➤ Asia-based content creators and broadcasters should stop using Google LLC, Facebook Inc. as distribution channels.
➤ Algorithms used to generate recommendations are not yet sophisticated enough to respond to audience particularities.
➤ Over-the-top, or OTT, regulation is required to prevent monopolies in Asia.
Asia-Pacific OTT video revenue is projected to grow 18% per year from 2018 to 2023, as several streaming platforms launch in the region. Patricio Cummins, vice president for APAC and Japan at video platform software provider Ooyala Inc., said local content creators and OTT platforms need more regulation and less reliance on the U.S. platforms to make the most of this trend.
Below is an edited version of the conversation with Cummins.
Patricio Cummins, Ooyala's APAC and Japan vice president
S&P Global Market Intelligence: The OTT market in Asia is very fragmented. Is this likely to change?
Patricio Cummins: Asia is a mosaic of different cultures which is why it is important to have a local presence. From a vendor perspective, the number of OTT vendors has grown like mushrooms after the rain and will consolidate. From a content perspective, more OTT players are entering the market and will continue to do so.
How are local OTT players competing against regional and international outfits like Malaysia's iFlix Sdn. Bhd. and Netflix Inc.?
The locals are still finding it challenging to find a business model that works for them as they do not have the advertising dollars that linear TV has. Meanwhile, regional players like Hooq Digital Pte. Ltd. and PCCW Ltd.'s Viu have benefited from economies of scale.
Can all players, including local, regional and international thrive in an overcrowded market?
Yes, they can if the regional and local outfits remove Google and Facebook as distribution platforms from their business models. The presumption was that by using these tech giants, small broadcasters and content creators could be present in a digital sense without incurring big costs. This is a fake promise. Free-to-air broadcasters, content creators have all placed their premium content on YouTube LLC, but they are only being offered 50% of revenue cuts. Tech giants take the investment, advertising and viewership benefits, without carrying the cost of creating content.
What are OTT players in the region investing in the most?
Automation and artificial intelligence. With consumer behavior changing so fast and with the introduction of multiple devices including the TV, computer and smartphone, the need to react quickly and engage effectively with an audience is extremely important.
Some in the industry say investing in machine learning and AI to generate recommendations is futile as algorithms don't adapt well to daily changes in consumer behavior. Do you agree?
Content providers are yet to come up with an algorithm that is not hard-coded and can pick up audience particularities to provide relevant recommendations. Advanced AI is required, and so far no one has got it right.
With so many players, are we likely to see multiple video services aggregated onto a single platform?
I hope not. I would hate to see that day as it would kill competition and therefore be unhealthy for the general landscape. If it does happen, we will need legislation to govern the way these platforms operate so they do not take the largest portion of the pie.
How will the entrance of Walt Disney Co.'s upcoming OTT subscription video-on-demand service Disney+ impact the region, and the chance of monopolies forming?
It is not good news. Disney+ will be able to use its economies of scale to invest in and create high quality content like Amazon.com Inc. and Netflix have done. Their distribution costs will be marginal. Again, OTT regulation will be required.