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Taiwan in View 2023: Pay TV operators stay confident amid subscription decline


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Taiwan in View 2023: Pay TV operators stay confident amid subscription decline


The Taiwan pay TV industry is expected to experience a customer decline from 6.7 million in 2022 to 6.2 million in 2027, reflecting a negative 1.4% compound annual growth rate.

Cable, the leading pay TV platform in Taiwan, will see subscriber churn by year-end 2023, which is expected to continue over the next five years.

Despite the decline, cable TV operators display optimism as collaborative efforts and strategic planning with the local government and telecom carriers continue.

Taiwan's multichannel operators have collaborated with telcos and the local government to retain their presence despite online video streaming's gaining popularity and the long-standing proliferation of piracy in the market. These topics were discussed at the Asia Video Industry Association's Taiwan in View conference held May 4. The event was the first in-person conference in Taipei, Taiwan, since the COVID-19 pandemic began.

Taiwan's pay TV sector had 6.7 million subscribers at year-end 2022 and is forecast to decrease to 6.2 million by 2027, according to Kagan estimates. Multichannel penetration reached 74.9% of households in 2022 and is expected to decline to 67.9% in 2027 as over-the-top services become popular and piracy remains widespread in the market. Cable led the multichannel market with a reported 4.6 million subscribers as of year-end 2022. Over the next five years, our model projects that Taiwan's cable subscriber base will further decline at a negative 2.1% compound annual growth rate (CAGR) to 4.2 million by 2027. Meanwhile, IPTV had 2.0 million subscribers and direct-to-home had an estimated 3,400 subscribers as of year-end 2022. Direct-to-home is projected to phase out over the coming years, given the limited uptake.

Despite facing challenges with over-the-top streaming and a decline of subscribers, Wang Jiang-Jia, commissioner at the National Communications Commission (NCC) sees the cable sector trend remaining "healthy" with more than half of the population of Taiwanese viewers. The government agency provides preventive guidelines and surveillance and enforces market regulation through cable pricing rules that require operators to offer a basic plan, with a certain number of must-carry TV channels, plus an additional package offering per month with more premium channels.

Wang said the NCC plans to draft a policy, the OTT TV Act, that contains trends on internet services, consumers' shifting behavior on video streaming, and insights from different labels and industry experts. The NCC has also planned financial assistance for cable TV operators to transition their services to digital cable and improve quality.

Kbro Co. Ltd. President Steve Wang had optimism that "cable users will come back soon" and still sees a positive outlook for cable TV. The company plans to offer varied types of set-top boxes but did not go into detail. Meanwhile, when asked about competition with mobile broadband (telcos), the executive stressed the intention of collaborating with the local government and telecom carriers, for example Taiwan mobile, in producing local content, showing the history and culture of Taiwan.

Cliff Lai, vice chairman of Homeplus Digital, formerly China Network Systems Co. Ltd., one of the major fixed broadband service providers in Taiwan, recognized the irreversible trend of cable subscription decline. Cable TV players that also provide fixed broadband services negotiate and collaborate with telcos to offer power-content video streaming bundles. Meanwhile, Lai perceived over-the-top, albeit progressively growing, as a "fragmented" platform.

Taiwan's fixed broadband customer base reached 6.6 million as of year-end 2022, translating to a 72.1% household penetration as of year-end 2022. The number of fixed broadband subscribers is expected to increase to 7.2 million by 2027 with a 77.2% household penetration.

Taiwan Optical Platform Co. Ltd. Deputy CEO Kevin Luo said the Taiwanese market still has potential for growth; however, the cable infrastructure and customer experience need to be improved. The executive also appealed to the government to subsidize the improvements necessary for the cable platform to guarantee the affordability of consumer services, recommending considering the young age of most consumers and building out smart infrastructure.

With the rising popularity of OTT services in Taiwan, the television and linear broadcasting sectors have kept up with the trend by investing in streaming — a foreseeable future of pay TV in Taiwan. Sanlih E-Television Senior Vice President of the Creative Marketing Department Jane Lin said the future of television is through the development of online content and broadcasting news over video-sharing websites, such as YouTube. The executive also said the future of TV lies in how the operators use their linear resources effectively.

As digital transformation becomes a challenge in Taiwan, Lin recommended amplifying the use of social media for viewing, re-editing TV programs to engage younger viewers — statistics show that Taiwan has an older viewing audience — and letting pay TV operators obtain multinational licenses in collaboration with other market players, such as cable TV operators, telcos and content providers.

Piracy of online video and the installation of illegal set-top boxes have become a widespread problem, with Asia Video Industry Association (AVIA) CEO Louis Boswell reporting its increase from 37% in 2022 to 47% in 2023. Consumers are more critical in terms of content they are willing to pay for, especially when they can find ways to watch content without paying. A survey conducted by YouGov and commissioned by AVIA's Coalition Against Piracy revealed 32% of respondents used social media to watch illegally acquired content. Out of this percentage, nearly half of the viewing population, or 44%, have canceled some or all of their legal pay TV subscriptions.

May Chen, secretary general of the Satellite Television Broadcasting Association, echoed the need for more intensified measures to alleviate piracy in Taiwan. During the conference, Chen publicized the association's recommendations to the government to combat the rampant piracy happening. Chen mentioned reinforcing Domain Name System Respond Policy Zone Technology, an approach ordering service operators to cut off the route to the illegal streaming hideout, making the piracy website inaccessible to all viewers in Taiwan. Chen also called for the government to enact the Digital Platform Law to manage digital platforms and regulate OTT boxes in the same way cable TV set-top boxes are regulated. Lastly, an agency or institutional body for network security should be created.

The dawn of online video streaming and the abundance of online content, backed by improving mobile and fixed broadband technologies, has become a proliferating niche for illegal entities to succeed, making it more challenging for Taiwan's pay TV sector to maintain subscriber and revenue growth in the era of cord cutters. With optimism from Taiwan pay TV operators and the NCC as well as prompt action to eradicate piracy, the multichannel sector could retain its presence in Taiwan's thriving video industry.

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Global Multichannel is a service of Kagan, a part of S&P Global Market Intelligence.

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