{"id":3598,"date":"2015-10-28T00:00:00","date_gmt":"2015-10-28T00:00:00","guid":{"rendered":"http:\/\/worldscreen.com\/tvasia\/2015\/10\/28\/special-report-closing-in\/"},"modified":"2016-01-26T17:47:42","modified_gmt":"2016-01-26T22:47:42","slug":"special-report-closing-in","status":"publish","type":"post","link":"https:\/\/worldscreen.com\/tvasia\/special-report-closing-in\/","title":{"rendered":"OTT in Asia"},"content":{"rendered":"

Mansha Daswani explores how OTT platforms are reshaping the landscape in Asia.<\/em><\/p>\n

Pay television arrived in Asia in the mid-\u201990s and, in the two decades since then, has extended its reach to about 500 million subscribers across the region. Over-the-top (OTT) platforms have been in operation for just a few years and, according to one estimate, had 594 million active customers last year.<\/p>\n

That figure, from Media Partners Asia (MPA), is expected to rise to almost 1 billion OTT customers across the Asia Pacific by 2020. The Hong Kong- and Singapore-based consultancy released that data in its Asia Pacific Online Video Distribution 2015<\/em> report in January, and the industry\u2019s developments since then have been rapid and significant.<\/p>\n

Of note, Netflix arrived in Australia and Japan, then announced 2016 launches for Hong Kong, Singapore, Taiwan and South Korea. Two pan-regional platforms\u2014HOOQ and iflix\u2014were unveiled and are now up and running. Pay-TV channel behemoth FOX International Channels (FIC) announced a slew of deals with OTT\u00e2\u0080\u0088platforms. A stand-alone HBO\u00e2\u0080\u0088GO went live in Hong Kong. In India, hotstar is seeing unprecedented usage. And OTT video views in China continue to surge, despite the implementation of new content restrictions.<\/p>\n

China is the overriding OTT story in Asia today, with staggering numbers. At present, the nation accounts for 85 percent of the region\u2019s overall OTT base, MPA reports; in five years\u2019 time it will still have a commanding lead of 80 percent.<\/p>\n

\u201cIn China, you\u2019ve had this traditional television ecosystem that had been highly regulated,\u201d says Vivek Couto, MPA\u2019s executive director. \u201cAnd then you have this pay-TV ecosystem that has also been regulated and hasn\u2019t really developed in terms of a subscription model. While those industries were having their issues, you had this parallel [OTT] ecosystem that developed.\u201d<\/p>\n

Couto values China\u2019s OTT industry at about $2.5 billion. There are a lot of platforms, and they\u2019re all making aggressive content plays.<\/p>\n

\u201cOne of the best deals we\u2019ve done is our multiyear volume agreement with Youku in China,\u201d says Ganesh Rajaram, executive VP for sales and distribution in Asia at FremantleMedia International. \u201cYouku is very aggressive in the OTT space in China, and they value the genre of product we bring to the market. We\u2019re seeing really good numbers in terms of traffic coming in to watch the programs.\u201d<\/p>\n

Rajaram says the partnership with Youku has been \u201cvery symbiotic. It will hopefully be the model that other standalone OTT platforms across the region will try to emulate.\u201d<\/p>\n

Youku and sister platform Tudou are not only major buyers of finished content, they are also investing heavily in originals, including locally developed IP and Chinese versions of imported formats, among them Big Brother<\/em> and The Voice Kids<\/em>. Earlier this year, Youku Tudou announced the creation of a new business unit solely dedicated to original dramas and web-native content. \u201cWe\u2019re well poised to rapidly ramp up our content creation, accelerate our revenue growth and diversification, and fully capitalize on the opportunities that the converging online and off\u00adline worlds bring us,\u201d Youku Tudou\u2019s chairman and CEO, Victor Koo, said in announcing the new division.<\/p>\n

PLETHORA OF <\/strong>PLATFORMS<\/strong>
\nYouku Tudou, of course, is not the only game in town in China\u2019s crowded OTT space. Tencent has been licensing a host of content from across the globe, recently inking a deal with South Korea\u2019s CJ E&M to stream New Journey to the West<\/em> simultaneously with its original run in its home market. Tencent also has an exclusive partnership for HBO content and a deal with FIC for programming from the FOX and National Geographic brands. Most recently, it sealed a landmark deal with Disney for the exclusive TVOD and SVOD rights to all six Star Wars <\/em>movies. The platform iQIYI, owned by search-engine giant Baidu, set aside a 50 million RMB ($8.1 million) production budget for originals in 2015. Even smaller platforms such as Sohu are making headlines; this March it said it was preparing a local edition of Saturday Night Live<\/em>.<\/p>\n

