Leading the Way is a column written by PricewaterhouseCoopers professional staff. It appears in the Business section of the Bangkok Post twice each month. The column provides specialised advice to corporate decision-makers in Thailand on global and local business trends.
This article appeared in the July 11, 2006 issue of the Bangkok Post.
In a world where the Internet is becoming increasingly important, it is not surprising that the Asia-Pacific region is following the global trend of increased Internet dependence and utilisation.
In fact, according to PricewaterhouseCoopers' seventh annual Global Entertainment and Media Outlook: 2006-2010, it is expected to be the largest and fastest-growing region for Internet advertising and access spending, with an estimated doubling of the market over the next five years.
Looking at some specific numbers, the Asia-Pacific region had a total number 155.7 million households with Internet access in 2005. This is expected to increase to 320.2 million by 2010, with China and India accounting for 89% of total Internet household growth. Thailand is expected to follow, with 2.37 million households in 2005 to 5.25 million in 2010.
If we look specifically at the broadband market, Asia has the largest market in the world, at 83.1 million households in 2005 and its already fast growth is expected to increase over the next three years. Spending is similarly expected to increase to $425 billion in 2010 from $274 billion in 2005. Internet advertising is expected to expand from $3.7 billion in 2005 to $9.9 billion in 2010.
It can be said that there are primarily two key market drivers behind this predicted expansion. First, increased investment in telecommunications infrastructure and further deregulation of the telecommunications sector will likely boost household Internet access. Second, government initiatives and private investment will simultaneously propel the broadband market, increasing the potential for products and services delivered online. Finally, it is also very likely this simultaneous increase in both household penetration and scope of services will stimulate online advertising.
If we are looking at the expansion of household access, it is likely be different from the one seen in the recent past. Previously, Internet subscription has been dependent on landline access. Hence, in countries with low landline access (below 30%), such as China, India, Indonesia, Malaysia, Pakistan, the Philippines and Thailand, Internet penetration has similarly been limited (below 25%). However, these countries are expected to a greater extent explore new wireless technologies to stimulate Internet penetrations, due to the difficulties and relatively high costs in rolling out landline networks.
Purchasing products online is due largely to the increase in broadband access, as this type of connection facilitates the downloading of high-volume content such as music, and movies, as well as TV distribution and online gambling and gaming. Digital distribution technologies are now becoming increasingly established and are changing the way consumers acquire entertainment and media content. Therefore, it is important to look closely at the second market driver: broadband expansion and online spending.
We can already see that online spending has more than doubled in India in 2005, has risen by 60% in China, and has displayed substantial gains in Japan and South Korea. While most online transactions are business-to-business, an emerging consumer market is using the Internet to purchase products.
Currently in Thailand, 3% of households have broadband access. By 2010, this number may reach 11.7%. However, this projected growth faces a number of challenges, the first of which is technology. It takes time for technological innovations from abroad to be implemented in the Thai market, and the process involves increasing consumer awareness and behaviour. But once the technology has been put to use, it tends to yield good results. For example, Internet access via satellite is becoming vital for accessibility in remote areas, due to the limitation of landlines.
A second challenge faced by the Thai market is competitiveness. To eliminate market dominance, thus making services cheaper and more accessible, continued support is needed from regulatory boards. This support will help create an environment of sustainable growth.
The final challenge is to jump start the services of online content providers, thus increasing online advertising. This will require adherence to legal issues such as piracy protection, as well as a willingness on the part of content providers to increase their investments. In order for the Thai Internet market to reach its projected growth, these challenges must be met.
The Entertainment and Media Outlook 2006-2010 covers key trends and market developments in 14 entertainment and media-related industries and forecasts the growth and spending in these segments in five geographical regions. Among others, these segments include film, music, advertising, amusement parks and newspaper and magazine publishing. For information on purchasing the full report, visit www.pwc.com.
