Abstract
Description
At more than 30% of households, pay-TV penetration in emerging markets is far
behind rates in developed markets, which average above 60%. In emerging
markets, free-to-air operators often take the lead, relying heavily on
advertising revenue rather than on the subscription revenue streams that are
so lucrative in many developed markets. Low incomes make high prices for
pay-TV unaffordable for most in developing markets, and free or inexpensive
alternatives such as pirated content deters adoption even further. As a
result, only 20% of pay-TV revenue worldwide comes from emerging markets even
though nearly two-thirds of the world' s pay-TV subscriptions are there.
Monthly subscription fees averaging less than $7, limited network capabilities
and a lack of engaging content across emerging markets are the main reasons
for the limited revenue opportunity to date.
One way that emerging-market pay-TV operators can improve revenue is by adding
video on demand (VoD) and positioning the service as complementary to
linear-channel programming - assuming compelling content is included.
Furthermore, providing content anytime - and increasingly anywhere - can draw
customers away from free platforms that lack such functionality. VoD can
therefore be a means to both raise ARPS and increase the loyalty of customers.
However, this solution is not so easy, because pay-TV operators need to
carefully select an appropriate type of VoD service while implementing the
most appropriate pricing model, and this requires network investments that are
often minor in comparison to the cost of content.
The main question that this report strives to answer is whether there is a
business case for pay-TV VoD in emerging markets. The success of a VoD service
in an emerging market will depend on a variety of factors, including the
network technology and architecture, content availability, consumer demand and
the competitive landscape. Optimal VoD positioning varies by market, so in
this report we provide explicit explanations, examples and case studies from a
range of markets, including Brazil, Chile, China, Hong Kong, India, Mexico,
Poland, Russia and the US. We believe these cases highlight best practices
that can be emulated to build incremental revenue streams with pay-per-view,
NVoD, push VoD, a-la-carte, movies on demand, DVR and time-shifted TV,
subscription VoD, free VoD, true VoD and interactive VoD. The report also
includes an update on the status of pay-TV adoption and revenue across
emerging markets, setting the stage for an analysis of whether VoD can serve
as a viable differentiator to help drive pay-TV demand or whether investments
in the service are doomed to fail. The report concludes with VoD and DVR
adoption and revenue forecasts covering the world' s largest emerging markets
measured by pay-TV revenue and adoption - Brazil, China, India, Mexico and
Russia - as well as forecasts for the US, the largest pay-TV market in the
world.
Key findings include:
- Despite lower attach rates in emerging markets than in the US, we believe
sizeable revenue opportunities for VoD and DVR services still await due to the
sizeable and largely untapped markets. In China for example, we expect the
number of VoD households to increase at a CAGR of 64% from 2009 to year-end
2014, while DVR households will grow at a 59% rate. By our estimates, these
rapid growth curves will translate into more than $1bn in DVR revenue and
nearly $240m in VoD revenue in 2014. Explosive growth will also take place in
India.
- At year-end 2008, pay-TV households in emerging markets totaled 426m, up
16% from 2007. By 2014, we expect emerging markets to account for 69% of all
pay-TV households, up from 64% in 2008. Almost half of the world' s pay-TV
subscriptions come from Asia-Pacific, mostly from China and India. The
next-largest emerging pay-TV nations are Russia, Egypt, Turkey and Poland.
- Growth in IPTV adoption should spur uptake of VoD services across emerging
markets, although the financial crisis, if it continues, could lead to a
slowing of deployments and uptake. IPTV operators and digital cable operators
are in a better position than analog and satellite players to offer true VoD
that includes two-way interactive features, programming that can be accessed
anytime, HD and DVR services.
- Our research has found that emerging-market operators are better off
introducing PPV or an a la carte model in the early stages to best assess
potential demand.
- Even though they boost customer loyalty and reduce churn, DVRs on their
own do not present a very profitable business model. We expect there to
eventually be a move from DVR STBs toward network DVR service.
