(2 March 2006 2:00 pm)

NEW DELHI: India is set to emerge as Asia's leading revenue generating pay-TV market by 2015 with multichannel video industry (cable, DTH and IPTV) turnover growing from $3.6 billion in 2005 to $7.2 billion by 2010 and $10.5 billion by 2015. According to a study done by the Hong Kong-based Media Partners Asia (MPA), in the Asia-Pacific region, the regional pay TV sector, an $18 billion revenue opportunity in 2005, could grow at a CAGR of 13 per cent over the next five years and 10 per cent over the next decade to reach $32 billion by 2010 and over $45 billion by 2015.

As far as India is concerned, economic growth, higher multichannel penetration, DTH growth and the emergence of IPTV will boost C&S advertising from $1.02 billion in 2005 to $1.8 billion by 2010 and $2.4 billion by 2015.

Pointing out that India has the potential of emerging as the largest DTH market by 2008, while being the leading market for C&S broadcasters by 2010, MPA, however, notes that the regulatory environment remains less than optimal in Asia's largest consumer markets -- China, India, Korea and Taiwan -- leading to conservative growth estimates.

Commenting on the report's findings, MPA director of content & research Vivek Couto said: "A $45 billion multichannel video opportunity over the next decade represents a healthy opportunity, but one that's limited by regulatory constraints. As a result, our projections are conservative.

"We expect that regulators, increasingly aware of the significant capital costs of media and communications infrastructure, will move on greater liberalization in the long term."

Couto added: "At the same time, we also expect market forces to prevail over time with scalable investments in content and distribution likely to grow over the next decade."

The MPA survey of Asia Pacific pay TV and broadband markets 2006 focuses on the distribution of multichannel video and broadband services over multiple networks (including cable, satellite, ADSL, FTTH and mobile) in 16 geographical territories across the Asia Pacific region.

The report represents the first ever examination of the key commercial and regulatory trends that could potentially help or hinder governments, media owners, and investors in the collective bid to unlock value across the multichannel video and broadband distribution chain.

Asia-Pacific regional pay TV industry turnover grew by 14 per cent year-on-year in 2005 to reach approximately $18 billion with more than $14 billion derived through subscription fees and approximately $4 billion from advertising.

Average revenue per user (ARPU) generation remains at its highest in Australia and Japan, while advertising remains most significant in China, India, Taiwan and Korea.

Pay TV penetration of total TV homes grew to 36 per cent with Korea, Taiwan, India and Hong Kong leading in terms of penetration.

China, India and Korea continued to lead in terms of critical mass with an aggregate of 198 million cable & satellite TV homes, though only 98 per cent of these homes have been penetrated by addressable digital pay TV systems.

Digital pay TV subscribers were up 37 Y/Y to 14.4 million, boosted by aggressive two-way deployments in Australia, Japan and Singapore and robust growth in Malaysia and Hong Kong.

Broadband penetration of total households in the Asia Pacific region reached 11 per cent in 2005 with Korea, Hong Kong, Taiwan and Singapore remaining the highest penetrated markets.

China continues to maintain its leadership in terms of critical mass, driven by ADSL rollout from China Telecom and China Netcom; followed by Japan, where increasing FTTH deployment has offset increasing saturation in ADSL and cable.

MAJOR TRENDS OVER THE NEXT DECADE

India: Significant (though not optimal) operating leverage. India is expected to join Japan as Asia's leading revenue generating pay TV market by 2015 and will overtake Japan as Asia's leading revenue-generating market for cable & satellite broadcasters by 2010.

While regulation in India has become increasingly uneven, investment in programming and digital distribution (primarily via DTH satellite) has increased and competition in the distribution of pay TV and broadband is set to grow.

China: Take the long road and possibly a leap of faith to reach the pay TV highway.

ADSL-driven broadband growth in China leads Asia with respect to subscriber mass but the market for digital pay-TV remains limited by content scarcity brought on by regulation and the continued ban on foreign investment in cable.

