Covid-19: Prognosis for digital consumer services in Asia and beyond

Omdia is the new global technology research powerhouse, established in 2019, with the combination of the Informa Tech’s research brands (Ovum, Heavy Reading, and Tractica) and the acquired IHS Markit technology research portfolio. In a webinar on Covid-19: Prognosis for digital consumer services in Asia and beyond, Ronan De Renesse, Practice Leader, Consumer Technology and Media & Entertainment, Omdia, said that Omdia is reporting daily and weekly updates regarding Covid-19. Most of the European governments have partially lifted the lockdowns. Across Asia, the virus spread is all over.

There are several exit strategies for countries. Eg., in France, most businesses are allowed to reopen from May 11. Cafes, bars and restaurants are to remain closed for longer. Schools and primary colleges can reopen on May 11, but secondary education will only resume for some on May 18, with high schools unlikely to restart before the beginning of June. In Norway, daycare centers and primary schools have reopened. Restaurants and cafes are closed. Larger gatherings are banned till August.

The economic impact will be felt in several phases, culminating in a recession. There will be initial supply and demand shock, along with containment and recessionary pressures. The picture is pretty bleak for the US and some of the European countries. The IMF expects a rebound in 2021. The recovery will take more than a year.

Anticipated impact

The anticipated impact of Covid-19 on digital consumer services is not trivial, and not always negative. Increased consumption of digital content, from mobile app to TV and gaming has already been observed in China and Italy. There could be 50% increase in traffic. eSports, music and cinema will suffer from ticket sales losses. At present, we expect that it will take 18-24 months before any recovery can commence. AI and smart home healthcare services should benefit in the long term. It will also accelerate the development of technologies that will help fight against it.

Telcos face challenges

According to Nicole McCormick, Practice Leader, Broadband and Multiplay, Omdia, the consumer mobile services space is interesting. Telcos are facing many challenges. Asia and Oceania held up better in 2019, globally, but 2020 is a Covid-19 situation. Telcos have also become more relevant in Covid-19.

The impact of changed consumer behavior has impacted a few KPIs. Responses so far require a multi-faceted approach. Telcos are allocating more network resources to areas at certain times. There is less consumer awareness to upgrade to 5G. China Mobile is already offering 5G handsets for $400. Some 5G plans are also cheaper than 4G plans.

Roaming revenues have grinded to a halt. The impact can be very country specific. Some operators have their big part of revenue made up via roaming. Nets ads are also coming under pressure. Consumers are also having problems to get to their retail shops.

The Japanese MNOs have delayed 5G access fees for 2 years. CMHK offers an extra 200GB. Vodafone NZ has delayed the 5G access fee to 2021. New entrants have also delayed 5G access fees till 2021, for Europe and Canada. Telenor Norway has delayed 5G fee for the time being. There are also licensing delays in NZ and India.

The 1Q20 financial impact is also mixed. There is roaming impact. Mobile services revenue has gone down for NTT DoCoMo and Rogers Wireless, among the others. China Telecom had net losses in January and February, but there were net adds in March. The mobile ARPU has been down for China Unicom and Rogers Wireless. These are expected to turn around, maybe, by June 2020.

The impact of Covid-19 mobile revenues in 2020 is expected to decline by 2% over 2019, for Asia Pacific. The revenues will decline nearly 4% in the USA and nearly 9% in Europe. Operators need to do pricing innovation for all. They should improve the customer experience. There should be 5G rich service innovation.  There are some exciting plans being announced by the operators. Operators should also help the niche groups during these tough times. They are also pulling back from charging the incremental extra for 5G.

TV landscape

David Scott, Associate Director, Research and Analysis, Service Providers & Platforms, looked at the Asia Pacific TV landscape and what to expect. The TV content has seen neutral revenue impact. There is demand for children, family and news content. Reduction in live event content. Free-to-air TV has also see neutral revenue impact. Adding content makes sense. Pay TV has seen negative revenue impact. OTT video has seen increased consumption at home with the increased uptake of OTT services. SVoD subscriptions will grow. AVoD services can capitalize on the increased viewership. However, cinema and advertising have taken large hits.

Eg. Sky Network TV in New Zealand is a pay TV leader. Return of live events sparked a mini-recovery, but premium tier revenues fail to fully recover in a declining pay TV market. Netflix in Apac has gained 3.6 million new subscribers in Asia Pacific, +22% growth over Q1 2019. The driving uptake is localization of services and availability of mobile-only plans in India, Indonesia, Malaysia, the Philippines and Thailand. Online video streaming services are experiencing growth, but delay in film production will lead to shortfall of new content.

Looking at the company impact and responses, Foxtel, in pay TV, has given free access to movie channels for sports subscribers in Australia. There was Disney launch of the OTT video in India. However, the Disney+ launch has been delayed. It has partnered with Hotstar, a leader in OTT. In Korea, Naver V Live cancelled the live theater performance and live streamed on V Live.

TikTok in China, in advertising and video sharing, offered $25 million in advertising contribution to deliver public education. It offered $100 million in advertising credits to help businesses restart and rebuild. Sharp in Japan, a TV OEM, is re-purposing TV display factory to produce protection face masks. The OTT video, cinema and advertising are licensing their old catalog to beef-up content line-up for catch-up services. As cinemas close, they should take this opportunity to do refurbishments, install new screens, etc.

Conclusion

Asia has been less hit than Europe, but it can learn from the European lockdown exit strategies. The post-lockdown recessionary impact and the long-term impact on consumer behavior has not yet been fully understood. In the mobile space, telcos need to prioritize the anti-churn management strategies. Pricing innovation is central to keeping the consumers happy. Streaming services like Netflix and Disney will come out as winners.

Andy Reese, Omdia, moderated the event.