In Asia Pacific where there is a mix of local, regional and international over-the-top (OTT) platforms, a clear marketing, content and audience strategy is required to stand out in this crowded space.
Failing which, experts say, they might end up in the same situation as Hooq, a Singapore-based OTT joint venture between Sony Pictures, Warner Bros., and Singtel, which recently filed for liquidation and will shut down for good on April 30.
The five-year-old platform, which operated on a subscription video-on-demand (SVOD) and advertiser video-on-demand (AVOD) model, had big dreams. It previously told The Drum it hoped to bring 100 original pieces of content from Indonesia, Philippines, Singapore and Thailand to its platform by mid-2020 through the Hooq Filmmakers Guild, an annual initiative to find new film talent in Asia.
However, Hooq announced at the end of March it was pulling down the shutters for good. It had not been able to grow sufficiently to offset escalating content costs and the continuous operating costs of an independent OTT distribution platform, according to its statement.
In addition, Hooq said it has not secured additional funding from existing or new investors. The platform had previously raised an initial $70 million in 2015 and the next funding round lifted it to $95 million in 2018, but it has had no publicly announced financing since 2018.
Lee Walsh, the vice president of media activation for APAC at Essence says the success or downfall of OTT platforms typically comes down to two things: marketing strategy and funding.
He points out that up until its liquidation announcement, Hooq subscription was offered as a complimentary service as part of select Singtel mobile phone bundles. When a platform's content can be accessed for free, he says it can be hard attracting paid subscribers in the future.
“Especially on international content, consumers can choose from leading global video streaming services like Netflix. Creating and licencing content is also incredibly expensive. To put this in perspective, ‘The Crown’ series reportedly cost Netflix US$130 million to produce,” he explains to The Drum.
“Furthermore, Hooq had the challenge of creating local content across five very different Asian markets. For instance, different programming would be required to resonate with subscribers in Indonesia compared to India. At the same time, without a large subscriber base to fund original programming, the quality and volume of offerings can suffer.”
Prerna Mehrotra, the managing director for media group in APAC at Dentsu Aegis Network notes Hooq tried to boost their user uptake by testing different models in the last few years. For example, lowering prices and introducing cheap daily plans in South East Asia, adding free content, ad-funded access, partnerships with Grab and a new brand campaign in late 2019.
Despite all these, she says Hooq failed to entice users and only reached around 80 million user mark in its life span, which could be put down to limited spend in brand building.
“Hooq did have a first-mover advantage when it launched five years ago but with growing clutter, expanded consumer choices and poor subscriber uptake it seems Hooq was not able to grow sufficiently to deliver satisfactory returns to cover escalating content and operating costs,” she says.
“The news of its abrupt closure was surprising and likely to have been induced by Singtel’s cost-cutting in response to Covid-19.”
Like many other brands, OTT platforms must regularly advertise to create awareness about their programming and get new users to signup, says Laura Quigley, the managing director for South East Asia at IAS.
She adds, with the support of Singtel, Warner and Sony, she would assume they had access to funds. However, success cannot be guaranteed through the running of campaigns alone because OTT platforms remain largely at the mercy of subscriber loyalty, as there are no long-term contracts binding the users and they can opt-out anytime.
“In the beginning, Hooq focused on western-centric content and expected that people would pay for it and found out the hard way that youthful, local content was what appealed to their audiences in the region,” she explains.
“They also discovered that while Singapore has the highest per capita GDP in the world, audiences in Hooq’s territories of the Philippines, Indonesia, and Thailand are much less willing to pay for something they expect to be free. And unfortunately simply making content legally available did not stop content piracy, so there were a few factors involved.”
AVOD or SVOD?
It has been predicted that the vast majority of OTT platforms across Asia will adopt an AVOD model because consumers are overwhelmed with subscriptions and emerging market consumers just cannot justify paying for dozens of streaming services.
Walter Cuje, associate media director at VaynerMedia feels there is reason to believe that either the AVOD or SVOD model, or a mix, could be sustainable.
"Hooq's shift from being exclusively SVOD to have free-tier AVOD was a fundamental change in strategy. This forced them to integrate more closely with distribution channels like telcos, which was an uphill battle," he explains.
