Running an SVOD service in markets where few people have access to credit cards or fixed line broadband was never going to be easy.
The sector faces multiple challenges in emerging markets, contending with poor broadband infrastructure and mobile fragmentation, as well as limited payment mechanisms and fraud, while trying to match global licensing norms with local sensibilities and regulations.
Pictured (from left): Howie Lau, Peter Bithos, Mark Britt, Kazufumi Nagasawa, SK Cheong
“I think we all underestimated the amount of business model evolution that has to go on, to create what will eventually be the successful model,” said Peter Bithos, CEO of regional platform Hooq, speaking at APOS 2016.
Hooq, which had been offering monthly subscriptions, recently announced a weekly alternative to expand its customer base, similar to top-up mobile data plans offered by telcos in growth markets.
What works for affluent consumers can only go so far for services chasing mass audiences in South and Southeast Asia.
“For the last 12 or 15 months, we've all been planting flags.” Bithos said. “The next 15 months are going to be about finding the business model that works. You're going to see a lot of business model innovation.”
Internet access offers another way to evaluate global scale and local relevance, suggested Mark Britt co-founder and CEO of regional rival, Iflix.
“The search engine's a global business. The operating system's a global business. Media has historically been a very local business,” Britt said, speaking on the same panel.
“This is going be a much bigger issue. And it's not just about the tools and technology. It's a fundamental philosophical and social question we have to tackle.”
Netflix, along with other global majors such as FIC, NBCU and Time Warner, currently serve a globalized world of premium services, spanning pay-TV and SVOD, where devices, tastes and payment channels are relatively similar, Britt noted.
SVOD services targeting growth markets however, operate in much more diverse markets, in terms of technology as well as tastes, where potential customers are more likely to be buying pirated DVDs than pay-TV.
“That’s the new money we’re trying to get into the market,” Britt said.
In markets with widespread broadband connectivity, TV incumbents also are actively engaging with OTT, to cater to changing consumer expectations.
Singaporean cable and telecoms group StarHub, for example, has announced tie-ups with two third-party SVOD products – Netflix and CatchPlay, an upcoming service from Taiwan – in addition to launching its own offering, StarHub Go.
“The customers ultimately will make the choice,” said StarHub’s CMO, Howie Lau.
“For us, it’s about being the platform to provide the right set of players, the right set of contents, regardless of what the customer finally chooses.”
So far, on-demand and linear services seem to complement each other, Lau noted. StarHub customers are opting for more mainstream content on linear channels, suited for communal viewing, while watching edgier fare on their personal devices.
“We're monitoring the consumption behavior and then adjusting, because ultimately it's the customer who will vote with their dollars,” he said.
Free-to-air broadcasters made some of the first forays into OTT, with ad-supported catch-up services. Hong Kong’s TVB, for example, launched its catch-up offering, MyTV, in 2008.
“That’s got great traction,” said TVB’s executive director and GM, SK Cheong.
“We’re selling at CPMs that are two and a half times television CPMs,” Cheong added. “We’re completely sold out on that so it shows that the service has gone somewhere.”
TVB is now making bigger strides into the OTT space, recently launching its MyTV Super OTT box, which carries its linear free and pay channels, together with on-demand content.
Broadband is the distribution platform for the future, Cheong said, and TVB is consequently repositioning itself as an internet TV company.
“I say, in a semi-jesting way, that if we’re successful in five to ten years, you can pull the coaxial cable that brings you TV signal off-air from your television set and watch everything online, including linear, non-linear, free, pay, the works,” Cheong said.
“That’s what we’re trying to do.”
Momentum in Japan
Five of the biggest free-air-broadcasters in Japan, meanwhile, run a joint catch-up service called TVer, which launched in October 2015.
One participant, Nippon TV, uses the platform to promote its own SVOD service, Hulu Japan, and is inviting other broadcasters to follow suit.
“Our vision is to let other broadcasters use Hulu as an integrated platform with theirs,” said Hulu Japan’s chief content officer, Kazufumi Nagasawa.
“If that happens, there are two big moving pieces, as per the future relationship between TVer and Hulu.”
TVer’s future remains unclear, however, with some partners such as Fuji TV and TV Tokyo also managing separate apps.
Hulu Japan, meanwhile, grew its paid base more than 40% year-on-year in 2015, and reached about 1.3 million subs as of March 2016.
The service is doing well thanks to programming and promotional support from its parent, which bought the service in 2014 from Hulu in the US.
SVOD has good prospects in Japan, by taking share from a still sizable DVD rentals market. At the same time, the sector also faces severe pricing challenges.
Amazon, which is ramping up investment in Japanese content, includes video as part of Amazon Prime, its broader paid ecommerce tier which costs significantly less than SVOD alternatives.
“That’s a huge threat to us,” Nagasawa said.
“But not only to us, to the whole OTT service or even to the whole entertainment industry, because that will change the customer’s mindset.”