The SVOD era has begun in Southeast Asia, picking up momentum last year as regional services joined local startups in the race for rights, distribution and subscribers.
Global SVOD platform Netflix however, a relative latecomer which only launched local services in Southeast Asia at the start of this year, is enjoying higher conversion rates from trial to paying subs than almost all regional and local rivals, according to new consumer research presented at this year’s APOS conference.
The findings were taken from a representative survey of fixed broadband users – a prime target for fledgling SVOD services – in three Asean markets: the Philippines, Singapore and Thailand.
The study was carried out in April by Media Partners Asia (MPA) and media research specialist BDRC Continental.
Of the eight alternatives covered by the survey, comprising two regional (i.e. Iflix and Hooq) and six local services, Netflix only trailed one, Thai startup Hollywood HDTV, in terms of paid conversions.
Hollywood HDTV, which launched in March 2014, enjoyed an 84% conversion rate in Thailand, the highest level recorded by the survey, versus 82% for the Thai version of Netflix.
Thailand is Southeast Asia’s most competitive and most developed SVOD market, where eight services are competing for a share of consumer spend.
However, consumer awareness of Netflix in Thailand, at 71% of fixed broadband users, was found to be markedly lower than in the Philippines (at 95%) and Singapore (at 90%), both markets with a bigger appetite for US content.
Nonetheless, paid conversions for Netflix were lower in these markets, at 63% in the Philippines and 68% in Singapore. That’s still higher than regional and domestic rivals in both countries, and also hints at better performance, for Netflix and others, as their SVOD industries mature.
At this stage, such findings are unlikely to concern Netflix, which is prioritizing bigger markets for now, and able to fall back on its global scale.
The platform faced a barrage of criticism earlier this year, when users discovered that local Netflix offerings offered less choice than the service in the US.
For local and regional SVOD hopefuls however, persuading people to sign up to paid tiers is a more pressing concern.
“If you have churns of 60-70% per annum, almost every 12-18 months you’re acquiring new subscribers,” said MPA vice-president Aravind Venugopal, presenting the study’s topline findings at APOS.
“That drains out your cash,” Venugopal added. “Your ability to generate free cash gets extended even longer.”
PRESSURE ON PAY-TV
In Thailand meanwhile, pay-TV revenues are also under pressure, creating prospects for cheaper or more flexible services, from incumbents or new entrants.
The BDRC survey found that around a third of Thai pay-TV subs were planning to cut the cord over the next 12 months, compared with around a quarter of pay-TV subs in the Philippines and Singapore.
Additionally, around a third of subscribers to premium pay-TV channels in Thailand were also considering downgrading to cheaper packs, a similar level to the US. In the Philippines and Singapore, the figure was around 20%.
These trends may also reflect a growing reluctance to pay, as broadband makes pirated content more accessible.
Fixed broadband consumers were generally willing to pay significantly less for an ideal SVOD service, usually comprising early window Hollywood content currently found on pay-TV, than current prices charged by the pay-TV incumbent, the study found.
That difference proved to be smaller in the Philippines, however. Price sensitivity analysis set the optimal SVOD price for fixed broadband users in the Philippines at US$13.30 a month, close to the monthly Arpu for local cable leader, SkyCable.
Different dynamics are likely to come into play as the SVOD base expands, with the next wave of potential subscribers, connected via growth in mobile broadband, looking for different kinds of content at lower prices.
For now however, the immediate challenge facing SVOD players in Southeast Asia, especially in growth markets like the Philippines and Thailand, is winning over more affluent A and B demos.
Many are tying up with telcos, allowing top-tier subs of local broadband providers to sample their video-on-demand services for free, sometimes for long periods, in the hope people will be more willing to pay once the complimentary trial ends.
It’s a page out the playbook from the early days of pay-TV, where channels and platforms were able to persuade viewers that some movies and TV shows are worth paying for.
It’s also a risky proposition, however, that could commoditize premium content in a broadband world, where free and pirated options are common.
“It is a double-edged sword,” Venugopal warned.
“How the telcos and OTT players manage that integration, how they get messaging across to consumers that this is not a free product, that content is not free, is going to be crucial over the next 12-24 months.”