Western streaming giants are making their first forays into Asia, but will they be able to negotiate different cultural tastes, piracy and local competitors to win over audiences?
While Europe is bracing itself against the impact of Netflix – with naysayers predicting the end of European cinema as we know it – the reaction to the SVOD giant across the Asia Pacific region has ranged from a hesitant welcome to indifference. Although Netflix has announced plans to launch in most major territories in the region, it’s rare to hear portents of doom.
The big exception is Australia, where Netflix first planted its flag in the region, launching in March this year. Despite a barrage of local competitors, Netflix had reportedly already signed up 400,000 households by June and at least one local VOD competitor has folded since its entry into the market.
In sharp contrast, when both Netflix and Amazon Prime Video launched in Japan in September, there was more talk about the huge challenges the SVOD giants would face rather than their potential to disrupt current business practices or dominate the market. Everyone remembers that their US streaming rival Hulu has already had a crack at Japan, launching there in 2011, but selling its operations to local broadcaster Nippon Television (NTV) in early 2014 when it failed to gain traction.
To be fair, Japan is unlike any other market in Asia, or indeed the rest of the world, in that it’s incredibly tech-savvy and charmingly old-fashioned at the same time. One of the last bastions of a physical DVD market, Japan is also a territory where audiences happily tune in to free-to-air broadcasters and pay-TV has a less than 30% market share. Audiences do consume films and TV shows on their smartphones, but this is usually bundled with telco subscriptions from major providers NTT Docomo, SoftBank and KDDI, so they’re not in the habit of paying for content online.
Netflix has been smart in partnering with Softbank, which will sell Netflix subscriptions to its 37 million mobile customers, while Amazon already has a user base in Japan after a decade of ecommerce operations. But the challenge both companies face in this market is the strength of local content. Local films had a 58% share of the Japanese market in 2014, while foreign TV shows such as House Of Cards and Orange Is The New Black are relegated to niche cable channels.
Amazon says it will carry local content but hasn’t revealed much about its plans, while Netflix has pacted with local producers such as Fuji TV, Polygon Pictures and Yoshimoto Kogyo and announced its first Japanese original production – an adaptation of Naoki Matayoshi’s novel Hibana.
“We spend the first year working on getting the market right for consumers by understanding their needs and adjusting accordingly,” said a Netflix spokesperson when asked about the company’s content mix in Japan. “We have interesting Japanese content in our pipeline. We are feeling pretty good, but know we have a long road ahead of us.”
Netflix plans to stream Hibana and Polygon’s anime series Ajin: Demi-Human worldwide, not just in Japan, which could make it an attractive partner for Japanese producers. But the volume of local content it needs to secure in Japan, plus the understanding of local audience tastes, will be much deeper than has been required for its assault on more Western content-friendly regions such as Europe or Latin America.
This also holds true for many of the other Asian territories Netflix is targeting – especially China, South Korea and India, where local content also has a majority share. Netflix also announced last month that it would enter the four Asian “tiger economies” of South Korea, Singapore, Hong Kong and Taiwan in early 2016. While three of those territories are open to US movies and television, Korean audiences are avid consumers of their own films and TV shows. Indeed, Netflix will need to hoover up Korean content for it’s offering in other Asian territories, especially China and South-East Asia, where Korean dramas have a fanatical following.
At the same time, there are many reasons why Netflix should succeed in Asia. For one thing, it won’t run up against the entrenched business practices and strict adherence to releasing windows that it has been noisily disrupting in the West. In many Asian territories, films move to online platforms or DVD just a few weeks after theatrical release with little protest from cinemas. In addition, Asia does not have any equivalent of Europe’s delicate financing and subsidy systems, requiring production investment from broadcasters. It’s also a region that is mostly wired, open to new technologies and gadget-obsessed – low-cost smartphones proliferate in the less affluent markets of Southeast Asia, while Northeast Asia enjoys some of the world’s fastest broadband speeds.
But China, arguably the region’s biggest prize, still appears closed to outsiders, who will need a licence and most likely a local partner to operate there. Netflix and Amazon will also find a growing number of homegrown competitors, in China and everywhere else in the region, most of which have deeper ties to local content producers, while many also have access to international movies and TV shows.
