largely due to some gains in India associated with the next, delayed phase of digitalisation "but the general trend is one of deceleration," Couto says. Adjusted for multiple subscriptions, MPA analysis indicates that pay-TV penetration will grow from 52% in 2013 to 60% by 2018.At the same time, TV Everywhere subscribers are expected to grow from four million to approaching 15 million over the next five years though revenues from these authenticated services are expected to amount to only US$200 million, MPA figures show. CHINA CABLE SLOWS, LONG LIVE IPTV In China, new cable subscribers have slowed down significantly, due to direct competition from IPTV, internet TV (the most popular of which are services provided by Wasu, LeTV, XiaoMi and BesTV's own OTT service platform), and to some extent, online video, Couto says. IPTV in China saw steady growth of 5.6 million net additions in 2013, driven by content and increasing broadband reach.INDIA BOOST In India, the first two phases of digitalisation boosted growth in 2012. Growth slowed in 2013 because of various structural factors plus the macro environment along with currency depreciation. "Now we see the next delayed phase of digitalisation boosting net new subscribers to eight million a year in 2015 and seven million in 2016 before decelerating again by 2018," Couto says, listing India as one of MPA's key markets to watch. NEW SUBS SLIDE IN SOUTHEAST ASIA Net additions in Southeast Asia slowed by almost half last year from 3.7 million to 1.9 million; two big DTH platforms in Indonesia in particular and Malaysia contributed more than 45% to that growth. Net additions will reaccelerate in Southeast Asia to about 2-2.5 million a year, driven largely by Indonesia, steady growth in Malaysia and the Philippines, "but we expect continued disruption in Thailand and only incremental growth in Vietnam while Singapore will remain somewhat flat". KOREA DRIVES NORTH ASIA GROWTH North Asia - Hong Kong, Taiwan, Japan and Korea - grew last year only because of Korea, which contributed 80% to growth due to new customers on IPTV and DTH in a market where penetration exceeds 100%. Going forward, in Korea, MPA expects incremental growth in digital cable, DTH and IPTV will push the market, "but penetration will remain largely flat in Taiwan and Hong Kong and potentially decline in Japan. Australia's growth will largely be anchored to IPTV as will New Zealand with some DTT". INDONESIA TRIO DOMINATES Indonesia's pay-TV penetration is moving towards 15% in 2018 from 9% today. "There will be upside in penetration in Indonesia but not as much as before as platforms continue to consolidate," Couto says, adding that "it's clear that the marketplace is now developing around three groups with the market leader having 73% market share".REVENUE MIX Analogue revenue is dropping and HD is growing but "it could be much more" than the US$11.9 billion forecast for 2018, Couto says. Pay-TV advertising only grew 7-7.5% a year in terms of a regional average, that's 14% market share of the media ad pie by 2018. "So our industry revenue is only growing 9% CAGR - an interesting trend when international programme networks are expected to grow 15% a year," he adds.IS THE MESSAGE GETTING THROUGH? Couto says channels in Asia are leaving "pretty much all" advertising to pay-TV operators. "Of course, along with billing, that's their job, but a lot more needs to occur as we transition from a B2B to B2C mindset," he adds. A few examples from India included tie-ups with TV set manufacturers, joint marketing initiatives and celebrity endorsements. Couto also pointed to the U.S., where after years of a flat base HBO added two to three million subs last year in joint efforts with operators. KEEP IT SIMPLE Couto's message on the tiering and bundling challenge is to "keep it simple". While one model does not work across all markets, common traits are appearing in Asia, he says. "A strong basic tier is important. But beyond the basic, is there an opportunity to pass the baton to customers and allow them to ‘control' the content they consume?" he asks. This a la carte option will have with a certain number of channels for a set price point so as not to dilute ARPUs. BUNDLE BUSTERS "Is it time to break the bundle, or does it still hold value?," Couto asked at APOS... and the answer from programmers was that they need the bundle to be alive and well and economically viable and will do their utmost to make sure it stays that way. Couto points out that wholesale channel bundles are becoming larger and operators are questioning value at the same time as they are investing more in their own self-produced content. One of the rising themes that may play out in Asia is channel groups coming together to leverage scale. LOCAL PREMIUM Local Asian content remains a basic proposition, and although exceptions exist, Couto says "there clearly remains a dearth of quality premium Asian content that could drive the pay-TV business to the next level".