Understanding OTT video growth opportunities in Asia-Pacific

The growth of video streaming in Asia-Pacific was in the spotlight at the 2022 OTT Summit, hosted virtually by the Asia Video Industry Association. Although streaming has been at the forefront of significant changes within the Asia-Pacific video industry in recent years, most executives maintained cautious optimism with regards to growth opportunities available for over-the-top video in the region.

The slowing rate of streaming growth in North America and Europe has been a key driver for the greater interest that global streaming players are exhibiting when it comes to expanding in Asia-Pacific. While most panelists believe that OTT services have barely scratched the surface of growth opportunities in the region, Asia Video Industry Association, or AVIA, CEO Louis Boswell offered a caveat about having expectations greater than what the market can deliver realistically. To help contextualize his point, Boswell cited the Asia-Pacific pay TV industry, which ultimately followed a different route from initial assumptions that traditional multichannel services in the region would also reach the adoption levels achieved in more developed markets in other parts of the world.

Most global and regional streaming executives agreed that Asia-Pacific is not homogenous and is not going to be a region that will deliver the same growth levels across markets. Sagar Pandit, associate director of business development in Asia-Pacific for Discovery Inc., said that growth will likely be correlated to how a service builds out locally relevant offerings, including pricing plans and content. Discovery+ is currently available in India and the Philippines, markets that are very distinct from each other in terms of consumption habits, preferences and average revenue per user, according to Pandit. He shared examples of how the company continues to invest heavily in localized content that spans traditional shows Discovery is known for, as well as Bollywood content in India, and offering sampler deals in the Philippines to allow consumers to test out the streaming service before subscribing.

Gaurav Pradhan, Netflix Inc. director of business development for emerging Asia, also believes that to perform well globally, services will need to perform well locally first. Netflix accounts for only 10% of TV viewing in the U.S. and its share in Asia-Pacific is much less than that, Pradhan said. The streaming service is focused on tailoring strategies fit for consumer preferences across unique markets in the region. Pradhan noted Netflix's investment in over 2,000 originals coming from Asia-Pacific, as well as the rollout of mobile-only plans, which he said delivered huge success for the company as they allowed for greater accessibility in low ARPU markets.

PCCW Ltd.'s regional streaming service Viu has also seen a lot of success with its freemium business model in emerging Southeast Asian markets such as the Philippines. In recent years, Viu's focus has shifted to growing engagement with locals on the ground to help them understand the value proposition of the service, which in turn successfully converts users into paying subs. According to Arianne Kader-Cu, country head of Viu Philippines, growth in a low ARPU market such as the Philippines will come from the younger generation, most of whom are not even familiar with pay TV. With the majority of the country's 110 million population under the age of 25, Viu's approach has revolved around offering introductory subscription plans suited for this age group and then increasing pricing as the budgets of this segment grows, Kader-Cu said.

Meanwhile, Marco Guida, chief business and revenue officer at True Corp.'s True Digital Group, believes Thailand is one of the fastest-growing markets for streaming services in the world, driven by skyrocketing consumption of content through mobile phones. According to Guida, the challenge for OTT providers in the country is addressing customer needs while staying true to the value proposition, because different segments often have different needs.

Thailand has also become attractive to Chinese streamers like Baidu Inc.'s iQIYI and Tencent Holdings Ltd.'s WeTV, both of which have cited the emerging country as among their leading international markets outside of mainland China. Both services launched with a freemium business model, given the companies' belief that it will be difficult to survive in the market with just an ad-supported platform. Advertising video-on-demand service Line TV shut down in Thailand in 2021.

Kelvin Yau, vice president of international business and general manager of iQIYI International in Thailand, acknowledged that being a late entrant makes advertising difficult for iQIYI due to its small market share in the country. "At the moment, the rates advertisers are paying are really low, so it will be hard to sustain anything unless you start building bigger or more interesting ad units," Yau said. He added that the presence of international subscription video-on-demand platforms in the market has helped train Thai consumers to pay for premium content. Aside from offering a mix of Chinese, Korean, Japanese and local content, iQIYI also calls subscribers VIP to differentiate from global streaming players and emphasize that the value it offers is more than what users expect.

Kanokporn Prachayaset, chief commercial officer and country manager of Tencent Thailand, said having an ad-supported and paid subscription option allows WeTV to provide users the choice of convenience. According to Prachayaset, this is important in a market like Thailand where users have around 4.5 OTT apps installed in their mobile devices. Prachayaset also thinks user stickiness cultivated by fan communities across the WeTV platform has been significant in differentiating the Chinese streamer from other OTT services in the market. Other expansion opportunities being considered by WeTV include a loyalty program and digital merchandise.

Some of the other OTT growth areas that streaming services are keeping an eye on in the Asia-Pacific region include OTT aggregation from telco and pay TV operators; the rise of addressable advertising and connected TVs; the migration of sports rights to streaming platforms; and other potential streaming use cases for 5G.

Economics of Internet is a regular feature from Kagan, a media research group within S&P Global Market Intelligence's TMT offering, providing exclusive research and commentary.