While Asia-Pacific represents the fastest-growing region for OTT, many of the region's players—a list that includes global giants such as Netflix and Amazon Prime plus dozens of homegrown upstarts such as Iflix, Hooq, Genflix, and Viu—are struggling to build robust and profitable businesses, primarily because of slim earnings from both advertisers and subscribers.
By some estimates, OTT globally accounts for around a third of TV eyeballs, yet captures under 3% of TV ad revenue. The number is likely lower in Asia, according to several media experts interviewed for this article.
“This is a very highly fragmented market in Asia and advertisers are yet to be convinced that they can make wholesale shifts from conventional TV to this newer medium,” says Nandini Dias, CEO of Lodestar UM, a media agency in India.
One reason is that there isn't yet a good solution to measure reach and frequency universally across an OTT buy, according to Samantha Stockman, group director at media planning agency Media Kitchen. "This is a big roadblock for linear-TV buyers who are accustomed to seeing this metric, but it's also an issue for digital buyers who want to ensure they aren't duplicating efforts or cannibalising themselves and increasing bids by buying the same inventory through different sources," she adds.
For the OTT platforms themselves, they are realising that relying on subscriptions for revenues alone won't get them far in Asia. Consumers in the region are typically used to free content—especially on YouTube—and baulk at paying monthly fees. Instead, many of these companies have had to lean on various alternative models—rock-bottom rates (Netflix in India offers a mobile-only monthly plan for Rs 199) or ad-supported models.
Revenue from advertising and subscription in Asia
|Source: Media Partners Asia|
“Customers are very price-sensitive in these markets, and if content is deemed too expensive, or ads deemed too frequent or long, then they will find alternatives, either legal or pirated,” says Malcolm Rogers, senior analyst with Global Data, a media, telecom and technology consultancy.
Growing competition will shake out the middleground
OTT platforms have become more strategic over the last 12 to 18 months in their rush to sign up users across Asia.
In July 2019, Hotstar, the Indian platform owned by Star (and in turn by Disney), hogged the headlines for notching up 25.3 million concurrent users for the India-New Zealand Cricket World Cup semi-finals. Leaning on this interest, the platform has seen its monthly users rocket to 300 million within four years.
Netflix has seen its paid memberships grow 148% in APAC between 2017 and 2019, reaching 14.5 million, thanks to the company's heavy investment in local content to sit alongside its catalogue of international hits like Stranger Things and The Crown. Chief executive Reed Hastings says the firm has so far invested in 180 originals in Southeast Asia alone.
Several others are jostling for a piece of the action. “Viu was developed with today’s viewers in mind, offering locally relevant premium content to viewers,” Janice Lee, CEO of Viu, tells Campaign. “We have grown to 36 million monthly active users by H1 2019, representing 2.88X growth of our user base from two years ago.”
Like competing OTTs, Viu’s growth has been based on offering Asian content that is locally relevant to viewers, including investments in Viu Originals, where it produces scripted and unscripted series via local adaptation of global IPs, original IP development, and social TV (creative concepts tied in to social media). “Our recent collaboration with Discovery marks a further step in the continual expansion … for our viewers through international and regional collaborations,” she adds.
It is similar strategy to that employed by regional providers Hooq and Iflix, both of which have invested in originals and struck content deals with local providers to offer content tailored to the different markets they serve. Hooq already has 63 originals on air and has laid down an ambitious plan to hit 100 by Q2 2020, while Iflix in September said it planned to quadruple its originals slate by year end 2019, adding at least 12 original television series and 30 movies. Both providers have also been focused on expanding their ad capabilities to boost income.
Yet while the likes of Netflix, Iflix, Hooq and Viu offer a broad range of content, niche players that focus on either one territory, language or type of content believe they have a better chance of finding a loyal audience.
HoiChoi is a Bengali-language SVoD owned by Indian producer-distributor SVF Entertainment. It is both niche in the fact that it offers only one language, yet mainstream in the fact its target demographic envelops 250 million people globally.
“There is a very big Indian and Bangladeshi diaspora that exists globally, in just about every country, and this is one way for them to connect back to their home country and culture,” explains Vishnu Mohta, co-founder and executive director, Hoichoi / SVF, in an interview with Campaign at Asia TV Forum. HoiChoi offers SVF’s extensive content catalogue of Bengali films and TV shows, as well as a range of originals made exclusively for the platform.
Elsewhere, Genflix, the first commercial OTT service in Indonesia, is focusing on growth in its home market rather than attempting to take on Southeast Asia too quickly like some of its regional peers.
