The recent demise of Asia-focussed over the top (OTT) video streaming service HOOQ is a stark reminder of the difficulty providers face in producing and distributing sufficiently compelling content to persuade consumers in the region to pay for subscriptions and one-off downloads.
Created as a joint venture between Singtel, Sony Pictures and Warner Bros, HOOQ filed for liquidation in March 2020 despite amassing an estimated 80m subscribers across India, Indonesia, Thailand, Singapore, and the Philippines. The timing of the announcement seemed to have had little to do with the COVID-19 crisis and more perhaps with Singtel’s year-end results.
HOOQ had received around US$95m of investment, much of that put towards producing content and capturing market share, including the US$70m by Singtel, Sony and Warner back in 2015. At its creation, Singtel owned a 65% stake in the venture, a figure which had since increased to 76.5%. That gives a strong indication of where the additional funds came from as the two other JV partners Sony and Warner appeared to have taken a back seat.
HOOQ’s financial report for the financial year ending March 2019 arguably offers a simple explanation for the decision to pull the plug. While its revenue more than doubled year-on-year to US$22m, pre-tax losses expanded to US$62.5m with net liabilities recorded at just under US$71m. Unless the streaming provider saw a considerable uptick in paying subscribers over the last 12- months, it is hard to see that Singtel could have continued to bankroll a project that sits well outside the telco’s core business activity.
Local content production expensive
Spending big on content production while subscriber revenue grows from a small base is not unusual in the OTT video streaming industry, as Netflix has demonstrated. But financial backers need deep pockets and patience while they wait for the business model to successfully mature and expand. HOOQ’s management said the business was unable to deliver sustainable returns due to the high cost of producing original content (the number of which estimated at 65 productions thus far) alongside consumers’ unwillingness to pay for it.
HOOQ does appear to have worked harder than many of its rivals to create local-language content, including dramas and films such as Mouly Surya’s Marlina, The Murderer In Four Acts and Anthony Chen’s Wet Season. In India, where it competed with around 30 local OTT video streaming services, the company signed a content-sharing deal with Disney-owned Hotstar, in 2018, to make its catalogue of Hollywood films and TV shows available to Hotstar premium users. HOOQ also partnered with Singapore’s Infocomm Media Development Authority (IMDA) to co-fund Singapore-driven stories, to be distributed on its platform and signed a deal with Vice Media in late 2018, to create more appealing content for a local audience in Indonesia. More recently, a content sales agreement inked with UK-based TV distributor All3Media International, at the end of 2019, was designed to distribute and sell select HOOQ original titles in other geographies, outside the bounds of HOOQ’s operations.
Video piracy undermined business
Other factors behind HOOQ’s may have been at play too. Competition for paying OTT video subscribers from bigger, global players has grown increasingly fierce since HOOQ originally launched in 2015, especially since both Netflix and Amazon Prime Video rolled out global services in 2016. HOOQ also competed with Asia-focussed rivals like iFlix and Viu, alongside a range of smaller, country-specific video streaming services. Competition for subscriber cash was intense, especially in economies where video privacy remains a major problem.
Recent surveys by the Asia Video Industry Association (AVIA) found that even in Singapore, 15% of consumers used set-top TV boxes to access pirated television and video content, for example. But while Singapore is estimated to have the highest per capita GDP in the world, for example, the same can’t be said of the Philippines, Indonesia and Thailand where consumers are even more reluctant to pay for video content.
The use of low cost, easy to install media streaming boxes, is common in other South-East Asian countries. Most countries in the region have a stable network infrastructure. Open-source media player software such as Kodi allow viewers to access some limited channels and streaming content for free. In its 2019 Asia Video Industry Report, AVIA calculated that 28% of viewers in the Philippines used illegal streaming devices (ISDs) in 2018, with 45% in Taiwan, while pirated Blu-ray copies of movies accounted for 171m movies in India during 2017.
Payment and billing strategies also key to growth
HOOQ may have also suffered from the lack of more distribution and sales partnerships with carriers in other countries to reach a wider audience. A partnership with a third-party payments provider that gave the company access to Airtel, Vodafone and Idea subscribers on both pre- and post-paid mobile plans in India, delivered some success, but did not appear to have been replicated in other territories. Some other partnerships such as the ones with Grab earlier this year, and with VideoMAX in Indonesia held promise but monetization was perhaps slower to materialise.
HOOQ may not be the last provider to find competition for paying video subscriptions too hot to handle in South East Asia. However, other OTT players can still learn a lot from its example to help ensure their sustainability amidst the surge in streaming content consumption due to the ongoing pandemic.