So where is the money to support these content initiatives coming from? It is almost entirely advertiser-driven. \u201cAdvertising is a sizable market,\u201d Youku Tudou\u2019s Koo told TV AsiaPac<\/em> earlier this year. However, \u201con the consumer side, the subscription business has been growing very strongly. Partly it\u2019s because of the anti-piracy initiatives by the government. There were always two problems in trying to build a Netflix-type model in China: one was the payment issue and one was the piracy issue. What we\u2019re seeing is that payments via mobile have improved considerably. Piracy was quite a problem. It\u2019s not gone away, but I think there are efforts to address that now.\u201d<\/p>\n

In June, iQIYI said it had reached the 5-million-subscriber mark, thanks in large part to its slate of premium movies. In 2014, the platform had the rights to more than 60 percent of movies theatrically released in China and 80 percent of titles that topped 100 million RMB ($16 million) at the box office.<\/p>\n

\u201cMost of iQIYI\u2019s users were born after the 1980s and understand the value of content,\u201d Xianghua Yang, the senior VP of iQIYI, said at the time. \u201cWith
\n5 million paid members, iQIYI is the industry leader in terms of paid subscribers. However, this is still a small portion of our over 500 million users, and we expect that the future conversion rate to paid members could be substantial.\u201d<\/p>\n

The biggest complication for China OTT in 2015 was the implementation of new regulations by the State Administration of Press, Publication, Radio, Film and Television (SAPPRFT). As of this year, imported content must be limited to 30 percent of the total volume of hours on a platform. And SAPPRFT screens said imported content. The first foreign series approved by the regulator was the Korean romantic comedy Hyde, Jekyll, Me<\/em>, which began streaming on Youku in July.<\/p>\n

Asked about the new rules, Koo told TV AsiaPac<\/em>, \u201cLike all companies, you have to abide by the local government regulations. It is a part of doing business in China. Since the very beginning, as we started as a video-sharing platform, we\u2019ve had a lot of content monitoring and systems and procedures in place, whether through technology or by a team of people. It\u2019s an area that makes us partner- and advertiser-friendly as well. We see it as an important part of our business.\u201d<\/p>\n

The effect these new regulations will have on all those programming deals done between Chinese platforms and international content providers remains to be seen.<\/p>\n

GLOBAL <\/strong>PLAYERS<\/strong>
\nNetflix is also in the watch-this-space category in China. In January of this year, the streaming platform announced it aims to complete its global rollout to 200 markets by 2017. Netflix is looking to tie up with a local Chinese partner to enter this already crowded and notoriously impenetrable country as part of its global ambitions.<\/p>\n

Up until this year, the streaming platform had been quiet about Asia, focusing its expansion efforts in Latin America and Europe. Its first Asia-Pacific move came with the March launches in New Zealand and Australia, where it has quickly taken on incumbents Stan and Presto.<\/p>\n

Next up for Netflix was Japan, where it rolled out in September. Its arrival there makes for an interesting case study for OTT\u2019s prospects in the region\u2014and the role international companies will play in this space.<\/p>\n

BIG IN <\/strong>JAPAN<\/strong>
\nFor its Japanese debut, Netflix aligned with local conglomerate SoftBank. As part of the deal, SoftBank customers will be able to sign up for Netflix at SoftBank stores, as well as through the company\u2019s website and call centers. The Netflix fee will then be added to the customer\u2019s regular SoftBank bill.<\/p>\n

Netflix arrives in the market after Hulu; the joint venture of 21st Century Fox, Disney and NBCUniversal had a considerable head start, rolling out its subscription offering in Japan in 2011. Three years later, Hulu sold its local operation to Nippon TV. Benefiting from the free-TV reach of its parent company, Hulu Japan reached 1 million subscribers earlier this year.<\/p>\n

\u201cWhat is unique about the Japanese market is that terrestrial is still very strong,\u201d says Kazufumi Nagasawa, chief content officer at HJ Holdings, the Nippon TV subsidiary that runs Hulu in Japan. \u201cNippon TV is the number one network and still gaining in the ratings. We are 100-percent owned by Nippon TV. We are in a good position to differentiate ourselves, as only we can cross-promote between terrestrial and SVOD.\u201d<\/p>\n

In a market as insular as Japan is on the programming front, local content is a key element for Hulu. Upon reaching its million-subscriber milestone, the platform knew \u201cit was time for us to start original programming,\u201d Nagasawa says. To that end, Hulu Japan ordered its first drama series, adapting the German hit The Last Cop<\/em>.<\/p>\n

Netflix, too, is stocking its service with Japanese content. Ahead of its launch, it announced a partnership with Fuji Television Network for two productions: a new season of Terrace House<\/em> and the drama serial Atelier<\/em>. Both shows will air first on Netflix and will then be available on Fuji TV On Demand and broadcast TV. Separately, it is also adapting the novel Hibana<\/em> by Naoki Matayoshi.<\/p>\n