Gradual deregulation could occur after 2008, increasing the quality and depth of pay TV programming on cable networks. Potentially, global media distributors will be able to participate more actively in program production, licensing and perhaps, the distribution of new 24-hour channels over the long-term.

This, together with growing competition from IPTV and DTH, should help accelerate digital pay-TV growth, boost the market for pay-TV subscription and help grow cable & satellite advertising.

Japan: Multiple distribution pipes will increase penetration. Japan has one of the strongest regulatory frameworks in the region, supportive of both investment and competition.

The market for pay TV has been historically fragmented and limited. Significant growth is expected in the future as incumbent cable & satellite operators and FTTH telecom providers consolidate the market and aggressively compete in the delivery of digital video and broadband.

Investment in FTTH broadband distribution is expected to reach optimum levels and further boost broadband penetration as DSL
matures.

Moreover, after 2008, FTTH providers will be able to broadcast HD terrestrial channels (which are proving popular with consumers), competing with cable operators. Faced with growing competition, cable will continue to consolidate and accelerate digitization.

Korea: Digitization and further consolidation. Competition from DTH and partial deregulation of investment norms has forced cable consolidation.

With IPTV deployment likely towards the end of 2006, Korean cable is readying for a volume-led deployment of digital pay TV, significant investment in programming content and a push for joint ventures and alliances with global media distributors.

Korea's pay TV battles will be increasingly fought in the broadband arena as cable and telecom operators aggressively bundle digital video, voice and data services.

Taiwan: The future remains dependent on deregulation. Analog cable has reached saturation in Taiwan and digitization shows little sign of acceleration.

Regulation and market structures have limited prospects for digitization and competition. Following the establishment of the National Communications Commission, a certain level of liberalization may occur with respect to rate regulation and the promotion of level playing field competition.

With more flexibility, cable MSOs could increase investment in digital distribution and subscriber acquisition and invest in programming for the much maligned digital tier. This may be dependent on even greater consolidation and new strategic investors entering the market.

Hong Kong: Sector realignment in favor of IPTV. A supportive regulatory has helped drive competition and investment in Hong Kong's pay TV and broadband industries.

MPA expects competition to remain intense in the delivery of digital video, voice and data.

Moreover, it is anticipated further realignment in the favor of IPTV with the incumbent telecom carriers likely to have a majority share of the pay TV market after 2010 and, at the same time, maintain a dominant share of the broadband market.

South East Asia: Favorable dynamics support growing broadband and pay TV penetration in Malaysia, Singapore and in the long term, Thailand.

Broadband adoption is growing rapidly from a low base in markets such as Malaysia and Thailand. Digital pay TV and broadband penetration remains robust in Singapore but the market is inherently small (only 1.1 million households).

In Malaysia, digital DTH satellite will continue to grow the market for multichannel pay TV, while increasing DSL-driven broadband adoption will provide a foundation for the deployment of IPTV by the incumbent telecom carriers.

Similarly, growing broadband penetration in Thailand will also provide a foundation for DSL borne pay TV services.

The launch of a new DTH service in Indonesia will grow the market for pay-TV to a critical mass in the future, though terrestrial TV is likely to remain dominant. While broadband, IPTV and cable are expected to grow in the Philippines, MPA does not envisage a significant improvement in pay TV industry economics.

Japan, Australia, Taiwan and Korea dominate operator rankings. The top ten operators in the region during 2005 include leading integrated pay TV and broadband operators expanding across the digital value chain with scalable investments in content and distribution.

Chinese, Indian and Korean broadcasters dominate channel rankings. In 2005, six out of the top ten pay TV broadcasters in Asia produced and distributed Chinese and Indian programming across Asia and globally. These include: TVB cable & satellite channels (Chinese-language); Star Group (Indian and Chinese); Zee Telefilms (Indian); Sony Entertainment TV (Indian); and Eastern Broadcasting Co. (Chinese).