Jessica Goodfellow
Jun 19, 2020

Chinese tech giants are circling SEA streaming provider Iflix

Southeast Asian OTT platform is exploring a sale to avoid the same fate as rival Hooq, which entered into liquidation in March after struggling to make finances work.

Chinese tech giants are circling SEA streaming provider Iflix

Chinese tech giants are understood to be circling Southeast Asian streaming service Iflix, which is exploring a sale in order to offset financial difficulties.

The Malaysia-headquartered streaming platform is said to be exploring several options to secure its future, which could include a sale or sourcing more investment. Iflix was reportedly gearing up for an IPO, but that option is looking unlikely.

Iflix has raised more US$348 million in seven funding rounds since it was founded in 2014, but has accumulated losses of $378.5 million throughout the period. It reported after-tax losses of $158 million in the calendar year 2018, up 30% from the previous year.

Chinese giants including Baidu-backed video streaming platform iQiyi and media conglomorate Tencent are thought to be the most likely buyers, since Southeast Asia is a crucial market for their international expansion. iQiyi was rumoured to be exploring an investment in Iflix in 2018. 

Tencent is viewed as the most aggressive acquirer—in parallel to a potential Iflix acquisition, rumours are swirling that the tech giant is also considering a takeover of iQiyi. 

US giant Disney is thought to be an unlikely acquirer, since it has already announced plans to roll out its Disney+ platform via Hotstar throughout Asia.

Campaign Asia-Pacific understands that Iflix is hoping to hammer out a deal by the end of the month. Campaign contacted Iflix but the company refused to comment.

The financial pressure of COVID-19 appear to be bearing down on Iflix, which has lost several board members over recent months and cut an undisclosed number of staff in April. Two of Iflix's cofounders, Patrick Grove and Luke Elliott, resigned from the company's board in April along with two other board members, according to DealStreetAsia. Grove and Elliott are both cofounders of Catcha Group, a Malaysian investment firm that is a major shareholder in Iflix. 

DealStreetAsia reported that two members of investment fund Mandala Asset Solutions, which offers advisory to "distressed assets" joined the Iflix board in May.

Iflix's other cofounder Mark Britt stepped down from his position as CEO in December last year, and was succeeded by managing director Marc Barnett. Britt joined the Iflix board as executive director. 

The financials of running an OTT platform are difficult—businesses have to contend with production and licensing costs, investments in technology infrastructure and fierce competition for subscribers. Convincing users to pay for TV is especially challenging in Asia due to dominance of free-to-air and the lack of payment infrastructure in developing economies, which is why Iflix and several other platforms adopted an ad-supported model as well. But without guaranteed monthly revenue from subscriptions, many OTT platforms have struggled to push a profit.

Crucially, Iflix wants to avoid the same fate of Hooq, which entered into liquidation in March after majority owner Singtel said it had struggled to make a viable business model for the OTT platform.

Iflix is available in 13 countries across Southeast Asia including Malaysia, Indonesia, the Philippines, Thailand, Brunei, Sri Lanka, Pakistan, the Maldives, Myanmar, Vietnam, Cambodia, Nepal, and Bangladesh. In 2019, it claimed to have more than 25 million subscribers.

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