China’s ambition to lead the development of 5G mobile networks will make the country the world’s largest market for over-the-top (OTT) content over the next five years. But Beijing’s stringent controls over production and imports of creative content will be the greatest obstacle to China’s dream to be a true global leader in OTT.
The 5G technology will not be in place until 2020, but its development is among the top priorities on China’s national agenda.
Besides playing an active role in joining other world powers to implement the global standard, the Chinese government has put huge emphasis on 5G development as part of it “Made in China 2025” plan, as well as the 13th five-year-plan. There is a target for commercial launch of 5G in 2020, according to Wilson Chow, leader of China-Hong Kong Technology, Media and Telecommunications at PwC in China and Hong Kong.
The China Academy of Information and Communications Technology, which is under the Ministry of Industry and Information Technology, published a report on 5G earlier this year. It forecast the 5G market will account for $167 billion (RMB1.1 trillion) — the equivalent of 3.2% of China’s GDP in that year. Combined investment in 5G by the three domestic phone networks – China Mobile, China Unicom and China Telecom – reach $47.5 billion (RMB313 billion) in 2023.
The 5G transmission speed is expected to be 10 to 100 times faster than 4G – fast enough to download a two-hour film in high-definition in just 12 seconds, according to one estimate.
With higher speed and broader bandwidths, the market for OTT content will expand tremendously particularly in mainland China. Analysts at CCS Insight and Jefferies forecast 5G subscribers will reach more than half a billion by 2022 and 2023, accounting for 50% of the global subscribers.
“The 5G application, which can enhance the speed and stability of video streaming and is capable of the delivery of super high-definition videos, will substantially improve the user experience and thus help boost the development of OTT industry in China,” said Chow.
Chow says creation of local content ranging from short videos and movies to drama series and sports content will grow to meet users’ needs. International content including Hollywood movies and content by global OTT players will also be in demand, he added.
The figures might be promising but China’s increasingly stringent control over content and the internet will be a great obstacle to the country’s OTT industry development. This summer, China introduced new cyberspace laws as a new measure to tighten its control of the internet within Chinese borders. That has dealt a huge blow to the foreign formats segment.
“Such controls may have an impact on the scope of content development, such as politically sensitive contents. Censorships and restrictions of the import of foreign contents will also affect what could’ve been promising future for OTT industry in China,” Chow said.
Chow said over the next five years, China will witness a significant shift of viewing video content from free-to-air TV to subscription video (SvoD) service. That in turn gives rise to more steady and sustainable growth of the industry.
“We expect the market to grow at a compound annual growth rate of nearly 20% over the next five years, and the expected revenue to be generated by the industry is forecast to reach nearly $4.5 billion in 2021. Subscriber level of leading SVoD portals is expected to grow to more than 180 million for each,” said Chow.