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PwC: China leads OTT video revenue growth in APAC with heavily monetized model

China revenue from over-the-top video services should grow around 20% per year to US$14.7 billion in 2023 from 2018's US$5.8 billion, according to data presented by accountancy firm PwC on June 5 in Hong Kong.

The country will see the highest growth rate in Asia Pacific, thanks to heavily monetized business models and changing consumer behavior, PwC said. APAC OTT video revenue will grow 18% per year from 2018 to 2023, according to the presentation.

China recorded 115% growth in OTT video revenue between 2014 and 2018, whereas OTT video revenue in APAC grew 51.2% from 2014 to 2018, PwC said.

Chinese OTT video platforms include Baidu Inc.'s iQiyi Inc., Tencent Holdings Ltd.'s Video platform and Alibaba Group Holding Ltd.'s Youku Tudou Inc. "These three platforms comprise 70% of the overall OTT market in China, while the rest of the industry is mostly platforms with a niche, like online game streaming," according to Cecilia Yau, entertainment & media leader at PwC China and Hong Kong.

OTT video platforms in China have a "unique" business model that helps them grow, according to Yau. All the platforms insert advertisements before and in the middle of episodes, which can only be removed by purchasing a subscription, she explained. Users can also choose to pay more to enjoy higher download speeds.

U.S. peer Netflix Inc. does not insert advertisements in the middle of videos, and others like Hulu LLC have been providing both ad-free and ad-supported versions of paid services.

Additionally, as the owners of Chinese OTT platforms are technology conglomerates, they can promote video content across their other services, according to PwC. For example, Tencent can promote its video platform on its social media platforms like WeChat and QQ, Yau said.

Consumer behavior has changed as well, according to Yau. Since 2015, the Chinese government has cracked down on pirated content, which used to be distributed across OTT platforms for free. Most pirated content has disappeared as a result, and forced the platforms to pay copyright fees. This encouraged OTT service providers to charge for their content, she said. "Consumers in China nowadays are more willing to pay for high-quality content and better user experience," Yau added.

Furthermore, Chinese key-opinion-leaders, or KOLs, aided growth by promoting online streaming platforms, especially for games, according to Wilson Chow, technology, media and telecommunications leader for global, Mainland China and Hong Kong at PwC. KOLs are popular with Chinese audiences, and the online game streaming platforms such as HUYA Inc. and Wuhan Douyu Network Technology Co. Ltd. invite these opinion leaders to appear on channels to boost viewing figures, he explained.

"We remain optimistic toward the Chinese OTT video market, and new technologies like 5G and virtual reality will further benefit its growth," Chow added.

Yau and Chow were speaking at a PwC event to launch the firm's Global Entertainment & Media Outlook 2019-2023 report, which says OTT services will be increasingly personalized.