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State Of Taiwan Online Video Subscriptions

Broadband Only Homes Skyrocket In 2018 Validating Top MSOs Connectivity Pivot

Fiber Route Mile Leaderboard

M&A: A New Year Resolution For The South Korean Multichannel Market?

Global Multichannel Market Up 3.1% In 2018 As IPTV Subscriptions Overtook Direct To Home Platform

Technology, Media & Telecommunications
State Of Taiwan Online Video Subscriptions

Highlights

The following post comes from Kagan, a research group within S&P Global Market Intelligence.

To learn more about our TMT (Technology, Media & Telecommunications) products and/or research, please request a demo.

Apr. 16 2018 — Subscription video on demand has struggled to gain ground in Taiwan due to the prevalence of free content in the form of value-added video options utilized by telcos in an extremely saturated and competitive mobile market, legitimate ad-supported video platforms, and pirated content.

Kagan, a media research group within S&P Global Market Intelligence, estimates that mobile penetration rates reached 124% in 2017 and are projected to climb to 140% by 2022. The major mobile players in Taiwan (Chunghwa Telecom, Taiwan Mobile Co. Ltd., and FarEastOne Communications) each offer forms of over-the-top video. Taiwan is also characterized by high rates of video piracy. In June 2017, an iQIYI Inc. executive claimed that levels of piracy in Taiwan exceeded those in China. He said Taiwanese regulators have not done enough to combat piracy and shore up the legal video market.

Taiwan mobile, broadband and multichannel penetration

For those SVOD players operating in the market, we have identified iQIYI, Catchplay On Demand, and Netflix Inc. as having made the most progress.

IQIYI is China's most popular SVOD service in terms of estimated paid subscribers. In March 2016, the service expanded to Taiwan in order to monetize its content in the second largest Chinese-speaking market in the world. The service operates both ad-supported and subscription revenue models in the country. Currently, iQIYI is a subsidiary of Baidu Inc., but the streaming service and its parent have recently announced plans to list iQIYI service on the Nasdaq Stock Market, having submitted a draft prospectus to the SEC for an IPO. Baidu plans to remain the majority shareholder, but listing the company would provide an influx of capital that would provide additional resources for acquiring and producing content in the extremely competitive Chinese OTT market.

Launched in China through a partnership with local content distributor OTT Entertainment Ltd., iQIYI has repeatedly applied to establish a local subsidiary in the country, but policies regulating the type of investment coming into the country from mainland China are prohibitive. Regulators cite the need to protect their right to broadcast and promote their own cultural content, as well as China's insistence on barring Taiwanese OTT services from operating on the mainland as primary factors in the issue.

Catchplay Group's roots are in theatrical and DVD distribution in the Taiwan market. By branching into content production, investment, and aggregation, the group has built a sizable film library that it monetizes through various ventures. In March 2016, with Netflix having launched in the country only months prior, the group launched SVOD platform Catchplay On Demand. The group's existing film assets allowed the service to enter the market with an advantage in terms of diversity of content and new releases. The service provides Chinese and Asian-language films as well as Hollywood content from independent and major studios including Comcast Corp.'s NBCUniversal Media LLC, Time Warner Inc.'s Warner Bros., and Walt Disney Co. The service also monetizes its film catalog through a rental revenue model in Taiwan.

Netflix launched in Taiwan in January 2016 as part of its global expansion. The service has not been successful in partnering with major telcos in the area possibly due to incumbent telcos offering their own OTT packages. Whether by design or default, Netflix instead pursued partnerships with system-on-a-chip manufacturers in the country. In mid-2016, Netflix began partnering with these regional manufacturers as part of its Recommended TV program. Through the program, Netflix evaluates the quality of smart TV delivery of Netflix content, bestowing a Netflix Recommended TV designation to quality products.

Pricing

SVOD is very reasonably priced in Taiwan. All three services register less than 0.3% on our affordability index, which is based on gross national income purchasing power parity. The affordability of the dominant pay TV platform is 0.4%. Even Netflix, which has typically priced its service on a premium tier throughout Asia, is affordable in the market. Netflix's most expensive four-screen subscription also registers lower than Taiwan's dominant pay TV platform on the affordability index. To provide context, Netflix's two-screen plans register 0.31% and 0.19% on the affordability index in the U.K. and the U.S., respectively.

