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, à-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.