- We highlight a number of obstacles specific to emerging-market pay-TV
operators that want to offer VoD. Content licensing remains the biggest
hurdle; other obstacles include a lack of affordability, regulatory hurdles,
low penetration rates of pay-TV and broadband, limited digital and two-way
network coverage, and bandwidth management constraints.
- As operators begin to amass attractive VoD customer bases and develop new
advertising models in conjunction with content providers as well as
advertisers, we expect ad-funded VoD services to become more prevalent and
account for a growing portion of pay-TV revenue.
- By 2014, we expect 34% of pay-TV subscribers in Russia and 29% in Mexico
to use VoD, whereas more than 86% of pay-TV subscribers in the US will use VoD.
Key Questions Answered
- What is the status (such as adoption and revenue trends) of pay-TV in
emerging markets, and how will current and future conditions affect the
success of VoD?
- What are the major drivers and obstacles of VoD?
- Is VoD worth it for pay-TV operators? For content providers? What VoD
strategies are being used in emerging markets, and which ones will be most
effective?
- What factors can be used to identify whether VoD will be successful in
particular emerging markets?
- What are the main challenges and lessons learned of emerging-market pay-TV
operators?
Target audience
Operators:
Understand the technology, competitive and content challenges that await a
pay-TV VoD launch in an emerging market. Evaluate your market opportunity and
benchmark your own tactics and performance. This report will help you develop
and refine an effective video-on-demand strategy as well as identify new
approaches to provisioning, pricing and content. Use our forecasts to size the
market opportunity and our case studies to assess best practices and develop
your go-to-market strategy.
Content Providers:
Discover what is holding back adoption in emerging markets and which
strategies can overcome obstacles such as piracy. Evaluate markets to target
those that best suit your products and capabilities. Develop strategies to
expand the audience for your content and to increase your revenue from it.
This report will also help you evaluate the different types of pay-TV VoD and
their competitive advantages to develop a practical growth strategy.
Vendors:
Understand market dynamics and assess the needs of both VoD operators and
content providers in emerging markets. Use our forecast to develop sales plans
and identify key market opportunities.
Investors:
Locate opportunities in challenging environments. This report will help you
evaluate and develop strategies that will position your portfolio investments
to take advantage of one of the more challenging growth areas of pay-TV in
emerging markets.
Companies mentioned in this report:
ABC,ABC.com,Akado,AT&T,Brasil Telecom,BSkyB,BT,Cablemas,Cablevision,Cartoon
Network,CBS Television Network,China Telecom,China
Unicom,Cinemax,Comcast,Comstar,Corbina Telecom,DirecTV,DirecTV Latin
America,Discovery Channel,Dish Network,E! Entertainment
Television,Etisalat,Fox,Fox Broadcasting,Freeview,Grupo Televisa,HBO,Hong Kong
Broadband Network (HKBN),Hulu.com,i-Cable,Internet
Group,Megacable,Millicom,Movie Channel, The,MTN,MTV,Multimedia Polska,NBC,NET
Servicos,Nickelodeon,NTV (TenekoMnaHNR HTB),NTV Plus,Oi,Orange
France,PCCW,Qwerty (Central Telegraph),Rede Globo,SeaChange
International,Shenzhen Media Group,Shenzhen Topway Video
Communication,Showtime,Sistema Mass-Media,Sky,Sky
Mexico,Starz,Stream,Svyazinvest,Tata Sky,Telefonica,Telefonica
Brasil,Telefonica O2 Czech Republic,Televisa (Grupo Televisa),Time Warner
Cable,TiVo,Topway,Tricolor TV,Tudou,TVB Pay Vision,TVN (Telewizja na
karte),UPC Czech Republic,UTStarcom,Verizon Communications,VimpelCom,Virgin
Media,VTR Chile,Warner Brothers,Youku,YouTube,Zain
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