Select Taiwan SVOD affordability


Technology, Media & Telecom
Broadband Only Homes Skyrocket In 2018 Validating Top MSOs Connectivity Pivot

Highlights

The segment stood at an estimated 23.6 million as of Dec. 31, 2018, accounting for 24% of all wireline high-speed data homes.

The following post comes from Kagan, a research group within S&P Global Market Intelligence.

To learn more about our TMT (Technology, Media & Telecommunications) products and/or research, please request a demo.

Mar. 20 2019 — The U.S. broadband-only home segment logged its largest net adds on record in 2018, validating Comcast Corp.'s and Charter Communications Inc.'s moves to make broadband, or connectivity, the keystone of their cable communication businesses.

The size and momentum of the segment also put in perspective the recent high-profile online-video video announcements by the top two cable operators as well as AT&T Inc.'s WarnerMedia shake-up and plans to go toe-to-toe with Netflix in the subscription video-on-demand arena in the next 12 months.

We estimate that wireline broadband households not subscribing to traditional multichannel, or broadband-only homes, rose by nearly 4.3 million in 2018, topping the gains from the previous year by roughly 22%. Overall, the segment stood at an estimated 23.6 million as of Dec. 31, 2018, accounting for 24% of all wireline high-speed data homes.

For perspective, broadband-only homes stood at an estimated 11.3 million a mere four years ago, accounting for 13% of residential cable and telco broadband subscribers.

The once all-powerful, must-have live linear TV model, which individuals and families essentially treated as a utility upon moving into a new residence, increasingly is viewed as too expensive and unwieldy in the era of affordable, nimble internet-based video alternatives. This has resulted in a sizable drop in penetration of occupied households.

As a result, continued legacy cord cutting is baked in and broadband-only homes are expected to continue to rise at a fast clip, with the segment's momentum in the next few years compounded by Comcast's, Charter's and AT&T's ambitious moves into online-video territory.

Note: we revised historical broadband-only home estimates as part of our fourth-quarter 2018, following restatements of historical telco broadband subscriber figures and residential traditional multichannel subscriber adjustments.

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Fiber Route Mile Leaderboard

Highlights

Our analysis of fiber networks held by U.S.-based companies found telcos in control of the three largest fiber networks.

Verizon has been the fastest-growing network over the past two years by fiber route miles, adding nearly 200,000 to end 2018 with more than 1 million globally.

Mar. 04 2019 — Optical fiber, long the backbone for broadband internet, will soon take on additional workload in the form of data backhaul for 5G wireless traffic. That has spurred the two fiber titans among U.S.-based companies to build out even further.

Our analysis of fiber networks held by U.S.-based companies found telcos in control of the three largest fiber networks. AT&T Inc. and Verizon Communications Inc. alone combine for more than 2.2 million route miles, more than half of the total in our survey of publicly available data.

Verizon is jockeying with AT&T to lead the 5G charge in the U.S.

Third on our list is CenturyLink Inc., which nearly doubled its fiber route miles in 2017 with the acquisition of Level 3 as it sharpened its focus on large-scale business functions.

Broadband and multichannel providers Charter Communications Inc., Frontier Communications Corp., Windstream Communications, Inc. and Comcast Corp., take up spots four through seven on our list. Their publicly available data on fiber route miles has been relatively static in recent years, perhaps because they are not under pressure to deliver next-generation wireless networks.

Our analysis is based on recent company filings or data found on corporate websites and is, consequently, an incomplete picture.

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Technology, Media & Telecom
M&A: A New Year Resolution For The South Korean Multichannel Market?

Feb. 25 2019 — The South Korean multichannel market should see a year of upheaval as the three incumbent telcos look to acquire some of their cable competitors to accelerate growth in 2019. LG U+ is already in discussion with CJ Hello while KT Corp. considers acquiring D'Live through its direct-to-home arm KT Skylife. Likewise, SK Broadband expressed interest in acquiring both t-broad Holdings Co. Ltd. and D'Live.

