The market for premium video content is rapidly shifting in the Asia-Pacific (APAC) region, with a number of new over-the-top (OTT) service providers now operating in places like Hong Kong, Malaysia, and Singapore. These upstarts are joined by media streaming giants like Netflix and Amazon in the region. But the legacy network service providers are still in play, and are rethinking their business models to enter the OTT market and remain competitive in the region.
We caught up with Jason Chao — Vice President for the Asia-Pacific region with Technicolor’s Connected Home division — to learn more about the market, what consumers want, and how a host of new and traditional players are mapping their strategies to meet demand.
Chao: We see that global players like Netflix and Amazon Prime Video have entered the market recently, and they’re making big waves. But they are all approaching the market a bit differently.
For instance, Netflix seems to favor using a partnership model, whereas Amazon Prime is more looking at going direct to the consumer.
In terms of content, Netflix is taking the lead in production of exclusive content, and actually last year spent a bundle of money producing 600 hours or so of original content. They’re actually doubling that this year and they’re going to spend about $6 billion.
Closer to home in APAC, a lot of interesting activities are happening.
PCCW has launched an OTT service called “Viu”. Within 18 months of launching they’ve reached about 6 million active users and claim to be the dominant player in the region. Their strategy has actually been to deliver premium Asian content, so they have Korean, Bollywood, Japanese and Chinese dramas, and they’ve partnered with about 200 content providers. And they’re not focusing, interestingly enough, on the Hollywood side at all, so naturally they differentiate themselves from the international guys.
The second one is actually a company called iFlix and they’re based out of Malaysia. They started off with a mix of local programming and global content in Southeast Asia, but they’ve quickly expanded to non-Asian countries and also the Middle East. They’re catering to local price points, so as an example in Thailand they’re offering a bundle of programing for about 100 Thai Baht per month.
This compares against the Netflix service, which is a minimum of 280 Thai Baht, or about $8 U.S., and that’s about three times the cost of the iFlix alternative. And earlier this year they actually received funding of about $90 million from their backers, Liberty Global, Sky and Zain. So, a lot of money is going into the OTT space here.
Another operator, HOOQ, is based in Singapore. It’s a joint venture started a couple years back by Singtel, Sony Pictures and Warner Bros. They’ve also reached a million active subscribers and their partnership model is with telcos. Today they’re actually in five Southeast Asian countries in the region and also India. But they’re actually looking at expanding from business-to-business to a business-to-consumer model, so I think we’re going to start seeing the rollout increase. And they’ve also increased the second round of funding to $25 million this year.
Finally, there is TVB in Hong Kong. They’ve got a treasure chest of content, over 80,000 hours, and it belongs to a service called MyTVSuper started just last year. It’s been pretty successful. What they’re doing now is they’re bolstering that content with the mainland Chinese content and working with media company partners and creating a regional OTT platform targeting the Cantonese and Mandarin speaking community throughout the region. This is called TVB Anywhere. They’ve launched this and they’re upgrading it further this year. It really has a potential to make a much bigger impact.
Chao: I think it’s seen as both a challenge and an opportunity. I mean, clearly the NSPs are under enormous pressure as the consumer behaviors change and new video offerings expand. The threat of cord-cutting is very, very real, and there are examples throughout the region. StarHub in Singapore lost 7 percent of their cable TV subs last year.
And the pay TV scene in Singapore has seen declining subscribers since early 2015. TVB, which I mentioned previously, had given up its pay TV license after four years of losses, losing in total 2.2 billion dollars. And i-CABLE in Hong Kong, their funding was cut by their parent company Wharf Holdings, and they’re actually going into the hands of independent investors. So clearly NSPs need to embrace an OTT strategy and it’s very much a case of “if you can’t beat them, join them.”
Chao: In terms of embracing OTT strategy, a lot of times it’s not about building OTT content and packaging it themselves; really it is more about partnering with OTT providers.
So, in the case of partnering, it becomes a revenue share model so the linear programming can stay on the network as well as OTT. That can allow the NSP to become more relevant to the consumer and also to expand their revenue models.
Chao: Clearly where there’s a major shift like this, there are many operational and strategic changes. And any company going through this type of transition needs to consider retooling the workforce to be effective. In the OTT world, there are a whole range of new partnerships, new business models and new revenue streams that are possible – so, forming new partnerships on the OTT content side, technology, looking at revenue streams that might not have been available in the past like advertising for instance, or maybe working with certain retailers and companies that can be more specifically targeted to the customers on the OTT network.
Chao: There are a couple of ways that Technicolor is working towards doing that. We’re a leader in technology. And on the video and CPE [customer premises equipment] side, there’s decades of experience in developing CPE that’s used by service providers throughout the globe. In fact, there’s probably about half a billion devices out there today that are Technicolor devices. Our experience in this space really is going to be used to transition the NSP into the OTT world.
One of the challenges is if you’re a linear pay TV operator, how do you transition and how do you add services? And one of the things we’re doing is working on the development of hybrid boxes and buddy boxes.
Let me explain that in a little more detail.
Hybrid boxes are where you’ve got the current linear programming – let’s say you’ve got cable, a satellite, or even terrestrial programming, and you want to add the OTT to it, and if you can do that in one box that means that you can provide that experience through one interface to the consumer.
On the buddy box side, this is a separate complimentary box that can sit beside a linear set-top box from, let’s say a cable operator or a [direct to home] DTH operator. And they can take the video in from the linear programming box, and then combine this with the OTT service to provide the one input to the TV screen so that becomes a much easier experience to move into the OTT space.
Technicolor is privileged to work with a large range of NSPs around the world, and normally the largest and the most successful ones globally, so we have a unique insight into the various business models and what works well, what doesn’t work so well, so we aim to be a trusted business partner not only on the technology side but also on the business side, so we can help the NSPs develop business models, strategies and best practices to overcome many of the challenges with bringing OTT to the market.