Chinese tech giant Tencent has bought embattled streaming service Iflix, which it will use to expand its own streaming platform WeTV into Southeast Asia.
A Tencent spokesperson confirmed the news in a statement, sent to Campaign: “We confirmed that Tencent has purchased Iflix’s content, technology and resources."
Rumours that Iflix was exploring a sale first started circulating last week. At the time, Campaign wrote that Tencent was thought to be the most likely acquirer as it aggressively pursues growth of its TV division. In parallel to the Iflix acquisition, rumours are swirling that the tech giant is also considering a takeover of rival Chinese streaming sevice iQiyi.
The media conglomerate, which operates Tencent Video, the second-largest subscription TV service in China (behind iQiyi), has been eyeing Southeast Asian expansion for the past few years. It took the first steps towards this in early 2019, when it spun out an international version of WeTV into Thailand.
The purchase of Malaysia-headquartered Iflix provides WeTV with instant access to more than 25 million subscribers across 13 countries in Southeast Asia, including Malaysia, Indonesia, the Philippines, Thailand, Brunei, Sri Lanka, Pakistan, the Maldives, Myanmar, Vietnam, Cambodia, Nepal, and Bangladesh.
"The purchase comprises a strong local network across emerging markets with a wide and compelling selection of video content such as TV shows, movies and local originals, to stream or download, on any Internet-connected device," the Tencent spokesperson said.
"Through the purchase, WeTV will further extend our presence in the video streaming industry across Southeast Asia, to reach a broader audience base within the region and to better serve our users with better viewing experience."
Given Tencent's ambitions to use Iflix as the backbone of WeTV, it is likely the Iflix brand name will be sunset. It is unclear how this will affect Iflix staff.
Tencent has not provided financial details of the purchase.
Iflix was running out of options to prevent itself from meeting the same fate of its rival Southeast Asian streaming service Hooq, which entered into liquidation in March.
The streaming service was already in troubled waters at the start of 2020, but the impact of COVID-19 on advertising spend meant it burned through its remaining cash reserves and reportedly ran out of money a few months ago, according to people familiar with the business.
Iflix has raised more US$348 million in seven funding rounds since it was founded in 2014, but has accumulated losses of US$378.5 million throughout the period. It reported after-tax losses of US$158 million in the calendar year 2018, up 30% from the previous year. It was reportedly gearing up for an IPO last year but failed.
The business 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. Meanwhile 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.