A glimpse into Pay TV reality

When John Logie Baird invented the television, he may not have imagined his invention would spur an entire industry.  The era of black and white and colour TV has given way to different forms of TV like IPTV and mobile TV and these are grabbing the attention of viewers and marketers today. Now, the early days of broadcasting seem like a far-away memory. Deepika François.

Not only have the methods of distribution changed but so has the way one watches TV. The dramatic change may have come about with the birth of pay TV that caters to the individual as opposed to the collective. Of course, with individual tastes varying greatly, pay TV has grown, giving rise to multi-channel TV that speaks to all from new-born babies to intelligent housewives and retired audiences.

Simon Twiston Davies, CEO of the Cable & Satellite broadcasting Association of Asia (CASBAA) sees no slowing down in the growth of the pay TV market in 2008 and believes that the young media-savvy population across Asia will embrace new channels as much as they embrace new technology.

In Hong Kong, market liberalisation in July 2000 led to the creation of many pay TV services. CASBAA's report entitled the "Power of Pay TV 2007" tabulates the dramatic increase in the number of pay TV households since 2002, with an estimated 1.37 million of homes now subscribing to at least one service and enjoying the widest choice of programming in Asia. Davies remarks that growth in Hong Kong may have been boosted by the introduction of a more competitive marketplace.

The pay TV market in Hong Kong shows steady growth, with penetration rates having risen from 30 to 60% in a short time frame. Ricky Ow, General Manager, SPE Networks Asia is of the same view as Davies, saying that in Hong Kong, competition arrived earlier on, allowing more room for growth.

Now TV launched in Hong Kong in 2003, while Singapore allowed for market competition only recently, when Sing Tel's mio TV launched in 2007. However, Low Ka Hoe, Director of mio TV and content, Sing Tel is of the belief that this may have been to the channel's advantage: "Technology wise, the timing of our launch meant that we had the advantage of being able to do things like roll out an end-to-end HD service from the start."

CASBAA's report also points out that Hong Kong Cable TV continues to lead the market but is being given a tough time by Now TV, which benefits from exclusive content agreements with content providers such as HBO and STAR TV. The very size of the market also makes Hong Kong an interesting place for pay TV operators, as opposed to Singapore where penetration rates are much lower.

On the other hand, Singapore is a burgeoning market, with more scope for pay TV operators to expand their business. As Basil Chua, Marketing Director of National Geographic Channels and Fox International Channels Asia observes, "the arrival of mio TV does give new channels the opportunity and alternative to tap into the burgeoning Singapore pay TV market."

Multiple operators, evolution of consumer habits, more TV penetration- various factors may be responsible for the vibrancy of the pay TV scenario in Asia. Multi-channel TV may be adding its allure to the pay TV landscape, but so is technology.

Today, subscribers can schedule remote recordings via the internet and can also record programmes off linear and free-to-air channels, actions that would not have been envisageable a few years ago. Technology is a major driver, with digitisation adding ten times as much capacity as opposed to the limited bandwidth of the analog world.

With less than 10% of households in Asia equipped with digital capacities, Davies thinks "there is a story to tell and it may be the story of the future." Currently, the pay TV market continues to be dominated by distribution and multi-channel TV but this may change over time. So what will happen to terrestrial or free-to-air TV?

Does the predicted growth of pay TV mean the slow decline and ultimate death of terrestrial broadcasting? This may be tilting the scales too much in favour of pay TV as developing markets like India and China continue to rely on national broadcasters, particularly in rural areas.

Cable TV penetration may be on the rise in these markets but it may be rather early in the day to put a finger on its future growth.

In Singapore, "local free-to-air TV commands the lion's share of audience exclusivity", says Chang Long Jong, MediaCorp Deputy CEO for TV. The numbers are staggering- 53% or 1.8 million viewers only watch LFTA (local free-to-air) TV. On the other hand, Pay TV commands 5%, which means 95% of cable TV viewers continue to watch LFTA TV. While these numbers alone may not tell the real story, they are proof that terrestrial TV may not be ready to retire.

Hong Kong is also dominated by local free-to-air TV, Television Broadcasts Ltd, which carries both a Chinese and English language channel- Chinese Jade and English Pearl channel respectively.

TVB as it is popularly known also hosts a pay TV channel, TVB Pay Vision, that hosts over 39 channels and caters to over 150,000 people across the country. Other pay TV operators like Now TV and HK Cable TV Ltd hold a major share of the market, with 758,000 and 786,000 subscribers each.

While both markets may share some traits in common, National Geographic's Chua observes a product packaging and pricing shift in Hong Kong over the last year, which allows for more on-demand TV. Also an affluent market, there are more possibilities for niche programming, permitting the growth of channels.

Pay TV by nature is specialised TV, catering to a niche audience, offering both variety and choice. It is also inherently personal, with individual TV homes electing content as opposed to free-to-air TV that dictates content from the onset.

At the same time, free-to-air TV carries unique local content that addresses the needs of the local population. Mediacorp's Chang is right when he says that viewers get the latest information as well as the opportunity to watch in-depth analyses or discussions on issues relevant to their country.  