\u201cWe feel that Japanese content is paramount in order for all of Japan to enjoy our service,\u201d said Greg Peters, the president of Netflix Japan, at a press conference\u00a0 announcing the Fuji alliance.<\/p>\n

The other major market where OTT is developing at a rapid clip is India, with two primary platforms backed by the largest pay-TV companies in the country: STAR and Zee Entertainment Enterprises. Each has taken a very different approach. STAR opted for the ad-supported route for its on-demand service, hotstar. Its numbers have been significant; streaming the ICC Cricket World Cup this summer, hotstar logged 340 million views. Zee charges a subscription fee for its DittoTV platform. As of this year, it has a reported 1.8 million customers.<\/p>\n

Netflix is said to be readying a 2016 rollout in India, where other key players include Eros Now, backed by film studio Eros, and HOOQ, a platform owned by Singtel, Warner Bros. and Sony Pictures Television that is gearing up for an Indian launch.<\/p>\n

\u201cIndia is critical for us,\u201d says HOOQ CEO Peter Bithos. \u201cIt\u2019s unbelievable how fast that market is evolving. We believe our mix of local and Hollywood content is truly differentiated. We think we have a fantastic opportunity to get into the Indian market quickly with a value proposition that appeals to people who love movies and quality stories. We\u2019re not going to be the mass-market premium model with a cricket offering. But with 1.1 billion people, there are a lot of movie lovers out there!\u201d<\/p>\n

REGIONAL <\/strong>REACH<\/strong>
\nHOOQ is one of two platforms battling it out in the Southeast-Asian arena. It began operations in the Philippines earlier this year. Other primary markets for HOOQ include Indonesia and Thailand, a similar footprint to that being targeted by iflix, which has been busy licensing a host of imported content, doing deals with the likes of Twentieth Century Fox, BBC Worldwide, Warner Bros., Disney and Starz, as well as providers in Korea and Malaysia.<\/p>\n

\u201cThe big opportunity is to really be a first mover in Southeast Asia and emerging markets worldwide,\u201d says Azran Osman-Rani, CEO of iflix Malaysia and COO of the iflix Group, about the new platform\u2019s aspirations.<\/p>\n

\u201cWhile the business model is already established in developed markets, especially in the U.S., the challenges of emerging markets are unique and require an adaptation of that business model,\u201d Osman-Rani says. \u201cFirst of all, Southeast Asia specifically and emerging markets generally tend to be much more mobile-centric. In developed markets, people have super-high-speed broadband connections, they\u2019re watching ultra HD on big-screen sets at home. In Asia, for most consumers, the small [mobile] screen is their primary, in many cases only, screen. That becomes the primary way of consuming content. Bandwidth\u2014while it is rapidly growing and certainly gives us the confidence that the time is right to [launch iflix] now\u2014is also quite variable in quality across the region. Even within a particular network it varies. So we\u2019ve got to come up with technologies like adaptive bit-rate streaming that can optimize the resolution quality to suit the bandwidth speeds that go up and down.\u201d<\/p>\n

The other complication for OTT platforms in emerging markets is payment methods, Osman-Rani says. \u201cIn developed markets, people are very comfortable with credit cards and [using them online]. That\u2019s not the case here. Even in Malaysia, where there might be 30-percent credit-card penetration, barely half of those users are comfortable using credit cards online. In markets like the Philippines, Indonesia and Thailand, it\u2019s even less in percentage terms. So you have to think about billing and payment in a way that is more suited to these markets.\u201d<\/p>\n

Taking those issues into account, iflix has launched in Malaysia, the Philippines and Thailand. Aligning with key telco partners in those markets has been central to the iflix strategy. \u201cGoing forward, in terms of which markets we go in, it\u2019ll be those where we can get the fastest alignment with the local telco operator.\u201d<\/p>\n

Pricing has also been an important consideration, Osman-Rani adds. \u201cPricing in emerging markets is very sensitive. The difference between a $2.50 proposition and a $20 proposition is massive in terms of the number of people who can afford that price point. To make the economics work at a $2.50 to $3 price point, you need scale. You cannot make this work within one market. For us to deliver economic sustainability for our investors, we\u2019ve got to be able to say we can get to more than 20 million subscribers over 20 different markets across the emerging market landscape. That includes Southeast Asia, South Asia, the Middle East, Africa, etc.\u201d<\/p>\n

MPA data estimates that HOOQ and iflix have some 150,000 subscribers at present.<\/p>\n

