MUMBAI: In a landscape still dominated by TV, the Asia Pacific online video industry seems to be on a path to double its share of video industry revenue ex-China from 9 per cent in 2017 to 20 per cent by 2023, according to analysis released today by Media Partners Asia (MPA).

The findings will be presented at the APOS Summit (April 24-26), an event for industry leaders in media, telecoms and entertainment, in Bali, Indonesia.

The analysis covers 12 markets: Australia, India, Japan, Korea, Hong Kong, Taiwan and six key markets in Southeast Asia, with a focus on consumer and advertiser spend, content costs and market share across key clusters.

MPA executive director Vivek Couto said: “The growth of subscription and ad-supported video services from Amazon, Facebook, Netflix and Google will propel these FANG companies to a combined 63 per cent share of Asia Pacific online video revenues ex-China by the end of 2018.

Google-owned YouTube’s dominance is reflected by its 70 to 90 per cent slice of a large and fast-growing online video ad pie in Australia, Japan, Southeast Asia and India. In addition, Amazon and Netflix have scaled quickly with subscription video offerings in Australia, India and Japan but have a long way to go in Southeast Asia and Korea. There’s also a long runway for more growth in India.

Encouragingly, local and regional players with strong entertainment and sports IP together with, in many instances, large TV businesses, have invested in online video platforms to grab a bigger market share. This is especially true in India, Korea and Japan, although Southeast Asia lags.

The outlook remains in FANG’s favour, however, with its aggregate market share maintained at 62 per cent in 2023. Such scale will dramatically alter growth and investment dynamics across key markets. We see significant upside for local and regional media platforms with attractive IP and strong execution as well as the appetite and patience to invest over the long term across digital video.

Excluded from MPA analysis are potential all-in premium offerings from Disney, 21st Century Fox and Time Warner, which are likely to start gaining traction at some point over the next five years as global media consolidation accelerates.

FANG’s share could also be greater once Amazon Prime Video scales up in Australia and key markets across Southeast Asia. This is not yet included in the assumptions underlying MPA’s analysis.”

Key highlights from the MPA survey include:

FANG vs The Rest

The growth of subscription and ad-supported video services from Amazon, Facebook, Netflix and Google will propel the FANG companies to a combined 63 per cent share of Asia Pacific online video revenues ex-China by the end of 2018. Google-owned YouTube’s dominance is reflected by its 70 to 90 per cent slice of a large and fast growing online video ad pie in Australia, Japan, Southeast Asia and India. Amazon and Netflix have scaled quickly with subscription video offerings in Australia, India and Japan but have a long way to go in Southeast Asia and Korea. There’s also a long runway for more growth in India.

Encouragingly, local and regional players with strong entertainment and sports IP and, in many instances, large TV businesses, have invested in online video platforms to grab a bigger market share. This is especially true in India, Korea and Japan although Southeast Asia lags.    

According to MPA, YouTube and Facebook combined will account for 72 per cent of online video advertising in Asia Pacific ex-China by 2023, versus 75 per cent at end-2018. In subscription-based online video, Amazon and Netflix’s combined share of the market should reach 35 per cent in 2018 and grow to 37 per cent by the end of 2023, although local and regional platforms are competing for and winning a share of incremental dollars in Australia, India, Japan, Korea and parts of Southeast Asia.

Content Investment

Total content investment in TV and online video across the 12 surveyed markets reached $23.1 billion in 2017, up 6 per cent year on year (yoy). MPA’s analysis includes movies, entertainment and sports. Content investment is expected to scale to $30.1 billion by 2023, a 5 per cent CAGR from 2018. Such growth is largely anchored to new dollars being spent across online video, which will account for 17 per cent of content investment by 2023 versus 10 per cent in 2018. MPA analysis focuses on premium video content creation across TV and OTT but excludes costs associated with the billions of hours being mass produced and uploaded on YouTube.

Content investment on TV is largely anchored to continued growth in sports rights, across Australia and India in particular, entertainment on free TV across Southeast Asia, albeit expanding at a more moderate pace, and pay-TV in India and Korea. Online video’s contribution to total TV and online video content costs will grow markedly in Southeast Asia, rising from 10 per cent to 20 per cent between 2018 and 2023. A similar growth trajectory is evident over the same period in Australia (13 per cent to 26 per cent) and India (10 per cent to 19 per cent).

The Overall Video Industry

Asia Pacific advertising and subscription fees across TV and online video grew 3.9 per cent ex-China in 2017 to reach $60 billion. TV and online media continue to grow at different speeds, as expected, with TV revenues inching up 1.2 per cent in 2017 while online video revenue expanded by 45 per cent to $5.2 billion.

MPA projects that total industry revenues will climb at a 3.8 per cent CAGR over 2018-23 to reach $77 billion by 2023, with online video scaling up by a 16 per cent CAGR to reach $15 billion in net terms by 2023 versus $7.1 billion in 2018. TV will only grow at a 1.8 per cent CAGR over the same period to reach $62 billion by 2023.

By 2023, the largest TV and online video markets in Asia Pacific ex-China will be: Japan ($27 billion), India ($17 billion), Korea ($9.2 billion) and Australia ($8.2 billion). Southeast Asia will contribute $11.1 billion by 2023. India will remain the fastest-growing video market, growing at an average annual rate of more than 8 per cent over 2018-23, followed by Southeast Asia with 5 per cent and Australia at 4.5 per cent.

Online Video

Online video advertising, dominated by YouTube to date, continues to grow at a stellar pace, increasing by 47 per cent in Asia Pacific ex-China to $3.6 billion in 2017 and projected by MPA to climb at a 17 per cent CAGR between 2018-23 to reach $10.7 billion by 2022. Online video subscription fees are growing rapidly from a very low base, up 41 per cent year-on-year in 2017 to reach $1.7 billion and forecast to grow at a 12 per cent CAGR from 2018 to more than $4 billion by 2023.

Japan and Australia will remain the leading markets for online video, contributing more than 55 per cent to Asia Pacific revenues ex-China in 2023. The third-largest market will be India, which will also be the fastest growing with a 26 per cent CAGR over 2018-23, with Southeast Asia the second-fastest with a 21 per cent CAGR over the same period.