VP, APAC, Deltatre
Craig Harvey, VP, APAC, Deltatre reflects on the evolving OTT landscape in APAC, and identifies trends that will characterise the industry in the region in the months and years to come.
The pace of change across APAC for the streaming industry is dazzling, with an estimated 400m viewers using OTT services. Now is a good time to reflect on the last 12 months and, to look ahead to even greater growth across APAC, accompanied by new entrants, innovative content collaborations and emerging technologies to invigorate the market.
We should guard against thinking that one strategy fits all across APAC. Markets across the region can vary dramatically, from high ARPU countries like Australia with a population of 25m to India with low ARPU and 1.2bn people. But overall, streaming usage is up – undoubtedly fuelled by the pandemic – and the direction of travel shows no signs of changing.
That’s not to say that establishing and running a service in APAC is easy.
While each market is nuanced – and understanding these are important – the core challenges of establishing a product remain similar to elsewhere in the world: building a frictionless experience that scales; acquiring and retaining users; strong content proposition; monetisation; etc.
Thankfully our experience around the world grants us a unique perspective on the varying challenges and our Strategy & Design Division work exclusively with organisations to clarify vision - no two platforms are the same.
Momentum continues to build
The transition to OTT continues to grow in APAC, with two distinct categories of platforms emerging: global and major locals.
As anticipated, the global platforms – Netflix, Amazon, Disney+ and YouTube – dominate market share (excluding China). Collectively they capture at least 60% share of the market revenue (AVOD and SVOD revenue) – in some countries that share can be as high as 90%. The remaining share is largely captured by major locals like Viu, Nine, Wavve & Vidio, with telco deals typically anchored to the success of these local platforms.
China, given its scale and maturity, is typically viewed separately, with an estimated 54% share of the online video revenue in APAC – dominated by Tencent Video, iQiyi and ByteDance. These three giants are all in the top 5 platforms by revenue according to research by MPA, collectively grossing an estimated US$10bn in 2020.
Room for niche platforms
However, that is not to say there is not an opportunity for niche content providers. There is space for such brands, like Shemaroo and HoiChoi, who differentiate through content specialisation, serving a growing user base of specific, tailored content in a way that major platforms (who are more horizontal) cannot achieve.
For these platforms, there is no expectation to challenge or usurp a Netflix – they can be successful without 100m+ subscribers, by utilising their intimate knowledge of their audience, and making smart, calculated investments and distribution deals to ultimately own that space in the market.
Of course, challenges do remain for the niche platforms. While they have a unique catalogue proposition, it is widely recognised that the user experience plays a critical role in maintaining them. How do these platforms – with lower budgets than their larger rivals – bring to market a service with a quality of user experience that meets consumer expectations and prevents subscribers from churning?
Market dynamics - AVOD and SVOD tipping point
APAC has typically been an AVOD market, but the latest metrics suggest we are reaching a tipping point, with SVOD likely to overtake AVOD revenues (again excluding China) in the next 2-3 years.
AVOD consumption has increased during the pandemic, but weaker advertising revenue has impacted revenue streams. One would expect this trend to be reversed in time, but we expect even more competition for every dollar - platforms that understand their users more comprehensively are therefore likely to be more attractive as they can provide the value back to the advertiser.
In parallel, we know that SVOD services also flourished over the past 1-2 years - with ever more entrants to the market as the transition to online continues. According to recent data from Statista, in 2021, China has over 300 million users. The second and third-biggest markets were in India and Japan, with 67 and 37 million users respectively. These absolute figures look large but fascinatingly the penetration per capita in these countries, and all other countries in APAC excluding Australia and New Zealand, is still sub-30% - leaving significant room for growth.
Advancements in broadband will continue to boost consumption, particularly within countries like India, Indonesia and Thailand. Here, partnerships with telcos will be vital for the local and niche platforms with restricted marketing spend and a need for billing technology given the limited online payment mechanisms. And the telcos will welcome the content as the global platforms do the reverse and seek to keep their content exclusive – for the exclusive ownership of the consumer and their data.
What’s next for APAC?
As we approach a new year, it’s customary to be asked, ‘what’s next?’. For me, the challenge of the question is less about what's next – I am sure everyone sees the trends that I talk about below – but more about how fast will change happen.
Web 3.0: The decentralisation of the ether – the so-called Metaverse – is the latest hot topic. While organisations might not be ready for blockchain, NFTs and enhanced VR in 2022, for certain these topics need to be part of our strategy sessions today. Irrespective of whether Web 3.0 will ultimately decentralise power – Web 1.0 and 2.0 had the same goal and we know the outcome here – the technologies will provide a wealth of opportunities in our industry in the ‘20’s.
Content: With 2/3 of the world’s population, APAC is hungry for content, and the market is expected to spend over $1bn in 2022. English content productions will remain important but less so for local platforms, with Korean, Chinese, Hindi and Japanese content being critical for these platforms to compete. Such demand for content provides opportunities for creators large and small (independent). Much like the OTT platforms themselves, independent creators will seek avenues to distribute their originals, and so expect to see B2B marketplaces like Vuulr prosper.
Maturity: As markets mature, we expect to see higher-premium plans for the same content, but with users being attracted with fresh, innovative features and functionality, gamification and VR. In less mature markets, like Indonesia, ARPUs will remain compressed as the race for reach and scale continues.
Artificial Intelligence: The ‘big data’ revolution fuelled the rush for organisations to collect as much data as possible, often characterised by the 3Vs – volume, variety and velocity. Today the V’s have expanded to include veracity, value and variability. While the term artificial intelligence (AI) is widespread, the understanding of how to deploy AI effectively is still new to many organisations, but its deployment is critical to address the new V’s and having accurate, actionable data.
Betting: The global sports betting industry is penned to be worth $200bn. We have seen in the West the impact of the US relaxing its betting laws, with it predicted to grow $8bn by 2025. In the region, reports suggest that the illegal cricket betting market in India alone is worth $150bn a year and growing 20% YoY. There are different trains of thought to the impact legalising betting would have in the region. If India (and others) do legalise it can learn a lot from the West, and build a framework that supports stakeholders in addition to growing the sport.
Remembering the fundamentals
Long gone are the days of playing a video through a web page and impressing the audience. OTT platforms today are complex ecosystems, distributing content in a paradigm that was not built for the purpose (like satellite and cable TV). Now, more than ever, media organisations need to collaborate in partnerships and embrace the journey together.
For many organisations, OTT in isolation is not the ‘silver bullet’ – OTT should be part of a strategy, not the strategy. Consumer-led approaches will triumph more than those that are the traditional stakeholder-led and being adaptive to the ever-changing consumer needs and habits, qualified through accurate, actionable data, will help ensure longevity.
And finally, if you’ve skipped to the end and missed everything above then don’t panic, as no matter where in the world you are looking to launch an OTT platform, know there is one golden rule applicable for everyone: the video must play.