PAY TV STRIKES <\/strong>BACK<\/strong>
\nHOOQ and iflix are primarily targeting those customers outside of the existing pay-TV ecosystem; they are not yet luring subscribers away from pricier packages on traditional platforms. But that doesn\u2019t mean that Asia\u2019s cable, satellite and IPTV incumbents are resting on their laurels. Malaysia\u2019s Astro is enhancing its popular TV Everywhere service, Astro on the Go. PCCW Media, owner of the nowTV platform in Hong Kong, has acquired a majority stake in the mobile on-demand video platform Vuclip, which is active in India, Indonesia, Malaysia and Thailand, as well as the United Arab Emirates.<\/p>\n

\u201cVuclip and PCCW Media will develop a best-of-breed OTT platform that provides immediate access to PCCW Media\u2019s premium Asian content set (including Korean, Japanese and Chinese-language titles) across a much-expanded audience base in the Asian continent and other regions,\u201d Janice Lee, managing director of PCCW Media, said of the acquisition.<\/p>\n

Channels, too, are looking at opportunities in the OTT space. Following the successful launch of HBO NOW in the U.S., HBO Asia expanded HBO\u00e2\u0080\u0088GO in Hong Kong, allowing non-pay-TV customers to access the premium channel for the first time. A+E Networks launched HISTORY Plus on the 4ME OTT platform in the Philippines. Also in the Philippines, FIC has built on an existing partnership with MediaScape, owner of the Cignal DTH platform.<\/p>\n

\u201cWhen the MediaScape group wanted to get into the OTT space, we were able to launch a bouquet of branded SVOD services [with them], as well as our sports channel,\u201d says Rohit D\u2019Silva, FIC\u2019s executive VP for commercial and sports in the Asia Pacific and the Middle East.<\/p>\n

\u201cOne of the things that helps us move a little faster is that there\u2019s an opportunity in the OTT space to work with existing affiliates, as well as new ones,\u201d D\u2019Silva continues. \u201cWe are doing something with Samsung in the Philippines, we are working with Avex in Japan and Tencent in China. Avex is streaming our FOX channel in Japan and [offers] all the catch-up we have associated with that channel. We don\u2019t look at an opportunity with a one-size-fits-all approach. There could be places where there\u2019s real value in approaching it in the way we\u2019ve done with Avex. There could be certain market dynamics where the provider is only offering a TVOD service and we have the ability to sell them some content on a syndication basis. We need to be flexible and collaborative, and at the same time, we have to keep the core elements of what we want to do with our brands.\u201d<\/p>\n

RIGHTS MATTER<\/strong>
\nThe size of its portfolio and its slate of owned content have also been beneficial to FIC in its OTT strategy. \u201cIf you are only in one or two genres, the challenges are greater,\u201d D\u2019Silva says. \u201cWe have a significant amount of SVOD product for National Geographic, we have our FIC original productions, and we\u2019ve cleared a lot of rights over and above that so we can offer SVOD. In Southeast Asia, we have TVOD rights to a lot of Chinese movies, and we have the SVOD rights.\u201d<\/p>\n

As the battle for rights intensifies, companies like FremantleMedia International are finding plenty of new opportunities to place a varied slate of products. \u201cThe whole OTT explosion has been a boon for us,\u201d Rajaram says. In addition to the volume agreement with Youku, the company has made package deals with the likes of Toggle in Singapore and TonTon in Malaysia, as well as with telco companies in Korea that have launched OTT services. He says deals with pan-regional players are possible but present a different set of considerations, especially when it comes to exclusive versus non-exclusive rights.<\/p>\n

\u201cWhen you have a reality program with a winner, its shelf life is very short,\u201d Rajaram says. \u201cWe have shows where non-exclusivity is the norm, as it is with most digital VOD deals, but there are certain premium shows we have where people pay a little more for exclusivity. So there\u2019s always this debate over which platform is going to be best for the show. It\u2019s not one rule for everyone.\u201d<\/p>\n

Rajaram says that 30 to 40 percent of his revenues in Asia now come from digital platforms. \u201cWe\u2019re doing a lot more deals now,\u201d he says. \u201cIt\u2019s not necessarily a lot more money, but the point is that you\u2019re getting so many more viewers. Content we represent will be seen by so many more eyeballs now than it was five or six years ago.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"

Mansha Daswani explores how OTT platforms are reshaping the landscape in Asia.<\/p>\n","protected":false},"author":1,"featured_media":3715,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[76],"tags":[82],"class_list":["post-3598","post","type-post","status-publish","format-standard","has-post-thumbnail","","category-features","tag-ott"],"yoast_head":"\nSpecial Report: Closing In<\/title>\n<meta name=\"description\" content=\"Special Report: Closing In. NEW YORK, October 28: Mansha Daswani explores how OTT platforms are reshaping the landscape in Asia.. 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