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The tough competition of media streaming platforms in Southeast Asia

Whether or not you’ve cut the cord, it’s likely that you have a few films or shows queued up online.

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Many of us have been stuck at home for weeks or longer. Some of us still are. Naturally, we’re watching more movies or binging popular series, and this has been a boon for streaming services everywhere.

Between January 20 and April 11, the average viewing time of each user of video streaming services in four Southeast Asian markets—Indonesia, the Philippines, Singapore, and Thailand—jumped by 150%, based on the report “Southeast Asia Online Video Consumer Insights & Analytics” published by research and analysis firm Media Partners Asia. And according to a survey by McKinsey & company, 49% of Indonesian respondents expect to sink even more time into watching movies or shows.

Yet the increased traffic doesn’t mean all players have benefited from a captive audience. Advertisers have slashed their budgets, and some video-on-demand (VOD) platforms have been hit hard. Speaking to Bloomberg in May, the CEO of Iflix, Marc Barnett, said the company’s main revenue from advertising has dropped. Iflix had to lay off staff to keep costs in line with ad revenues, although Barnett expected that Iflix’s advertisers will recover over the next couple months.

Over in Singapore, Hooq, which was backed by recognizable names like Singtel, Sony Pictures, and Warner Bros, shut down in late April after its shareholders sought liquidation. Costs were rising quickly, and the company showed insufficient growth to justify sustainable returns.

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Hammering out the right model

With 655 million people living in Southeast Asia, the region’s digital economy carried a value of USD 100 billion in 2019, based on the “e-Conomy SEA 2019” report by Google, Temasek, and Bain & Company. And that number is expected to triple by 2025.

But how can a streaming platform convince their customers to sign up for monthly payments, especially when there is so much media content that is available for free online? Dellawati Wijaya, a former director and head of content at Hooq Indonesia, said that VOD companies have a hard time convincing Southeast Asian consumers that their services justify a fee.

“For OTT players, paying for Hollywood movies or local studios’ content is not cheap. Meanwhile, customers are not so willing to pay [for VOD entertainment]. In India, we found out that one customer made 50 emails only for the free trials,” Wijaya told KrASIA.

To acquire paying customers, or at least remedy the issue of repeated signups for free trials, Hooq collaborated with major companies in other sectors to bundle services. Guntur Siboro, former head at Hooq Indonesia, said partnerships were formed with Indonesian telcos, Grab, and Ovo. This took the platform’s monthly active users to 5–8 million, 90–95% of which were brought on board through partnerships with other firms. This helped the company shift slowly toward attaining a positive cashflow. But there was another snag.

“The license cost of movies is very hard to be predicted. The price can be from zero to infinity. If the quality content is good, it can increase the price, and the price continues to grow as the needs to watch new movies is increased,”, Siboro told KrASIA.

Alexander Rusli, the chairman of Iflix Indonesia, echoed that sentiment and said that there is a mismatch between the expenses for purchasing content and the revenue earned from customers. “The company needs to spend their money first in buying the content licenses, but we can obtain revenue from the customers in the long-term period, even if some of them prefer to watch it for free or pay only for the content that they want.”

To balance its financial structure, the Malaysia-based streaming player is relying on advertisements to generate income. It also partners with some local media producers, such as PT Media Nusantara Citra Tbk (MNC) and Emtek Group, to acquire more content and keep costs low. MNC and Emtek Group hold minority stakes of Iflix.

Meanwhile, Hong Kong-based Viu understands that it takes time to encourage and build new behavior in users, so the platform employs a freemium model, where customers can watch films or series for free with commercial breaks, or they can subscribe to the platform to remove the ads.

“I don’t believe relying on ads is the right strategy, because you need to have a balance of free and paid. The only way to survive in the entertainment industry is when you have a lot of paying users, so that you can continue investing in newer content. We use the advertising on the free layers to make sure that the consumers are disturbed just enough so that they may move to make the purchase,” Varun Mehta, country manager at Viu Indonesia, told KrASIA.

At the end of 2019, Viu had 41.4 million monthly active users across the 16 countries. In terms of size, Mehta claimed Indonesia has one of the largest user bases for the app, which has the most paying users in the entertainment vertical for both iOS and Android devices in Indonesia.

Recently, a new entrant joined the race with the backing of major investors. Gojek’s GoPlay, however, won’t take the same approach as other VOD players because of the high levels of capital required, GoPlay CEO Edy Sulistyo told KrASIA in an interview. It prefers a revenue-sharing model with content creators and production houses.

This means that GoPlay has positioned itself as a film platform that utilizes Gojek’s existing ecosystem to gain viewers—and hence paying customers. The company also bundles services with other Gojek offerings, much like Amazon does with Prime.

Andi S. Boediman, CEO of Ideosource Entertainment and one of GoPlay’s investors, breaks down the competition into three categories—international, regional, and local players. Platforms with an international presence operate differently from the others, he said.

“International players rely on content power and a massive library. This model needs massive capital, and the content targets the upper-class users, who love international content, but the number of users is limited. Regional and local players have the chance to focus on specific verticals, like how Viu focuses on Korean drama,” Boediman said.

Major players come a-knocking

As Southeast Asian consumers slowly become converts of subscription video on demand, three major players in the sector are vying for the lead in the region.

Tencent acquired Iflix on June 25 and will integrate it with WeTV, its streaming platform developed for audiences outside of China. Company spokesperson Judy Wong said that the move was in line with Tencent’s strategy to take WeTV to more screens in Southeast Asia.

Another Chinese streaming service, iQiyi, has plugged in to test the regional market, starting with Singapore in March, shortly before the city-state’s lockdown “circuit breaker” was put in place. The Baidu-backed VOD platform has also developed partnerships in Malaysia and Myanmar. And to give its international business a boost, the company appointed Kuek Yu-Chuang, a former vice president at Netflix for the Asia Pacific region, as its vice president of international business.

Meanwhile, Disney+ will begin streaming in Southeast Asia soon, although there is no solid schedule yet. The company’s official statement came after Singaporean cable TV networks Starhub and Singtel removed the Disney channel from their offerings.

Competition among VOD providers is heating up quickly in Southeast Asia. Each platform has its own strengths. Boediman said Disney+ has a strong brand and attractive content, while iQiyi still needs to cast a more recognizable profile in the region. And Tencent’s acquisition of Iflix sets it on a shortcut to reaching a pool of users who are already picking films and series to watch in their spare time.

For now, it seems unlikely that one platform will pull ahead of the rest and cultivate a monopoly. Viu Indonesia’s Mehta put it this way: “It is a long-term business, and we believe one customer will have two or three movie streaming platforms on their mobile phone.”