While the war between OTTs in the West continues, there is a battle of equal size going back and forth in the East. However, while success in the West may come from mass-marketing, content stuffing and battling with Quality of Experience (QoE) issues, how to succeed in Asia’s competitive OTT market isn’t quite the same.
The relationship between broadcasters and OTTs is becoming a much more intimate affair. While these companies are arguably still in competition for the same audience, many new strategies between telcos and OTTs such as skinny bundling and partnerships are a win-win for both parties. These allow telcos to acquire customers by including subscriptions to various streaming platforms─who are therefore also gaining subscribers.
While in the West this is a relatively new idea that is still being tested by companies like Vodafone in Spain and Xfinity in America who are partnering with HBO, in the East, many of the most successful telcos have been experimenting with this strategy for a long time.
This shift in power means that the way in which consumers expect to consume content changes, creating a different list of concerns that depend on the variable network infrastructure of each Asian country.
The variables which decide whether someone is going to subscribe to an OTT service can change purely based on the market country, so when looking at an entirely different region than the Western market, there are many thresholds which fluctuate and standards that change.
“Japan and South Korea are number one and number two in terms of connectivity globally,” says our Head of Sales in Asia, Brian Pang. “The infrastructure of the countries is very diverse. some will have great infrastructure, some will struggle. The difference is much bigger between Asian countries than European countries.”
In order to understand more about this market, we asked Brian about some of the most important issues facing OTTs in the Asian market and what the winning companies are doing to succeed in this competitive landscape.
“Essentially, the most popular ones in Asia are the ones that have lots of localized content which they produced themselves and don’t make available anywhere else.”
One of the major differences in Asia is the demand for localized content. “For most of the OTTs here, they’re coming from different broadcasters,” explains Brian. “They have their own content. They produce their own content in some cases and buy from third-parties in others.”
This is one of the big problems. “A lot of them just don’t make any money and a lot of them already jumped into the OTT space at least a couple of years ago. this means they have invested in many infrastructures, but they are struggling because they are not able to generate enough revenue to justify their expansion.”
While this creates a problem for larger companies such as Netflix and Amazon who are looking to maintain a presence in every area while investing in content for Western markets, this creates a number of opportunities for smaller companies which are looking to have a monopoly over national and regional markets with a focus on homegrown content.
This is exemplified when we look at ‘The Netflix Problem‘ in Europe. Netflix’s market penetration sits at 52%, while Amazon takes up 21% of the market. This means nearly three-quarters of the market is taken up by two big players. In the Asia-Pacific region, Netflix takes up only 11.8% of the market. This leaves a lot of room for local streaming services to captivate audiences.
However, issues with exclusivity are still very important for consumers. “I think content is the biggest issue in this market,” Brian explains. “Essentially, the most popular ones in Asia are the ones that have lots of localized content which they produced themselves and don’t make available anywhere else.”
“I think it is very country specific in terms of the service,” states Brian. “Of course, Netflix is a pretty dominant force, however, outside of Netflix, there are many different services in each country. Let’s say Japan, for example, the most popular is Abema TV, one of our customers. However, in Singapore, they have a service called HOOQ which is the most popular service in the southern-eastern Asian countries.”
Recently, Netflix stated that they would be making a push in 2019 to create more homegrown content in Asia. so, is this disrupting the market? “This has definitely had an effect on local providers, forcing them to focus even more on localized content,” Brian admits. “In Asia, getting the rights for big content is extremely expensive, so this is the way they can capture the audiences of Netflix and Amazon.”
In regards to telcos and OTT partnerships, this is one of the differences with Asia. For many Asian companies, the video is just a bonus. Most telcos will not offer video and instead partner with OTTs because they just want to focus on their core business.
“The power of fibre-optic networks in Asia is so high, meaning Europe and the rest of the world have to change many of their systems from older delivery platforms in order to keep up.”
As we investigated in our report, ‘Video quality & Consumption Trends in Asia’ last year, the likelihood of users in Japan churning after two months is 65%, whereas the likelihood of users in America is only 55%. That 10% difference represents a large problem in terms of churn which leads to a reduced return on investment (ROI). The world-leading connectivity in Japan and South Korea means user tolerance is very low. These audiences are accustomed to lightning fast download speeds, instantaneous join times and minimal buffering.
This hyper-competition between services and low tolerance from the audience creates an unstable market which many OTT services are struggling to navigate with a positive ROI. “I would say that over 60% of them are actually losing money,” Brian elaborates.
As mentioned above, localized content should be priority number one for any streaming service looking to invest in the Asian market. However, the second most important factor is the quality of service (QoS).
“It needs to be top-notch, it’s already a given. Client-side issues are very rare. This comes down to how well infrastructures were built in the first place. The power of fibre-optic networks in Asia is so high, meaning Europe and the rest of the world have to change many of their systems from older delivery platforms in order to keep up.”
Many of our clients in Europe and North & South America use our analytics platform, YOUBORA, for real-time platform monitoring, automatic error detection and consumption pattern tracking. However, the way many of our customers in Asia use our software is to supercharge their customer care teams and react immediately to any platform anomalies (however rare they may be).
“The biggest benefit for them is a much quicker support response,” Brian adds. “This comes down to the tracking and alerts system. Let’s look at Japan, its infrastructure is already very good. So, this means their buffer ratio is very low, so they mainly use our service for A/B testing. However, in other places where the network infrastructure isn’t as strong, that’s where they will be utilizing the real-time monitoring aspect of YOUBORA.”
“I was in South Korea recently and tried out the new 5G in a very cloudy environment but I still had a download speed of 1GB/s.”
In our report, ‘Video quality & Consumption Trends in Asia’, we found that just over half of all content in Asia is consumed on mobile (52.6%). This creates a huge dynamic change for streaming services as well as their users when it comes to accessibility, functionality and video quality.
“Especially for Thailand, Malaysia and the Philippines, there is a huge mobile market,” elaborates Brian. “Most people will consume their content on their phone. Even on their PCs, they don’t really watch content there.”
But does this then affect how companies both produce and distribute their content?” I don’t think they do this so much. However, it will change their go-to-market strategy. Considering they will be watching through mobiles, the OTTs will partner up with Telcos to get their product into their data plan.”
Looking at the future for this market, 5G is going to be making a huge impact on a mobile-led market. “I think the main focus will be how to push an even higher quality of actual videos,” predicts Brian. “Let’s look at South Korea. They already launched their 5G service a couple of months ago with SK Telecom. They have already been heavily promoting this service.”
“Once customers are on 5G services, streaming platforms have space to create more ambitious content in terms of UHD and HDR content. I was in South Korea recently and tried out the new 5G in a very cloudy environment but I still had a download speed of 1GB/s.”
Truthfully, the unpredictable OTT market is an everchanging landscape which takes research and investment to overcome. To succeed in Asia’s competitive market it’s important to pay close attention to your platform performance and align your benchmarks with the industry standards using data analytics.
Research & Editorial Team on May 23rd 2019
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