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Business

Malaysia's iFlix fights for screen time across Southeast Asia

The Kuala Lumpur headquarters of iFlix, which began with only two employees two years ago.

KUALA LUMPUR -- Malaysia's iFlix is aiming to be the leading online video streaming service in emerging markets and it has already gathered more than a million subscribers across Southeast Asia.

The company started out with just two employees in Kuala Lumpur two years ago and now has 250 staff in six cities in Malaysia and overseas. It expects to double that number over the next year, as Asians turn increasingly away from television to smartphones and other devices for streaming.

"In the long run, the entire entertainment industry will be on demand, other than live events [like] sports, reality TV and news," Mark Britt, group chief executive and co-founder, told the Nikkei Asian Review. "Customers don't like ads and that's challenging for an industry that's built on advertising. Whether it's iFlix or anyone else, a service that is built to put the customer in control is likely to be successful."

An iFlix promotion for the Korean drama "Boys over Flowers"

Leveraging off a catalogue of thousands of Hollywood blockbusters and popular TV programs from the U.S. and U.K. as well as Korean, Japanese and Indonesian dramas, iFlix has expanded outward from Malaysia into Thailand, Indonesia and the Philippines. It recently appointed a general manager for Pakistan and the company is exploring opportunities in the Middle East and Africa.

IFlix faces as at least five regional rivals in Southeast Asia including PCCW's Viu, Astro Malaysia Holding's Tribe and HOOQ as well as single-nation providers and, since January, Netflix from the U.S. Viu claims to have about 8 million subscribers spread across India and nine countries in Southeast Asia and the Middle East. HOOQ, which is backed by Singapore Telecommunications, Sony Pictures Television and Warner Bros., has said it has more than 100,000 subscribers in the Philippines, with the rest in Thailand, India and Indonesia.

"It's a land-grab," said Vivek Couto, executive director of research and consultancy company Media Partners Asia. "People are just starting to develop these services and getting distribution. Over the next 24 months, this will be a battle."

Media Partners expects Southeast Asia, led by Thailand, will generate annual video streaming subscription revenue of $200 million by 2021, up from an estimated $19 million last year, excluding wholesale revenues and fees received from telecom operators.

IFlix was founded as a partnership between Catcha Group, an investment group established in 2004 by Singaporean-Australian entrepreneur Patrick Grove, and Evolution Media Capital, the investment arm of Hollywood's Creative Artists Agency. Philippine Long Distance Telephone invested $15 million in iFlix before its launch and now owns a 7.5% stake. In March, European satellite broadcaster Sky invested $45 million, marking the European pay-TV provider's first investment in Southeast Asia.

In 'The Playground,' iFlix's Kuala Lumpur headquarters, staff beaver away at laptops against a wall covered with commissioned graffiti. With its beanbags, long tables and corner kitchen, it looks like a cross between a newsroom and a student canteen.

Getting help

A key element of iFlix's strategy is to deepen links with telecom operators to get their help in reaching potential customers, collecting payment and improving streaming delivery.

Fazri Nuha, a graphic designer and event organizer in Kuala Lumpur, is now enjoying a few months of free iFlix service as an extra attached to his broadband plan with Telekom Malaysia.

"I haven't watched TV since I got broadband in about 2002. [iFlix] has been really good. Their content curator has done an excellent job," he said, noting that he is considering paying for a subscription when his trial service expires. "If you take it up for the whole year, it's only 8 ringgit ($1.96) a month. That's good value."

About 60% of iFlix subscribers watch programs on their mobile phones. While iFlix's recommended data service speed for viewing is 2-5 megabits per second, the average at which its programs are actually watched is just 750 kilobits per second, but Britt says that iFlix is working to optimize delivery with telecom partners. A deal in April with Indosat Ooredoo was iFlix's eighth with a telecom operator in the region and its second in Indonesia. But iFlix faces competition too in seeking out partners. Tribe last month signed a deal with the Philippines' Globe Telecom to distribute its service.

IFlix subscribers can also use up to five different devices and download videos to watch offline. HOOQ, which has not yet launched in Malaysia, is charging less than $4 per month in other markets. Netflix's basic package is 33 ringgit per month and it only allows subscriber access through a single device. It also doesn't have a download option.

Netflix, which has made a name for itself with acclaimed productions like a remake of the U.K. television series "House of Cards," has about 45 million U.S. subscribers and 30 million abroad following its ambitious extension of service to 130 new countries in January.

All of the services are trying to sway consumers who in many cases have gotten accustomed to illegally downloading movies and shows they want to watch. IFlix's goal, said Britt, is to build a service that is "better than piracy."

Asian content

IFlix has not yet released its own shows, but says there are a number in development. According to Britt, the overlap between the video libraries of iFlix and Netflix is only 6-7%. Both offer tried-and-tested Hollywood fare, but iFlix, which has licensing deals with content providers including Disney, BBC Worldwide, and Warner Bros. has more Asian programs. HOOQ also has a focus on local shows, which CEO Peter Bithos told the Nikkei Asian Review was "equal if not more important than Hollywood content."

IFlix tailors its product to regional tastes and what Britt calls the "community standards" of the different countries in which it operates. Netflix does not censor, although its offerings vary considerably across markets because of different licensing and broadcast rights arrangements.

Media Partners' Couto predicts that, by 2021, consolidation will bring the number of Southeast Asian video streaming players back down, with perhaps three regional players as well as local platforms in countries such as Thailand and Indonesia. "The key thing is how does the market consolidate?" he said. "Out of HOOQ, Viu and iFlix, who survives?"

IFlix's growing band of powerful backers are betting its chances of sustaining its low-cost model are good.

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