Southeast Asia, comprising 11 countries at different levels of economic development, has seen two pan-regional SVOD services emerge since January. Kuala Lumpur-based iFlix, owned by Malaysia’s Catcha Group and Evolution Media Capital, started out in Malaysia and the Philippines and launched in Thailand last month. HOOQ, a joint venture between Singaporean telco Singtel, Warner Bros and Sony, operates in the Philippines, Thailand and India. Both offer a mix of international and local content and have plans to enter local-language production.
“Today, across developing markets, there is limited access to quality entertainment – it’s either illegal, high cost or difficult to get. We aim to fix that,” said HOOQ CEO Peter Bithos when the service launched in January. iFlix CEO Mark Britt says that since iFlix launched in May, he’s noticed that content produced in one Southeast Asian territory can travel around the region, particularly reality and competition shows. “Scripted comedies and dramas are a bit further behind but have great potential to develop loyal followings, similar to what we’ve seen with Korean and Japanese dramas,” says Britt.
However, SVOD services in Southeast Asia face greater challenges than their counterparts in the North. Southeast Asians consume local and foreign films and TV shows with gusto but disc piracy is rife and spending power relatively low in some territories. New services also have to take into account the region’s relatively slow or patchy internet access. HOOQ and iFlix have both priced their subscriptions low at around $3 a month and both focus on mobile delivery, technologies that adjust streaming to different bandwidth rates and offline viewing features. Netflix has categorically stated that it’s against its policy to offer the latter.
All the market conditions impacting the rollout of VOD services in Southeast Asia are also present in India – where both Netflix and Amazon Prime Video are planning to launch next year – although in this market the need for local content across the country’s multiple language groups is even greater. Until recently, it appeared that sluggish broadband speeds and strong satellite offerings were holding back VOD growth, but on-demand services now appear set to explode with local production studios, broadcasters, telcos and other tech companies piling into the sector.
Rapid growth in smartphone usage and the imminent launch of 4G services appear to be the biggest drivers. At the end of 2014, India had around 116 million internet-enabled smartphones, according to the 2015 FICCI-KPMG report, a number expected to reach 435 million by 2019. There are also signs of a digital window for movies opening up before mainstream TV. ErosNow is streaming several titles including Tanu Weds Manu Returns and Happy Ending prior to their broadcast on TV. Digital platforms are also being used to market theatrical releases – Fox Star Studios created a one-hour show around Anurag Kashyap’s crime thriller Bombay Velvet, which premiered on Hotstar ahead of the film’s theatrical release.
India’s VOD players have as many different delivery modes and revenue models as the country has languages, but as in Southeast Asia, the biggest challenge will be getting people to pay. “Currently freemium [free to the viewer but with charges for additional services] is enjoying the limelight. However, as this space evolves, so will consumption and payment habits,” says Eros Digital CEO Rishika Lulla Singh. “We are working on growing our premium subscriber base through a few drivers such as ad-free, portability across devices, exclusive content, originals and compelling pricing.” ErosNow’s basic premium ad-free tier costs $0.8 (Rs50) a month, a price point that will be difficult for foreign competitors to match.
As innovative digital services, both local and foreign, roll out across Asia, it could also be the case that some of the most influential platforms may not be territory-specific SVOD services offering everything, but global services catering to niche appetites such as Dramafever for Korean TV shows, Crunchyroll and Niconico for Japanese anime; and Viki.com for global TV shows that are subtitled by fans.
What will be interesting to observe as VOD gains traction is whether it will lead to more diverse viewing patterns across the region. In recent years, there have been signs of Asian audiences focusing only on content made in their own language groups or perhaps Hollywood. But Britt says that several shows that are largely new to SoutheastAsia have been extremely popular on iFlix, including Japanese anime Coolheadedness, Korean variety show Running Man and BBC drama Orphan Black.
“The internet is the great enabler of our generation,” says Britt. “Due to the constraints of traditional broadcasting, many fantastic programmes have only received limited exposure outside of their local markets. Internet distribution has the ability to change that completely.”