With faster internet speeds and technological advances enabling new digital lifestyles, subscription video on demand (SVOD) services are streaming into Asia.
The rise of services such as Netflix and Iflix has led more consumers to "cut the cord" on more costly pay-TV subscriptions and is also starting to reduce piracy of movies and TV shows on disc and illegal downloads.
The high adoption rate of smartphones and tablets has played a crucial role in online video consumption. However, the pace of adoption and viewing habits differ from region to region and even more so from country to country.
Asia Pacific is becoming the world's largest market for SVOD with a forecast compounded annual growth rate (CAGR) of 21% between 2017 and 2022 to US$46 billion, according to Media Partners Asia (MPA), a media and telecommunications analysis firm.
Iflix has built a big audience by offering wallet-friendly subscriptions. iflix
China will lead the way with 85% of all customers in the sector and 78% of online video sector revenue in Asia Pacific by 2022, it added.
Asia is by far the biggest market in the world by population size. China, India and Japan have more internet users than North America and Europe combined. Online video consumption is one of the most popular internet activities globally.
"The move from household-based consumption to individual users across mobile is helping to significantly expand the reach of over-the-top (OTT) service operators," said Vivek Couto, executive director of MPA.
Also supporting the growth of online video subscription is the fact that pricing remains relatively modest in most markets.
Winradit Kolasastraseni, senior vice-president of innovation at Discovery Networks Asia Pacific, says OTT operators such as Netflix will continue to be potential disruptors in pay-TV and satellite-TV in Asia but the impact will vary from market to market.
"I think that in the short term it's not much of a threat, but mid- to long-term it is a huge threat," Mr Winradit said in an interview with Via Satellite, a magazine that focuses on the global commercial communications satellite industry.
"I see Asia has two to three different clusters, where in the more advanced markets such as Japan, things might go a lot quicker than people anticipate. In a market like Thailand, it could also happen rapidly, as the infrastructure is already reasonably good. But In India, it will take a lot longer as there is still one TV per household, yet I do foresee this happening."
According to Dataxis, Southeast Asia has seen strong growth in SVOD, especially from Malaysia and Indonesia. Netflix, the world's leading internet television network, still holds the majority market share in Asean but new players are continuing to enter.
Among the top contenders is Malaysia-based Iflix, whose aggressive business expansion and low prices have captured consumer interest. Netflix and Iflix combined control about 50% of the market in the region.
Iflix began life in Malaysia and the Philippines in May 2015 and now offers unlimited viewing of 20,000 hours' worth of movies and television shows at any time of day.
Its monthly fees are equivalent to just $2-3 or roughly equal to the price of a pirated DVD sold in local markets. This is one of the main reasons why many Southeast Asian viewers have been willing to change their movie viewing behaviour.
PRICE COMPETITION
At less than half the price of Netflix and with a strategy to be more local in its content offerings, Iflix has developed a highly successful business model. It now serves more than 5 million subscribers in nearly two dozen countries across Southeast Asian and the Middle East. It has already partnered with many major western studios including MGM, Disney and Paramount. While some call it the Netflix of Asia, Iflix founder Patrick Grove begs to differ.
"Iflix has succeeded by positioning itself as a cheap alternative to piracy, which is rampant in poorer countries where most people don't pay for cable. Iflix is not really like Netflix and it isn't our main rival. Pirated content is," Mr Grove said earlier in an interview with Forbes magazine.
The Iflix platform aims to revolutionise how movies and TV are consumed over the internet in emerging markets. It has been estimated that people in these countries spend roughly $6 billion a year on counterfeit DVDs. But even Iflix admits that its mission will be a work in progress and it will take quite some time for people to fully turn their back on piracy.
Singapore-based HOOQ has a rich catalogue of Asian content and is keen on offering more original movies to bolster its appeal. HOOQ
RIGHT MIX OF CONTENT
Among the key components of entry strategy models, localisation is very important to be successful in Asia. SVOD platforms must ensure that they can tailor attractive packages to local preferences. HOOQ, more so than any other player in the region, offers one of the most robust catalogues of locally produced Asian content. A Singapore-based joint venture formed by Sony Pictures Entertainment, Warner Bros and SingTel, it was launched in 2015 and now operates in the Philippines, Thailand, Indonesia, Singapore and India.
Deep partnerships with leading studios in each market have allowed HOOQ to offer the best selection of Hollywood and local movies for subscribers. It is also one of the keenest on producing original long-form content, the same strategy that has helped Netflix and Amazon Prime Video ride to success.
"Original shows help set a content provider apart from the competition. We can always license exclusive content from someone else. If there is a really high-quality show or movie, people watch it time and again," HOOQ chief executive Peter Bithos said in an interview with Nikkei Asian Review.
The key to increasing subscriber numbers, he said, is to find the right mix of local content, original programming and a quality library of international content. Signing deals with powerful distributors in each market, especially mobile phone service providers, also helps to expand subscriptions.
COST-SAVING PARTNERSHIPS
Introducing new products and getting customers to use a platform come with high cost and represent the major challenge for any technology startup and video streaming is no exception. Apart from differentiating your service by creating original content to create some exclusivity for audiences, the right partnerships are vital.
"In terms of customer acquisition cost, it is usually very high among these companies in the industry. Netflix has been extremely smart by relying heavily on its local telecommunications partnerships as a way to increase its presence in each market, especially outside of the US," Paolo Pescatore, vice-president for multiplay and media, said in an interview with CNBC.
Partnerships with the right telecom companies will allow these content platforms to reach a large group of customers in a very fast and cost-effective way, he added.
The success of Iflix is a case in point. It has partnered with several operators including Malaysia's DiGi Telecommunications, Telekom Malaysia and Philippine Long Distance Telephone Company. It also entered a deal with Total Access Communication (DTAC) in Thailand earlier in September last year.
Iflix has further strengthened its position by developing relationships with manufacturers of internet-enabled TV sets. It has collaborated with Samsung Electronics Southeast Asia and Oceania to have the company's smart TVs sold in Thailand, Indonesia, Malaysia, Myanmar and the Philippines come pre-installed with its application. Samsung customers who purchase specific models receive a free 12-month Iflix subscription (worth about 1,200 baht). This strategic partnership is an effective way to gain a larger user base.
BEHAVIOUR SHIFT
However, changing the viewing behaviour of customers could take some time. According to Nakorn Phopairoj, chief editor for Thai movies at the film review magazine Bioscope, counterfeit DVDs are slowly disappearing, but online links to free movies are taking their place.
"Despite the low subscription fees among SVOD platforms, many viewers are still addicted to watching free movies online," Mr Nakorn told Asia Focus. "There are many sites where they can download movies, both old and new. Therefore, these companies will have to work hard to have them start paying for the services."
However, he said he had observed some changes in recent years in Thailand since the arrival of streaming video.
"Subscription services for movies are a good alternative for movie lovers, especially when the price of a movie ticket in the country is as expensive as a good meal in a restaurant. I have witnessed fewer people going to movie theatres."
Apart from having their own original content, these platforms need to find a way to shift or create incentives for people to sign up for their services. Mr Nakorn noted that in a very dynamic market environment, industry changes will continue to evolve, and players will have to adapt faster.