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Analysts: Regional OTT players eclipse Netflix, Amazon in Southeast Asia

As local content and pricing are key factors for Southeast Asian consumers when selecting a video streaming service, regional players continue to have an edge over global over-the-top players, analysts have said.

Since Netflix Inc. and Amazon.com Inc.'s Amazon Prime Video entered the Southeast Asian market in 2016, when they rolled out in more than 100 countries, consumer choice for online video platforms increased significantly. As a result, competition is heating up while the sector is booming.

Kagan, a media research group within S&P Global Market Intelligence, estimates that the number of paying subscribers for streaming services in the Asia-Pacific region could nearly double, to 121.5 million in 2021, from 64.8 million currently.

The research shows that by 2021 the Philippines is expected to grow its paying video subscriber base to about 1.9 million subscribers, from 800,000 in 2016, while Thailand could have 1.5 million subscribers, from 400,000 last year, and Malaysia could increase its paying streamers to about 1.2 million, from 400,000 in 2016.

In the race for the paying online video consumer, local content is increasingly a differentiator.

Regional players such as iflix, HOOQ and PCCW Ltd.'s Viu offer an extensive catalog of local content, including original productions. Examples include iflix's first Malaysian original series "Oi! Jaga Mulut," which premiered in July, and HOOQ's "OTJ: The Missing 8," a six-part original series based on a Filipino crime drama film titled "On the Job." Viu released a slate of original content across Southeast Asia in July.

"The content mix is what drives the success of iflix, HOOQ and Viu [in Southeast Asia]," according to Brice Longnos, an industry analyst at Strategy Analytics.

HOOQ, iflix and Viu earlier positioned themselves in the region's streaming space as one of the few credible OTT choices.

Iflix began with its roll out in Malaysia and the Philippines in 2015, and expanded to 18 countries in Asia and the Middle East, seven of them in Southeast Asia.

Meanwhile, HOOQ, a joint venture among Singtel, Sony Corp.'s Sony Pictures Television Inc. and Time Warner Inc.'s Warner Bros., started with launches in Indonesia, the Philippines, India and Thailand, and was followed shortly by its launch in Singapore.

Both iflix and HOOQ complement local offerings with international exclusive content through extensive deals with large studios, such as iflix's and HOOQ's respective agreements with Walt Disney Co.

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A recent consumer survey by Media Partners Asia resonates with Longnos' analysis that content is key, revealing that Hollywood movies attract many new subscribers in Hong Kong, Indonesia, Malaysia, the Philippines, Singapore and Thailand, while there is also a significant demand for Asian drama in these markets.

Having such content in your catalog can lock in customers for a longer period.

"Content partnerships help with stickiness and loyalty," Longnos explained, pointing out that a varied content offering "may appeal to the lower end of the market that do not have knowledge of foreign content."

Consequently, Netflix and Amazon Prime Video's growth in the region is being held down by their higher price points and lack of partnerships, resulting in "very little local content," according to Thomas Adkins, an analyst at Kagan.

He said in an interview that, throughout Southeast Asia, exclusive and original content, including sports content, are increasingly important to entice people to pay for streaming platforms.

Longnos recognizes that observation. Regional players are getting more traction in the majority of Southeast Asian markets due to their "mass market appeal," compared to Netflix, which mainly targets a high-end English speaking audience.

"[Regional platforms] are performing better to some extent and have better return on investment than Netflix or Amazon," he said.

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Partnerships with local and regional telecom providers further help streaming platforms to expand their reach and scope.

"[Southeast Asian] markets are generally mobile-first, with often a less than ideal fixed broadband infrastructure, [so] telco partnerships are key for their customer bases as well as payment infrastructure," Adkins said.

As of April, online video companies had set up carrier billing agreements with 14 telcos in six Asian markets, including Indonesia, Malaysia, Philippines and Singapore in Southeast Asian region, according to a survey conducted by Kagan.

However, despite the impressive sector growth, subscription models of streaming services remain only as "a fraction" of free ad-supported revenues or the amount of pirated content, Adkins said.

"A concerted and heavily enforced government and industry effort to combat piracy would greatly increase market share," he concluded.