In a bid to expand the presence of its streaming platform in Southeast Asia, Tencent has struck a deal to buy Iflix, a regional player that has established a sizeable user base but failed to generate equivalent financial results.
While the Chinese entertainment giant confirmed that the purchase is aimed at growing its WeTV unit, it declined to give further details when Tech in Asia reached out for comment. WeTV has already amassed close to 20 million downloads across Southeast Asia in the past 12 months, according to data from analytics platform App Annie.
Iflix is currently available in 13 countries across Asia, including Pakistan, Malaysia, the Philippines, Thailand, Indonesia, and Vietnam.
As of April 2020, Iflix had had over 25 million monthly active users on its platform, though it’s unclear how many of them are paying subscribers. The deal will combine Tencent’s regional reach with Iflix’s library of local original content – a type of asset that the Chinese firm is strongly pursuing, Tech in Asia research suggests.
Staying original and making money
Tencent’s total video subscriptions rose 26% year on year to 112 million during the first quarter of 2020. Its subscription revenue, which includes both its video and music offerings, grew to 62.4 billion yuan (US$8.8 billion) during the same period from the nearly 49 billion (US$6.9 billion) it recorded in 2019.
Tencent attributed the growth to original content that caters to its mainly Chinese audience. It singled out its original productions, such as the third season of The Land of Warriors and Eternal Love of Dream, as major growth drivers.
The company appears to be emphasizing quality productions over quantity these days.
Tencent released 216 programs in 2019 versus 252 in 2018. Despite the drop in quantity, viewing time in 2019 went up to 35.19 min compared to 33.64 min in 2018.
And similar to its games production, the company has taken a data-driven approach in video content production and promotion.
Tencent has a “golden rule” for online video-streaming promos, a tip it shared in its videos annual report. In the first 20 minutes, the show or the endorsement should aim to reach 60% of core customers and have at least one “bao dian” (i.e., a twist or memorable moment) either in the episode or the ad.
Tencent also understands that Southeast Asia could dig its Chinese original productions. In Thailand, The Untamed, an original production by Tencent Pictures, racked up more than 100 million views.
With its Iflix acquisition, Tencent could export more Chinese originals to Southeast Asia, potentially maximizing revenue for each production.
“This library of Chinese content, and Iflix’s collection of Korean, Southeast Asian, and Indian content, together with Tencent’s warchest, can present an interesting alternative to the other global and regional entertainment streaming providers,” App Annie told Tech in Asia.
The reverse could also be true, which was proven by Bad Genius, a locally produced Thai comedy movie that generated more revenue in China than it did in Thailand.
It seems Iflix will continue to exist: Tencent tells Tech in Asia that majority of Iflix’s employees will be retained. “Our current priority is to ensure smooth integration [between Iflix and] our existing business and also talent retention,” the company added.
Among the region’s video-streaming platforms, Iflix is one of the biggest producers of local original content. “Our most popular and impactful shows are predominantly local ones,” Iflix ex-CEO Mark Britt shared previously. For instance, its Indonesian drama series Magic Hour broke “every metric” on its platform in 2018, topping US superhero series The Flash and popular Korean drama Goblin.
In a 2019 interview with The Australian Finance Review, Iflix co-founder Patrick Grove said:
“People in the West assume that as Southeast Asia’s middle class grows, as people own a house and a car for the first time, they’re suddenly going to want to watch Star Wars or Orange Is The New Black. We license those on Iflix, they do OK. But when we make a new Filipino movie, or a special with a Malaysian comedian, they explode.”
The combination of Tencent’s financial muscle and expertise in data and content production with Iflix’s local know-how and regional reach seem to indicate a formidable partnership.
Another plus factor of the deal: Iflix has already amassed a vast library of content, partnering with studios and distribution partners such as NBC Universal, Discovery, Paramount Pictures, and Warner Bros. It also has partnerships with many local media companies in the region to enhance its inventory.
Given that original content is king, it puts local film and content platforms such as Viddsee in a very interesting spot.
Video streaming in Southeast Asia
However, creating original and localized content is not the be-all and end-all to make it in Southeast Asia’s online streaming market.
In 2017, when other players like Netflix and Hong Kong’s Viu were also just trying to capture market share, Iflix raised US$133 million to put more content on its platform.
While the strategy helped attract millions of new users, Iflix failed to monetize its growth and faced financial distress, which potentially led to its sale.
Hooq, which is backed by telecommunications major Singtel and a joint venture that also involves Sony Pictures Television and Warner Bros., also took a similar approach.
In 2019, the Singapore-headquartered company announced it would be developing at least 100 original shows and films by the end of 2020. These shows were set to be produced in Singapore, Indonesia, the Philippines, Thailand, and India.
But as Netflix entered more markets in the region, Hooq struggled to generate major gains and eventually filed for liquidation in March 2020.
Right now, Netflix is still WeTV’s biggest competitor in Southeast Asia.
According to a recent report from Media Partners Asia, the US-based service leads the region in average weekly watch minutes, with Viu coming in second.
The study also placed new entrants iQiyi, Tencent, and HBO in a good position for growth, as they will be able to ride on Southeast Asia’s rising consumption.