China on Track to Become Biggest Pay TV Market in Asia in Subscribers, Revenue

New SNL Kagan report credits state policy that encourages convergence of telecom, broadcast TV and Internet for accelerated growth.

With 2011 sales of $7.5 billion, China is set to surpass Japan as the largest multi-channel market in Asia by revenue and the 5th largest in the world, according to a new report by SNL Kagan.

China is already the world's largest multichannel market in terms of subscribers. Now with a 9% increase in pay TV households which helped video service revenue soar 31% in 2010 to reach $5.8 billion, China is on track to become the biggest pay market in Asia in both subscribers and revenue.

Between 2010 and 2015, Kagan forecasts China will see its multichannnel sub based grow at a 5% clip to reach almost 260 million households with revenues reaching $124.7 billion.

The growth is expected to be accelerated by a state policy in China to encourage convergence of telecom, broadcast TV and the Internet. That means phone companies and cable companies will be able to compete and offer double and triple play packages of services. The increase in broadband is expected to also create opportunities for new ventures on the Internet.

"China's pay-TV market continues to see exceptional growth as cable digitization and IPTV rollouts invigorate product offerings and boost average-revenue-per user," says Eva Zhang, a Kagan Media and Communications Analyst. "Over the coming 5 years we expect cable and IPTV ARPU will grow at 13.7% and 5% CAGR, respectively."

Other findings in the Kagan report include:

•    Despite IPTV gaining momentum, cable continues to dominate China's pay-TV landscape accounting for 95.7% of multichannel subscribers and 91.2% of video service revenues in 2010.
•    47.0% of China's cable subscribers had migrated to digital connections by end 2010. In 2011 a further 22.5 million households are expected to adopt digital cable service.
•    HD services are gaining ground with 2.5 million cable homes adopting the set-top-boxes and packages needed to access HD programming in 2010. By 2015, 17.2 million cable households are forecast to be HD.
•    VOD is gaining steam with deployments in place at major operators including: Jiangsu BC&TV Network, Shenzhen Topway, Hebei TV Network, Oriental Cable Network, Wasu Digital TV, Shaanxi BC&TV Network, Chongqing Cable Network, and Beijing Gehua.
•    IPTV accounted for 3.8% of China's multichannel subscribers in 2010, with 7.4 million households generating $493.2 million in video service revenues.
•    China is the world's largest fixed broadband market, with 31.1% of total households or 126.3 million subscribing to fixed line broadband in 2010.