“It is very challenging to have a regional business because you probably need a local independent operation in every market, so having one brand to suit all those different market needs may not be the best business model," explains Genflix managing director Jimmy Kim in an interview with Campaign at Asia TV Forum. "I would rather focus on the major market in Indonesia, which is already challenging enough.” Kim has not ruled out regional extension to neighbouring countries "assuming we have an established business model first".
He believes the OTT market in Asia has become “very crowded”—in Indonesia alone there are 15 platforms on offer—and predicts there will be consolidation.
“Some of their [rival OTT platforms] business models aren’t working out, and in the meantime more players coming in from China, for example,” he says.
“If you recall what happened to the newspaper business, the likes of the Financial Times, Wall Street Journal, New York Times are still globally relevant brands, at the same time you may read your own local newspaper because that is very relevant to your daily life, but in between there’s probably not much relevance," he adds. “The same thing will happen to the OTT industry. Either you are very local or a very global brand. Someone who doesn't have a clear identity, deep pockets to invest or enough library will not survive."
Financial viability concerns
There are concerns about the financial viability of subscription services in Asia, when piracy is on the up and research has shown that consumers are only willing to pay for an average of three subscription services each—which includes TV, music and ecommerce (this is a US figure, it would likely be lower in APAC).
Malaysian SVoD Iflix, which is reportedly gearing up for an IPO, has raised more US$348 million in seven funding rounds since it was founded in 2014, but has accumulated losses of $US378.5 million throughout the period. It reported after-tax losses of $160 million in the calendar year 2018, up 30% from the previous year.
While Netflix topped a landmark billion dollars in Asia revenues this year, the company’s cheaper plans in the region meant its per user earnings were $9.31, compared to $10.26 in EMEA and $12.36 in the US, for the nine months ended September 30, 2019.
As these companies jostle for a sliver of the market, their attention may be shortly distracted by the looming onset of Disney+, with the $60 billion entertainment behemoth leaning on the runaway success of Hotstar in India to launch its services in Asia. Disney+ made its APAC debut in Australia and New Zealand in November at a competitive price point of $6.70 per month, likely followed in 2020 by Japan, where a similar service, Disney Deluxe, already exists today. According to multiple reports, in India and Southeast Asia, Disney will share its extensive catalogue with Hotstar next year. Meanwhile, Apple TV+ was launched globally in November, with prices in Asia Pacific ranging from $1.40 per month in India to $6.10 per month in New Zealand.
Homegrown OTTs aren’t backing down in the face of these deep-pocketed global rivals making themselves amply heard. “Viu is a service built to be locally relevant, in terms of its streaming technology, locally relevant pricing model and locally relevant content,” counters the company's Lee. “We have also built a robust monetisation model with dual revenue streams with an ad-supported tier and premium subscription tier. This allows us to address and tap into growth in both AVOD and SVOD (opportunities).” Even then, the firm has had to make a tough choice—exiting the India market—to focus its energies on the opportunities in the rest of Asia.
The other headache for global content giants is the Chinese market, which by some estimates accounts for three-quarters of subscribers in the region. Hemmed in by tough regulation that mandates when and how content can be aired and a strong local player in Iqiyi—which has racked up over 500 million users—outsiders may find the going tough.
Monetisation is also a challenge, contend analysts. “Today Chinese consumers are moving away from ad-supported toward premium subscriptions but in much of emerging Asia, ad-supported models are critical to avoid piracy,” says Rogers of Global Data. “Overall, pricing needs to be market specific as well.”
More tailored packages
While the crowded Asia market has compelled global companies such as Netflix to change tack and offer cheap mobile-only plans, industry-watchers believe that more OTTs will start to offer packages tailored to a specific group or interest (sports, for instance) or a language to capture growth.
Mobile operators such as Vodafone and Jio in India, or Singtel in Singapore, for instance, could offer a marquee event (Cricket or Rugby finals live) to draw a sharply defined cohort of users.
"Right now, OTT mostly consists of video on demand inventory; however, as more streaming services win bids for live sports deals or offer 'skinny bundle' live TV within their service, we will likely start to see the spend/viewership gap narrow," says Stockman of Media Kitchen.
Local providers may also opt to expand their advertising opportunities. In the US, for example, OTT providers create ad experiences that go beyond the 15- or 30-second spot, giving opportunity for advertisers to engage the audience and be native to the platform (examples include Hulu pause ads or new binge watching ads and Roku's custom hub experience).
In the new year, fresh battle lines are being drawn, with local and global competitors getting entrenched for a long-drawn war.