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PCCW exec: Dual revenue model best for Asia's emerging streaming market

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PCCW exec: Dual revenue model best for Asia's emerging streaming market

About 80% of Viu's business is outside of Hong Kong: Thailand and Indonesia are its biggest markets.

Recent protests in Hong Kong may impact Viu's domestic advertising performance.

➤ Investments in artificial intelligence and machine learning have helped Viu attract subscribers, combat piracy and improve ad customization.

An increasing number of over-the-top players in Asia-Pacific have been experimenting with a subscription-based revenue model, similar to global counterparts such as Netflix Inc., as they find their feet.

However, a model that combines subscription and advertising revenues has proved fruitful for Viu and works well in Southeast Asian markets in particular, Janice Lee, managing director of Hong Kong-based PCCW Media Ltd, which oversees OTT platform Viu, told S&P Global Market Intelligence.

Below is an edited version of the conversation with Lee.

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Janice Lee, Managing Director, PCCW Media

S&P Global Market Intelligence: Viu recently recorded an 80% year over year growth in subscribers to reach 36 million. What was the biggest driver of this growth?

Janice Lee: Two strategies were responsible for this growth. The first was new market expansion. We expanded in Myanmar last year and South Africa earlier this year. The second is in-market penetration, particularly in countries like Thailand and Indonesia. These two markets have become our biggest due to headroom and sheer market size.

Are you profitable in these markets?

We are still in the investment phase. Some markets are turning a profit while others are getting there. I cannot name the specific markets or go beyond what is already publicly disclosed.

How is Viu able to compete with regional platforms like Hooq Digital Pte. Ltd., iFlix Sdn. Bhd. and international OTT platforms in the region?

We use a dual revenue stream where 50% comes from advertising and 50% of the revenue is subscription-based. This has proven to be successful for a regional player like us because it has given us the right proposition. While everyone else was going after the SVOD model, we, being part of the public company PCCW Ltd., made monetization a priority. This translated to not just building monthly active users but also increasing user engagement, which generated advertising dollars. We were also one of the first few to focus on Asian content while other players looked at Hollywood content.

Do you view Apple Inc.'s and The Walt Disney Co.'s upcoming streaming platforms as a possible threat?

They have not settled on a launch date in Asia yet. I believe the battleground is very much in the U.S. right now. While I cannot comment on their strategy, it is one thing to make a service available and another to run it locally and relevantly. Having said that, Asia is big enough for multiple players.

How important are partnerships with regional telcos?

A part of our subscription revenue is driven from telco tie-ups. In Singapore, we work with Singtel; in Indonesia, we work with Telkom Indonesia; in Malaysia, we are with Maxis Bhd. and Digi.Com Bhd.; and in Thailand, we work with Advanced Info Service PCL. These partnerships are important because through bundles and add-on plans, telecom operators can help drive data consumption while pushing their data plans.

Being a Hong Kong-based company, are you impacted by the ongoing political protests?

For our domestic market, advertising may look a little softer for the second half of the year. However, 80% of our business is outside of Hong Kong, so this will give us some resilience.

How is Viu's content strategy different from others in the region?

We have focused on expanding our slate of local content by acquiring locally and investing in originals. We do about 90 titles a year and around 30% of these are Chinese. We also use a format that engages with our audiences, use social media influencers and recently, we tied up with a platform that connects us to unsigned scriptwriters. By 2019-end, we aim to have 80 originals. Viu is also investing heavily in technology.

Can you elaborate on these technology investments?

Sure. Viu has been investing in artificial intelligence and machine learning tools. The technology is being used to improve our customer acquisition by accurately attracting quality subscribers who will pay. AI and machine learning tools, along with hired teams, are also used to combat piracy by helping us subtitle faster. We subtitle our Korean content within four hours of its release. And we apply machine learning techniques to improve video recognition for advertising purposes. By feeding it content, the machine is able to recognize certain scenes based on content tagging. This can help advertisers looking, for example, to promote content on Valentine's Day by searching for kissing scenes.

Lastly, is Viu thinking about entering the livestreaming market?

We are looking at livestreaming and content expansion, but we cannot announce anything yet.