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Coronavirus adds to South Asian streamers' woes, with consolidation likely

Asia's dominant streaming platforms are expected to see subscriber numbers increase in the first quarter of 2020 as the coronavirus forces people to remain indoors. But the pandemic may have the opposite effect on smaller South Asian streamers that are already dealing with heavy competition, experts told S&P Global Market Intelligence.

Platforms without an extensive content library could struggle to keep up with rights costs, which are expected to "escalate exponentially," said Louis Boswell, CEO of Asia Video Industry Association. While content costs began to increase prior to the pandemic, the trend is accelerating as demand grows at the same time as work on new productions is paused.

"Intense competition combined with the forces of the [coronavirus] pandemic will make it harder for the smaller — not by revenue but by audience size — operators to survive," said Constantinos Papavassilopoulos, a media and consumer analyst at research firm Omdia.

Smaller players could seek a buyer or exit South Asia altogether, he said.

Negatively impacted streamers include Malaysia-headquartered iFlix Sdn Bhd, which recently said it will cut more than 50 jobs. "The industry is not immune to these unprecedented circumstances," CEO Marc Barnett said. The company's IPO plans have also reportedly been put on hold.

Smaller operators that serve a niche market more efficiently than their bigger counterparts will weather the outbreak, Papavassilopoulos said, pointing to India's Hoi Choi streaming platform and its focus on Bengali content as an example of a relatively small player creating its own niche.

Well-established global platforms in the region, such as Netflix Inc. and Inc.'s Amazon Prime, are better suited to ride out increases in costs related to the pandemic, Boswell said.

According to its earnings release, Netflix's revenue for the Asia-Pacific region rose to $1.47 billion at 2019-end, up from $945.82 million in 2018 and $575.93 million in 2017. Paid streaming subscribers also rose 53% year over year to 16.23 million at the end of 2019.

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Along with a lack of fresh content and increasing rights costs, increasing competition is also a challenge, experts said.

In March and April, Discovery Inc.'s Discovery Plus and The Walt Disney Co.'s Disney+ launched in India. Apple Inc.'s Apple TV+ launched its services in various parts of Asia last year, while HBO Max is looking at a global rollout this May.

According to Kagan data, subscription over-the-top revenue is expected to reach $19.9 billion by 2024 in the Asia-Pacific region. Southeast Asia, in particular, is attractive to new entrants due to its scale and increasing smartphone penetration. Kagan is a media market research group within S&P Global Market Intelligence.

"I think a big factor [of OTT consolidation or liquidation in Asia] will be the plans that large international services like Disney+, AT&T Inc.'s HBO Max, Hulu LLC and NBCUniversal LLC Peacock will have for launching in the region," said Thomas Adkins, an analyst at Kagan.

Disney launched its streaming service through popular local platform Hotstar during the initial 21-day lockdown in India.

"I believe the launch will result in a lasting increase of Hotstar subscribers," Adkins said.

Five months after its U.S. launch, Disney+ said it has surpassed 50 million paid subscribers, including 8 million in India.

According to Adkins, the coronavirus will lead to large increases in paid subscriptions in the first quarter as an immediate impact of social distancing measures across the region. But he expects a contraction in the second and third quarter once the measures are lifted.

Before the outbreak, the region's OTT industry was already in flux, with many players flooding various country markets and experimenting with different monetization models while battling piracy. The industry was heading towards consolidation, experts said, and the outbreak has accelerated this.