Quigley points out price is the number one factor consumers consider when thinking about adding a new service. She says if the content and user experience are not the quality customers expect, they are more likely to cancel their subscriptions. Therefore, it is becoming clear that streaming platforms will need to adapt to remain competitive.
For example, Verizon Media’s move to offer a year of Disney+ free with a contract is potentially is why it currently has 28m subscribers in less than a year, while it took HBO Now three years to hit 5m subscribers. As more and more streaming platforms start to emerge and start to develop their own original content, they will need to consider moving to an ad-supported model in order to offset costs.
“Despite the popularity of ad-free Netflix, viewers won’t seem to mind a few ads. In a recent study that IAS administered to CTV/OTT consumers, 76% of our sample said they would be willing to see ads for premium content. And, despite the continued and almost unstoppable growth in mobile, OTT content is still mainly viewed as a TV medium, with more than half of viewers consuming OTT only on television,” she explains.
She continues, “Of course, as CTV becomes the main way to reach viewers on the biggest and most important screen in their home, this bodes well for advertisers looking to take advantage and access potential consumers.”
However, few OTT platforms have made the AVOD model work at scale, says Walsh. Advertiser-funded models may make sense on paper, but they require significant ad tech infrastructure and experienced sales teams to be successful, both of which are expensive.
“AVOD models also need a lot of inventory to manage optimal frequency across audiences and advertisers. Without enough inventory, it is unlikely that a platform can generate sufficient demand from media buyers,” explains Walsh.
While it is unclear how much inventory Hooq actually had, it previously said its advertising ambitions included having a video-first ad server to optimize their inventory management, connection with a best-in-class SSP to access advertising demand along with advanced audience solutions, and brand safety capabilities.
What does this mean for the future of APAC-born OTT platforms?
Netflix recently announced it added more than 15.7 million subscribers in the first three months of 2020, around the time the coronavirus outbreak (Covid-19) became a pandemic and saw countries go into lockdown.
This is not a surprise as Netflix has dominated the market with premium, original content, which means they will not be toppled easily. With Hooq failing, sources tell The Drum the likes of Iflix could be the next. The Malaysia-based OTT platform has held retrenchment exercises frequently since 2016 after burning through cash and being unable to secure significant funding.
However, Cuje prefers to be optimistic, as many APAC-born platforms have approached the market with a very different strategy than Hooq.
“APAC players have an edge up on global competitors when it comes to regional-specific content, which remains hugely important to success in the region,” he explains.
“What we do know, however, is that OTT is growing, and no doubt will do even more so given the current unprecedented times we’re in, so there definitely continues to be potential in this space.”
Quigley agrees, adding that by 2025, the global OTT market is expected to reach US$332 billion. As browsing streaming services like Netflix and Hulu have become the evening standard, streaming becomes ingrained and a part of people's lives, which means the future, does not look bleak for local players.
“Faced with a rapidly evolving media landscape and fickle-minded audiences, OTT streaming services in Asia are expected to remain ahead of the curve. OTT players in the region are innovating and forming alliances with telcos like any battle, forming strategic alliances is key to clinching victory,” she explains.
“In Asia especially, partnerships between OTT companies and local telcos have surely explored the potential of AI in content creation. Voot, for instance, plans to use AI instead of human labour to efficiently create bite-sized highlight reels from full-length broadcasts like sports matches.”
“By joining forces, OTT companies can ensure the wider distribution of their content, while telcos can offer extra value to their subscribers at a premium.”
So, the question remains: Will premium subscription accounts continue to keep people interested enough to continue paying for them?
Ultimately, it is all about relevant and engaging content, seamless experiences to create stickiness and balancing this with the right marketing, pricing and business models, as Asia is significantly different when it comes down to video consumption habits of consumers.
One of the key consumer trends in Asia, as highlighted by Brightcove, is the considerably higher tolerance for advertising that has further helped the AVOD models.
As streaming platforms begin or continue to create their own content, costs for developing that content will grow and it is likely that subscriptions will not be able to handle the costs alone. Ultimately, streaming platforms will need to turn to an ad-supported model to drive adoption. Otherwise, viewers are less likely to add on to their already overloaded streaming catalog.