Why China’s entertainment giants are turning their focus to South East Asia
Three major streaming platforms, Baidu’s iQiyi, Tencent Video, and Alibaba’s Youku, occupy over 80% of market share in mainland China. But their dominance is constantly being challenged by new players such as Bilibili and short-form video services.
With competition within China getting more intense, a new growth market beyond China is necessary for those platforms to continue expanding and dominating. Their interest in the South East Asian streaming markets is an easy one to understand.
In June, Tencent bought out struggling Malaysia-based over-the-top (OTT) platform Iflix, while iQiyi hired Netflix executive and former Singapore diplomat Kuek Yu-Chuang for an Asia expansion role. At the same time, iQiyi also picked agency partners to build brand awareness in SEA markets.
Separately, Tencent Video, in addition to launching its WeTV platform in Thailand and Vietnam, has featured members from Malaysia and Thailand in their latest variety show Chuang 2020, which has drawn great attention from audiences across the region.
“This goes to show that SEA will very likely be the next battlefield for these Chinese streaming service giants; purchasing Iflix is one of many steps Tencent is taking in joining this battle,” Jedy Chen, a senior creative technologist at R/GA Singapore tells The Drum.
“It’s also worth noting that Tencent’s WeTV did not bring about a significant impact upon entering Thailand and Vietnam. Purchasing an existing platform like Iflix is a more efficient way to acquire the audience in the South East Asia market. At the same time, the purchase of Iflix provides easy access to a local team, entertainment assets and an established network of production studios, which will benefit WeTV in the long term.”
Iflix had more than 25 million active users on its service as recently as April 2020, with over 2.5 billion minutes viewed per month. However, Iflix has been haemorrhaging money – reporting a 30% increase in after-tax losses to $158m in the calendar year 2018 – causing analysts to predict it was heading the way of failed Singapore-based OTT platform Hooq.
The platform has also raised around USD $350m in funding over the last five years and has not yet turned that investment into a viable business. It has invested in building talent, building its brand, acquiring content and creating content, but it has yet to build the necessary scale with that investment so far.
Rohan Lightfoot, the regional chief growth officer for Asia Pacific at Mindshare, points out that while Tencent has successfully bought Iflix, it remains to be seen whether the business will be ‘saved’.
He notes that while the Iflix brand could be maintained, there is speculation that Tencent will use the acquisition to accelerate take-up of its own Tencent Video platform outside China.
“Tencent has bought a business with a reported 25 million active users in a footprint that fits well within Tencent’s expansion plans in SEA,” he explains. “The Iflix brand is clearly portable beyond the current footprint, so Tencent may choose to retain and expand it. Clearly the work that Iflix has already done to build awareness and subscribers looks more valuable to Tencent than having to do all of that work themselves from scratch.”
Benjamin Condit, the chief strategy officer for Mindshare China, does not believe Tencent will ultimately bring Iflix into China to compete against the likes of iQiyi and Youku. As of March 2019, Tencent Video had over 900m mobile monthly users and 89m VIP subscribers.
“What, however, seems far more likely, is talent and content sharing between Tencent Video and Iflix/WeTV to provide a truly global, yet dual market (China and the rest of the globe) approach, providing a large opportunity for Chinese content creators to get their work better known around the world,” he explains.
From an industry perspective, the streaming service industry in China has gone through a period of intense competition, with over 300 streaming platforms fighting for dominance at its peak. With the market now relatively stable, SEA will be the next frontier for the remaining players.