China OTT subscription landscape: 8 key facts and trend

1. Across Asia, over the next few years, subscription video on demand (SVOD) is reaching more than 470M households in 2022

asia subscription video on demand household growth in 2022

Data from S&P Global Market Intelligence, in the report “the asia video industry report” from Asia Video Industry Association.

2. Growth from OTT subscribers in China is amongst the highest in the world

Subscription OTT Video Viewer Growth china japan south korea argentina us worldwide 2019

3. OTT subscription revenue in China is forecasted to be as big as pay TV in 2022

ott subscription revenue in china in 2022 vs pay tv revenue

Data from S&P Global Market Intelligence, in the report “the asia video industry report” from Asia Video Industry Association.

4. Three main OTT video players in China have roughly the same number of paid subscribers (around 80M+ in 2018)

According to data from Tencent, iQiyi quarterly earning reports, iQiyi has 86M paid subscribers and Tencent Video has 82M paid subscribers by the end of 2018. Report from eMarketer expects Alibaba Youku paid subscriber number to be relatively in the same range with iQiyi and Tencent Video.

YouTube paid subscription increased substantially this year due to the Russia World cup right.

5. OTT platforms are on course to spend more on content creation than traditional TV programming spend in China

China OTT spend on content creation vs traditional TV programming spend 2013 - 2018

Data from this report from IHS Markit. When I reached out to IHS Markit, IHS Markit Senior Research Analyst Kia Ling Teoh provided the attached data and the comment “We estimate Alibaba Youku, iQiyi and Tencent Video collectively spent $7 billion on programming in 2018; in which 32% went into originated programming and the remaining were for acquired and sports.”

tv programming investment by iqiyi alibaba youku and tencent video in 2018

6. Paid video OTT subscribers in China pays on average between $26 – $35/year

Data from Baidu iQiyi platform and Tencent Video platform. Given the competitive nature of the market, I expect Alibaba Youku subscription price to be in the same range. This is significantly lower than the monthly/annual cost for Netflix or other similar services in overseas markets.

Data from “the asia video industry report” from Asia Video Industry Association shows that China IPTV average revenue per user (ARPU) is around $0.92/month or only $11/year, so perhaps it’s not surprising to see the annual cost for digital video OTT service in China.

In comparison, IPTV ARPU was highest in New Zealand at $49.24 per month.

7. Sports OTT is getting big in China too with about 2/3 of internet users in China use laptop/mobile/tablet to watch sports content online

china internet users use laptop mobile tablet to watch sports digitally

There are many services in China offering sports content digitally

8. While Tencent Video and Youku don’t disclose their profitability, we expect all three leading OTT services (including iQIYI) are running at loss

Latest third quarter 2018 earning report from iQIYI showed that the company had an operating loss of US $377M for Q3. According to Forbes and IHS markit, Tencent Video and Youku are probably operating in the red in the similar range, given the competitive nature of the market, content development/licensing cost etc.

However, all three companies seem to continue to invest heavily to capture more market share by developing a stronger content offering ecosystem.

That’s all from me for today. If you have any questions, feel free to drop them below.

Cheers,

Chandler

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