Operators’ quest towards online video subscription. Will they win hearts?

The region has seen remarkable progress in the development of online video recently. Initially, adoption was mainly driven by YouTube, but later more players have entered the market ranging from localized free streaming sites (eg. Youku in China) to paid TV players extending to the over-the-top content (OTT) platforms (e.g. Foxtel in Australia). While some have managed to accumulate fan base in multiple countries (e.g. Viki), most of the dominance are confined to a single market. However, recent announcements on Singtel’s Hooq and Philippine Long Distance Telephone Company (PLDT)’s investment in iFlix brought in new dynamics to the region. Both ventures aspire to become the largest regional player of online video subscription.

Interestingly, these ventures came at a time when Netflix announced its interest to expand into Asia. Asian operators are seen pre-empting Netflix’s disruptive move by launching their own service. With a rapidly expanding digital population, the region comes across very promising. However,  first-mover advantage may not apply as the curation of content and exclusivity are known success factors that will determine interest, leading to subscription uptake.

The content game has its own nuances that requires different strategies compared to telecoms services. The paramount importance of ‘killer’ content and exclusivity such as Netflix’s House of Cards is a good example, where a popular TV series help them differentiate in a highly competitive US market. What will be the content ‘hook’ that is comparable to this region? Sports content aside (expensive and complicated regional distribution rights), keen providers will need to assess local interests such as locally themed reality TV shows and K-Pop that could stimulate interest.

Pricing strategy is equally important to drive mass market adoption. While various tactics such as bundling, discounts and freemium approaches can be applied,  altering the user’s mindset to paid content will be key in piracy-rampant markets. The entry price point must be attractively low. For instance, Netflix charges six times lower than most US cable players and this has also been the strategy by Hooq and iFlix where entry package costs less than US$5.

Facing with the dilemma of high content cost and low subscription price, players will hope to reach economies of scale through multi-country launches. Content business requires a long term business case and players should expect some impact towards their bottom line. Netflix expansion outside of the US is a reflective case study where margin was affected while it takes around five years break-even in a new market.

In conclusion, operators’ increased interest in venturing into this area should not be just a response towards the threat of OTT players, but one that recognises online video as a lucrative avenue for future growth, albeit one that comes with specific challenges unique to this region.

What do you think? Do you think the OTT players should be afraid?