Mobile TV tops 17 million users

There were more than 17 million mobile TV users in Asia at the end of 2007, though operators of mobile TV services are struggling, constrained by regulatory and commercial barriers, with business models incorporating a mix of both free and paid services increasingly seen as critical to profitability and growth.

Subscriber growth was boosted last year by platforms using free and pay models in Asia's two largest markets for mobile TV, Korea and Japan, as well as new rollouts in Malaysia, the Philippines and Vietnam. Meanwhile, new launches are expected this year in China, India, Indonesia, Singapore and Taiwan. 3G adoption is also growing, increasing by 38 percent in 2007 to top 128 million users, a viable critical mass to drive up interest in mobile video streaming,  according to a new analysis from Media Partners Asia (MPA).

In Japan and Korea, existing business models for mobile TV remain unprofitable however. Japanese broadcasting regulations prohibit advertisers from generating profit and restrict content developers from producing exclusive programs for mobile. Similarly, government regulation is limiting opportunities to generate advertising revenue in Korea, while a subscription-based mobile TV operator, TU Media, is experiencing substantial losses because of competition from free services. The near-term solution in these two markets will likely take the form of a subscription package incorporating both conventional free-to-air channels and a sample of premium channels.

Lower economic growth could limit near-term demand for pay-TV and broadband in mature markets, as well as restrict the scope for advertising growth, while global financial concerns will limit the availability of capital in emerging markets. These risks may be offset by robust levels of regional economic growth however, which should help bolster demand and advertising prospects as well as financing options and M&A.

High-definition viewing to reach 44 million homes by year-end

HDTV is finally on the brink of mass market acceptance, according to a new report from Informa Telecoms & Media. Simon Murray, the report's author, says: "A major contributing factor is that set top box prices have fallen substantially in the last two years."

National free-to-air broadcasters are launching HD services, which will further stimulate uptake. High-definition TV won't take off in any territory until the main free-to-air broadcasters are involved. Major sports events such as the Olympics and Euro 2008 spur FTA broadcasters to provide more HD programming.

Murray continues: "Digital platforms now use HD channel provision as a differentiator against their competitors. Operators often pay carriage fees to showcase HD channels, especially from main FTA players and prestigious international brands such as Discovery. There are no hard and fast reasons why HD works, but uptake grows substantially when a tipping point of choice (around 20 channels) is on offer."

According to the report, Global HDTV Forecasts 3rd Edition, only 4 percent of global homes will actively watch HD programming by the end of this year. However, this means nearly 44 million active HD households, up 19 million from the end of 2007 (or 2 percent of global TV households). By 2012, Informa forecasts 179 million active HD homes, representing 16 percent of TV households. Penetration of active HD homes will vary considerably from one country to the next. Canada and the US will have over 70 percent penetration by 2012, with Japan next at 58 percent.

The next highest country, Korea, will be quite far behind at 39 percent, and no other country will be above 30 percent. Some large territories will have very low shares, such as Brazil (1percent), Russia (1percent), China (2 percent) and India (2 percent).

HD uptake has been highest in North America, partly due to lower-priced equipment and greater content availability but also because the picture and audio quality of standard definition (SD) programming is relatively poor. By 2012, the US will have 82.5 million active HD homes and Canada will contribute a further 9.4 million. Asia Pacific is the second-largest region, thanks mainly to early adoption in Japan. The region will retain its second place - and increase its share of the global total - by 2012, due mainly to up take in Korea (8.0 million) and China (8.4 million).

Cable set top box market looking strong after record growth in 2007

In 2007, the cable set top box (STB) market experienced record-setting growth, as both worldwide unit shipments and revenues reached new highs, reports In-Stat. Strong demand for basic digital cable set top boxes, especially in the Chinese market, coupled with sustained demand for advanced digital cable set top boxes in the North American market, is fueling the market growth.

"The next several years also look bright for this market," says In-Stat analyst Mike Paxton. "In-Stat is forecasting that demand for worldwide digital cable set top boxes will remain strong through 2012, although unit shipments will decrease gradually throughout the forecast period as the analog to digital cable TV transition matures."

Recent research by In-Stat found the following:

• In China, demand for digital cable set top boxes remains high. Over 14.7 million digital cable set top boxes shipped last year, up from 9.9 million in 2006.
• Worldwide digital cable set top box unit shipments spiked to over 41 million units last year, up from 29.7 million units in 2006.
• Worldwide cable set top box revenues passed the USD 6 billion mark in 2007, up from USD 4.8 billion in 2006.
• Unit shipments of advanced or high-end digital cable set top box products, such as HD-capable and PVR-enabled boxes, also set a new record in 2007.  Over 11 million advanced digital cable set top boxes shipped in 2007, up 30 percent over 2006 unit shipments.
• Motorola and Cisco Systems remain the top two global manufacturers of digital cable set top boxes, although their combined market share in 2007 decreased to 45 percent as Chinese set top box manufacturers increased production.
  

Pay-TV broadcasters: Report highlights India, Korea and Japan markets

A new report by MPA indicates owners of brands and networks focused on India as a key local proposition, and on Asia Pacific as a viable regional proposition, and will by and large continue to do well, though access to Korea and Japan will become increasingly important.

The report, entitled ‘Asia Pacific Pay-TV and Broadband Markets 2008', says that there are significant local growth opportunities in Japan and Korea. Going forward, more pay-TV broadcasters from Korea, Japan and ASEAN are likely to emerge as leading revenue-generators. Originators of Indian and Chinese content will continue to capitalize on the growth of consumer media industries in both India and Greater China, as well as the demand for Indian and Chinese-language programming in Asia and the rest of the world.

In 2007, pay-TV channels and content providers in Asia generated USD 10.6 billion in advertising and subscription revenues. This could almost double to USD 20 billion by 2011 and climb up towards USD 28 billion by 2017. MPA expects advertising to grow at a CAGR of 10 percent over the next decade to top USD 16 billion by 2017, driven by economic expansion as well as growing pay-TV penetration.

The economics of channel distribution remain very different outside of Japan and Australia, as subscription fees are challenging due to relatively low pay-TV ARPUs and limited penetration of digital pay-TV. Revenue composition is unlikely to significantly change in the near term because of the strong pace of ad growth and less than optimal sub fees. However, MPA anticipates a big boost from digital deployment in India, North Asia and ASEAN over the long term, with channel fees climbing at a CAGR of 14 percent to reach USD 11.4 billion by 2017, versus USD 4.5 billion in 2007.

Specific positives for the future include:

• The Indian advertising market growing at more than 20 percent per annum, with new digital distribution platforms emerging for content suppliers
• China's growing critical mass of digital subs raising a sliver of opportunity for pay-TV broadcasters
• The proliferation of digital pay-TV distribution in Korea and Japan
• Leading local broadcast groups in Indonesia realizing gains from terrestrial TV advertising and, for the first time, pay-TV distribution.
• Near-term risks in the content space include:
• Intensifying competition, costs and regulation in India
• Regulatory barriers and potentially slow growth of actual pay-TV in China
• Soft macro conditions and regulatory constraints in Taiwan
• The potential migration of ad dollars away from pay-TV channels and onto online and digital sectors.