This is not the first time a telco has proposed a cable MSO acquisition in South Korea. SKB's proposed merger with CJ Hello in 2015 was banned by the South Korean Fair Trade Commission, which prohibits any operator from monopolizing the multichannel market with subscribers over one-third of the total subscriber base. Should the government have no intention of modifying the existing rule, KT would fail to acquire any other operator while SKB's plan to boost subscriber share to 30% would unlikely be approved. Given its relatively small subscriber base, LG U+ stands the highest chance of success from a regulatory perspective if it were to acquire any of the cable MSOs.

Cable has been the dominant multichannel platform in terms of subscriber share in the market and yet IPTV is expected to take over from 2019. As of December 2018, Kagan estimated cable and IPTV made up 43.8% and 42.9% of the total multichannel households, respectively. By the end of 2019, IPTV's share is expected to reach 45.3% as cable's share drops to 41.9%.

Ever since the launch of IPTV in 2008, telco-owned IPTV operators have successfully gained traction in building their respective subscriber bases. A key factor has been the bundling of IPTV with the telcos' data, fixed voice and/or mobile services at affordable prices. Therefore, many of the cable TV subscribers are willing to take IPTV as a secondary multichannel connection. This also explains why the market has maintained a multichannel penetration rate of over 100%. As of year-end 2018, the market's multichannel penetration was estimated at 167% and is expected to reach 177% by 2023.

In terms of subscriber share, KT is currently dominating the market with its IPTV service branded Olleh TV and DTH-services branded KT SkyLife and Olleh TV SkyLife. KT's subscriber share as of June 2018 was 31.07%, followed by SKB with 13.8%, CJ Hello with 12.83% and LG U+ with 11.49%. The potential tie-up of LG U+ and CJ Hello would secure about a quarter of the market's subscribers, superseding SKB's existing share and posing a threat to KT's long-term dominance.

In response to the potential threat, KT is considering the acquisition of D'Live, the third-largest cable MSO with 2.4 million subscribers as of June 2018. SKB, on the other hand, is interested in buying both cable MSOs Tbroad and D'Live to secure a subscriber share of over 30%. The telcos aim to quickly boost and retain their subscriber bases and hope to accelerate revenue growth in the long run through the potential M&A deals.

Low average revenue per user has always been a challenge to South Korean multichannel operators, especially cable MSOs, which can hardly raise the price due to churn concerns. As of December 2018, IPTV's average blended ARPU was $15.15 per month while cable's average blended ARPU of both analog and digital was significantly lower at $8.69 per month. Cable operators had a hard time fulfilling their digitization commitments while not shifting the cost to subscribers and facing significant churns for six years until 2016. Merging with one of the telcos could be a surviving opportunity for operators of the declining platform.

The potential wave of M&A would consolidate the market into fewer players. The telcos would secure a bigger subscriber share and further dominate the market while the remaining cable operators would find it even harder to stay relevant. Yet it is uncertain if the growth of the country's multichannel subscriptions can be sustained. Many multichannel households that currently have both cable and IPTV connections would likely cancel cable service if it were offered by the same company, and the cable platform would further shrink as a result.

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Global Multichannel Market Up 3.1% In 2018 As IPTV Subscriptions Overtook Direct To Home Platform

Highlights

With year-over-year growth of 14.3%, IPTV was the fastest-growing of the three major pay TV platforms in 2018

Number of multichannel subscribers worldwide is modelled to grow at a 2.4% CAGR over the next five years from 1.07 billion in 2018 to 1.21 billion in 2023.

Global multichannel economy generated $230.06 billion in video service revenues in 2018, which are projected to increase to $245.41 by 2023.