On the other hand, as cities grow and become more global, audiences grow more sophisticated. They want a piece of the bigger picture and pay TV can give them a taste of that.

While one could argue that this audience is but a minority, an increasing number of viewers are moving towards a global landscape. Be it Singapore, Hong Kong or New York, the younger generation may share similar emotions, tastes and empathise with some of the same issues. Pay TV enables them to share the same reality, allowing for cross-cultural understanding of some of the major issues facing the global population.

It is also an answer to the needs of a population that is increasingly difficult to please and where attention spans may not hold longer than it takes to zap a few channels. More variety and choice are welcome but risks of overdosing are ample. "The more people experience multi-channel TV, the more they'll use it", Davies shrewdly observes.

This in itself harbours well for pay TV that is a highly competitive sector. Most of its revenues are a mix of subscriptions and advertising and the more viewership, the more advertising revenues a channel stands to gain. Smart marketers know segmentation is key to achieving their targets and pay TV enables them to do just that.

Ow of SPE Networks Asia calls pay TV a "sophisticated marketing tool" and adds that advertising in a "multi-environment" has proven to be more effective than advertising in a "single environment", as it reaches out more efficiently to target groups. Caroline Wong, Senior Marketing Director, HBO Asia also recommends it for its niche targeting but highlights one of its other benefits. "By virtue of it being a paid service," she says, "it also appeals to those with high purchasing power."

As it reaches out to a wider audience but also a more targeted one, pay TV proves to be cost-effective, allowing advertisers to maximise their resources while minimising media waste.

More importantly, as Chua of National Geographic points out, it enables "multi-market advertising within the same media environment- something that cannot be done with terrestrial, which is specific to one market only."

Certainly a smart marketer would choose pay TV to increase brand awareness due to its wide regional/global reach. On the other hand, free-to-air TV can prove more efficient when it comes to targeting local audiences. Ultimately, its about the choice pay TV gives to marketers, who can choose from over a 100 channels and over 100 varying audiences.

Alongside multi-channel programming, new platforms are also being explored with IPTV (Internet Protocol TV) growing in stature. Sing Tel's Low talks of features on mio TV such as true video on-demand, access to movies released on the same day as DVDs and high-definition content.

Digitisation is on the rise but levels here are not comparable to those of more developed markets such as the UK. One of the major factors may be the cost of delivering digital content and marketing it to the consumer, reminds Davies of CASBAA.

As demand for pay TV rises, does the market have sufficient supply of bandwidth to enable the creation of new channels? National Geographic's Chua thinks there will always be room for another good channel, if it helps drive subscription to the pay TV service.

Ow of SPE Networks Asia calls more channel offering a marketer's dream. Marketers are on the look-out for more channels to choose from but StarHub's Lim explains that a wide channel offering may not be the differentiating factor. The option of cross-platform selling- i.e offering marketers innovative ways of reaching their customers may be key.

So what does the future hold? Can free-to-air TV reside alongside pay TV and which one of them will have the upper hand? Sing Tel's Low believes there is room for different operators to cater to different segments of the population. He doesn't see terrestrial TV as competition and he is not the only one.

Chua of National Geographic thinks terrestrial TV's propositions and business models are completely different from those of pay TV. However Ow predicts that terrestrial TV will have to fight harder to retain its viewership.

From the onset, it is clear that the objectives of national broadcasters and commercial broadcasters vary highly and they don't reach out to similar segments of the population.

However, both can continue to grow alongside as they don't share conflicting interests. In Hong Kong, as elsewhere, the market may make it difficult for pay TV to usurp free-to-air TV. Simultaneously, the number of households carrying pay TV stands at 60% (Source: CSM HKTAM Establishment Survey 2006, CASBAA). Pay TV penetration has grown and is on the ascendant. As Davies of CASBAA observes, "Niche programming is on the rise and people are willing to pay a premium price for that content."

So while the medium is undoubtedly important, the message is the defining factor. Content is still master of the game and content providers who observe, analyse and understand the needs of their audiences may have a larger share of the cake. Low of Sing Tel says with the evolution of consumption habits, customers will start expecting more on-demand and interactive content.   

The more sophisticated audiences become, the more specialisation they expect. Pay TV needs to answer these growing needs and come up with innovative content that can keep pace with the demands of its audiences.

The cost-factor may seem immaterial as affluent customers pay for services they request.

The audience of today may be hard to please but this may lead to the continuous churning of new and more exciting content. If this is the case, Chua of National Geographic may be right when he says that viewership between the two will gradually shift to pay TV. This shift may also force terrestrial TV to reinvent itself and compete on a more even footing.

The future may not be what one makes of it today and free-to-air TV may usurp cable TV or vice-versa. With over 250 million existing connections to pay TV across Asia and more up for the grabs, the battle is set to be an interesting one. In such a scenario, the loser may not lose all and the winner may keep the loot only for a short while. Attention spans are on the decline..the next channel or platform to win the game must know what it takes to stay in pole position.