In some North American and Western European territories, SVOD subscriptions seem to have reached a glass ceiling. Despite their interest in premium content, households experience SVOD fatigue and major streamers started to lose subscribers. As East Asian markets share common points with those countries – high purchasing power, multiscreen content consumption, high connectivity rates that enable large-scale streaming – alongside differentiated consumption habits, it is uncertain whether they undergo the same trend. Does SVOD actually slow down in East Asia?
SVOD penetration: only China has reached its glass ceiling
In contrast to the Western markets, East Asian countries are still yet to reach the stage of SVOD saturation. In Japan, the subscriber base still grows strongly and Dataxis estimates this tendency to last until 2027. The ARPU will start decreasing in 2025, thus enabling revenue growth until 2025. Growth is even more dynamic in South Korea, where both the 15 million and the 20 million subscribers’ milestones were passed last year. Quite surprisingly, the ARPUs have already started stabilising, and have even slightly decreased for some actors. Yet this normally translates to the market having reached maturity. Likewise, the Hong-Kong and Taiwanese SVOD markets combine these two phenomena. On the one hand, their subscriber bases have grown 31 percent and 35 percent year-on-year respectively in 2022. They currently amount to 3 million accounts in Hong-Kong and 5 million in Taiwan. On the other hand, the ARPUs on the markets have been stable around 30 HKD ($3.85) and 161 TWD ($5.77) respectively since 2020. Dataxis expects them to start decreasing as of 2023.
In contrast, China is the only country experiencing SVOD fatigue in the region. Most platforms lost subscribers at Q4 2022, and the overall subscription number has stabilised around 375 million since Q1 2022. Among other effects, the tremendous success of AVOD can partially explain the current situation of the Chinese SVOD market.
Newcomers enter the market to capture a share of the pie
As in any other bull market, new players have launched their offer to capture growth, except in China where SVOD perspectives are less appealing and foreign platforms banned. The most successful newcomer over the last few years has undoubtedly been Disney+. It was launched in Q2 2020 in Japan, and now counts almost 3 million subscribers. Dataxis forecasts this number to triple by the end of 2027, thus accounting for a 13 percent market share. Only Amazon Prime Video and Netflix will enjoy higher market shares by then. Capitalising on its strong brand awareness in the region, the service was then rolled out at the end of 2021 in South Korea, Taiwan and Hong Kong. It was met with tremendous success in South Korea, where it has quickly gathered 20 percent of the total SVOD subscribers. This market share should however not increase much in the future because of the highly competitive South Korean SVOD landscape. Disney+’s market entry has been less spectacular in Taiwan and Hong-Kong. It accounts for respectively 5 percent and 4 percent of market share, both in terms of subscribers and in terms of revenues. However, due to the less intense competition in these markets, Dataxis forecasts strong growth. In 2027, Disney+ is expected to account for roughly 20 percent of subscriptions and over 25 percent revenues in both markets.
Other major launches include Coupang Play in South Korea in Q4 2020 by local e-commerce giant Coupang. It now provides 2M subscribers with its offer and was the fastest growing service in the market in 2021.
As competition intensifies, winning strategies emerge…
Amid intense battle for market shares, some players have built winning strategies that enable them to outperform the market. Most of the time, these strategies include exclusive content consumers highly value. In Japan, DAZN and Abema TV have both gained market shares since 2020, most notably thanks to sports content acquisition. The same goes for Chian Mobile’s OTT service Migu Video, which has acquired the rights to broadcast the NBA, the UFC, the Olympics, and the FIFA World Cups among other major events. As for the latest Olympic Games and FIFA World Cup, Migu Video even developed metaverse-related slates where viewers gathered to watch a contest or a game. Such moves suggest what the future of premium video content consumption may look like. Quite remarkably, Paramount+ is present in only one Asian country (before its rollout in India later this year), exclusively through a partnership with CJ E+M and not as a standalone offer. As a consequence, it is offered for no additional fee on TVing, which belongs to the South Korean conglomerate. In parallel, the most popular streaming players have inked win-win bundle agreements with local operators to expand their reach. The latter ones themselves cash in on such deals, as it enables them to provide differentiated offers to their consumers. Consequently, they frequently choose to team up with renowned players that enjoy stronger attraction power. It is therefore not surprising to notice that the largest players often also implemented a higher number of distribution agreements than their counterparts, as they benefit from this virtuous circle. In this realm, the success of Disney+ goes side to side with the numerous bundles offering the service (KDDI in Japan, KT in South Korea, Hong Kong Broadband in Hong Kong, Taiwan Mobile in Taiwan).
And consolidation helps keep the pace
As opposed to these players, some streaming services either fail to reach critical mass or to stop the loss of subscribers they have been experiencing. When platform owners estimate that the tables cannot be turned anymore, they often decide to shut down the service. The Japanese market has already witnessed some service terminations, as the race for market shares becomes more demanding. Before AVOD platform Gyao! shut down in March, SVOD platform Tsutaya TV had already terminated operating in June 2022. Again, this could be interpreted as a sign of market maturity. Nonetheless, the strong growth rather suggests that this results from the high competition intensity in the market. As a consequence, many players opt for exogenous growth. For smaller players, it is an opportunity to contribute to a larger success. For bigger players, it is a quick way to drastically expand their reach. In Japan, Paravi and U-Next announced in February their upcoming merger, which is scheduled for this summer. The merged service will be the largest local player in the market, thus a credible challenger to leaders Amazon Prime and Netflix.
A similar situation has occurred in South Korea, where struggling local players have teamed up to remain in the competition. Pook and Oksusu merged into Wavve in Q3 2019, which is now a tier-1 player. Moreover, TVing and Seezn (ex-Olleh TV Mobile) announced their merger in July and completed it last December. TVing is now the main contender of Netflix’s hegemony in the country, and quickly catches-up with it, notably thanks to its exclusive distribution agreement with Paramount+. In response to this threat looming large in its business, Netflix recently announced massive investment worth USD 2.5 billion in South Korean content over the next 4 years.
Towards market concentration amid national political strategies
Except in the notable case of China, East Asian markets are yet to reach their maximum SVOD penetration potential. As premium content has become critical to differentiate from competitors, most players battle to secure exclusive content distribution, either thanks to their very ownership structure or through partnerships. As production costs surge, only big players will be able to vertically integrate this part of the value chain. Consequently, the tussle for market shares will most probably result in more concentrated market structures. Furthermore, national policies might push more and more for building market leaders that will flagship the country’s soft power expansion. As an example, Netflix announced its commitment to invest $2.5 billion in South Korean content during South Korean President Yoon’s visit to the White House. South Korean content breaking through as the most watched genre on streaming platforms in South East Asia is a serious challenge to the Japanese and Chinese soft powers, with the potential to weaken the position of their audiovisual content for both inland an foreign audiences.