Feb. 18 2019 — In 2018, IPTV overtook direct-to-home as the second-largest multichannel platform in the world by subscribers after cable, accounting for 23.4% of the total market of 1.07 billion. With year-over-year growth of 14.3%, IPTV was the fastest-growing platform in 2018, driven by large subscriber additions in Asia-Pacific and, to a lesser extent, Western Europe. Over the next five years, IPTV is projected to post a 7% subscriber CAGR, second only to pay digital terrestrial television with a projected 8.5% five-year CAGR.

While cable remains the dominant multichannel platform globally, cable subs are modeled to continue declining over the next five years at a 0.3% CAGR, largely due to migration to IPTV in Asia and Western Europe.

China, India and the USA remain, by far, the largest multichannel markets, collectively claiming 57% of the global subscriber total in 2018. China and India alone are expected to account for half of the global market by 2023.

The global multichannel economy generated $230.06 billion in video service revenues in 2018, a 1.1% year-over-year increase, while multichannel penetration breached 60% by year-end. North America remains the most lucrative multichannel region accounting for over half of global revenue.

The effects of cord cutting are only observed in North America where multichannel subscribers, revenue and penetration are projected to decline in the foreseeable future, as well as in a handful of oversaturated markets, including Singapore and Hong Kong. In Europe, the biggest threat to traditional multichannel services is posed by free-to-air DTT and lies in the integration of over-the-top and catch-up TV services into DTT platforms as well as the ability to stream channel packages via hybrid boxes.

Global multichannel market overview

Kagan estimates that in 2018, the global multichannel market grew by 3.1% year over year, down from 3.9% in 2017, as rapid subscriber growth is slowing down in China. After the global multichannel market breached 1 billion subscribers in 2017, 32.3 million new homes adopted pay TV services in 2018 to reach 1.07 billion multichannel homes by year-end. We project that the global multichannel household growth will continue to decelerate in the foreseeable future with most markets across Europe, North America and advanced multichannel markets of the Asia-Pacific reaching saturation. The global market is forecast to post 2.7% year-over-year gains in 2019 with a 2.4% 2018-2023 CAGR.

Global multichannel video subscriptions are forecast to increase to 1.21 billion by 2023, adding 136.3 million net subs over a five-year period, while multichannel penetration is forecast to increase to 61.2% in the next five years, up from 60.1% in 2018.

Global multichannel subscribers by platform

While cable TV is expected to remain the largest platform on a global scale in the next five years, its share is forecast to decline from 52.3% in 2018 to 45.8% by 2023, largely due to analog subscriber churn and market share gains by IPTV operators. IPTV, the fastest-growing of the three major pay TV platforms, is modeled to capture a 23.2% market share by 2023.

Global multichannel revenue

The global multichannel economy generated $230.06 billion in video service revenues in 2018, a 1.1% year-over-year increase, with more than half earned by North American pay TV providers. The region's pay TV operators, however, lost 2.4% revenue year over year due to steep subscriber declines, despite growing average revenues per user. Western Europe remained the second-largest multichannel economy, accounting for only 17.7% of the global total in 2018. Latin American multichannel revenues expressed in U.S. dollars declined in 2018, mainly due to exchange rate fluctuations in most of the region's markets.

Given its comparatively high video service ARPUs, North America is expected to remain the most lucrative multichannel economy in the coming five years, despite being only the third-largest by subscribers and experiencing subscriber declines. The region is modeled to account for 43.2% of global video service revenues by 2023. Despite having the lowest multichannel ARPUs among the six regions analyzed, Asia is projected to overtake Western Europe as the second-largest multichannel economy by 2023, due to the sheer size of its market accounting for 18.8% of global multichannel revenue.

IPTV remains the fastest-growing multichannel platform, except in North America and the Middle East and Africa, where increasing pay DTT rollouts are driving revenue growth. Pay DTT is the only platform in Western Europe that is losing revenues, largely due to falling ARPUs. Although cable experienced overall subscriber declines in Western Europe and Asia in 2018, revenues increased on the back of digital subscriber and ARPU gains.

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Global Multichannel Market Up 3.1% in 2018 as IPTV Subscriptions Overtook Direct-To-Home Platform

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Global multichannel market up 3.1% in 2018 as IPTV subscriptions overtake DTH

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