Since 2016, NAGRA has been running a research program called the Pay-TV Innovation Forum that interviews and surveys industry executives worldwide on trends and innovation opportunities. In 2019, one key finding stands out – Industry executives surveyed estimated that 17% of the households worldwide now use illegal TV services on a regular basis, up from 11% in 2017. In APAC, this percentage is 19% versus 14% in 2017. In Indonesia, 59% access pirate content on online platforms or devices, 49% use ISDs, in Philippines, 34% use a pirate ISD; up to 66% visit streaming piracy websites, and in Malaysia,25% use a pirate ISD; up to 50% visit streaming piracy websites. This is a significant acceleration in pirate service consumption that is driven by easy-to-use, high video quality streaming apps and devices that grant illegal access to thousands of channels, including premium channels, creating a new business risk for the whole content industry – Hollywood & sports, everywhere, where piracy is becoming THE competitor. We observe this as a global trend and piracy levels in Asia seem higher than in other markets such as North America and Europe.
We can expect that all content owners will face an increased risk of piracy in the years to come, along with a fierce battle for keeping or gaining new subscribers. Pirate services usually found as apps on Android devices and on set-top boxes or Smart TVs bought in retail, with hundreds of sports channels and large VOD catalogues, all in one place, are the new real competition that service providers now face. And it is totally unfair competition as pirates steal content rights while freely promoting their look-a-like services on the internet as legitimate ones, featuring credit card subscription schemes or targeted advertising.
Piracy is also widely available on social media. With social media increasingly embracing the role of broadcasters of premium content, they also have a responsibility to ensure there is no space for piracy on their platforms. As an example, 16% of French internet users access infringed premium content through social media (HADOPI study – 2019/10/17). This is significant!
The Internet is a global playing field for pirates where they illegally, promote, sell and broadcast their infringing services. While privacy rules on the Internet are meant to protect internet users, they also benefit pirates a great deal, in enabling them to hide behind proxies and anonymization services. In some jurisdiction, the mere collecting of IP addresses of pirate servers is subject to certain restrictions (as any IP address – even of a pirate server – is considered as personal data and subject to privacy protection). Privacy regulations should not end up protecting wrongdoers.
This is where regulation needs to be adapted to respond satisfactorily to the best interests of the industry to fight audiovisual piracy and cybercrime in general.
Pirate servers are resilient, they move from “IP friendly” territories to “DMCA non-compliant” territories; they use proxies to obfuscate or hide leaking servers. Pirate organizations are resilient: they can close down and reopen a boutique under a different name next door. Pirate are resilient to countermeasures. Think of VPN to circumvent IP blocking and Google DNS (or alike) to combat DNS redirection. This is the never-ending story of the cat and mouse game.
To mitigate this, an end-to-end strategy aimed at identifying and neutralizing the source of piracy is needed, including a combination of technology, enforcement and regulatory efforts.
While such protection makes the job of casual pirates very hard, this is not sufficient in resisting more organized groups that have access to all sorts of video hacking tools to steal content.
Hence, anti-piracy services need a three-pronged intelligence-based approach that focuses on:
- identifying and shutting down content leaks -with the use of technologies like content watermarking that add invisible user-level “digital signatures” added to the video
- monitoring streaming servers and getting hosting companies to take down infringing services
- disrupting pirate services, mainly by blocking access to specific servers.
From service providers to content owners, all stakeholders need to contribute to the anti-piracy efforts in a concerted way to be effective. Hence, the need to build alliances within the industry that effectively combat piracy in any form or shape.
Peter: We are focused on building the leading, locally-led entertainment platform in Southeast Asia. At HOOQ, we were the first regional service of our kind in Southeast Asia. We are built in Asia for Asia. We’re not interested in serving just a narrow market like the affluent people of Asia (many of you reading this!). Rather, we are out to make the best local and international entertainment accessible to emerging middle class homes of India, Indonesia, Philippines, Singapore and Thailand – people who are really into locally meaningful stories (many of which haven’t even been produced yet!) but appreciate relevant stories from overseas as well.
Providing engaging and relevant movies, television shows and short form to our customers is just part of our success equation. The other piece is creating a platform to make this content available to everyone across our markets. This means providing an array of price points and subscription types as well as partnering with like-minded companies to widen our distribution. HOOQ is currently partnered with more than 20 leading companies bringing HOOQ to millions of Asians. These companies include the likes of AIS, Globe Telecom, Grab, Singtel, Telkom and Telkomsel and payment services OVO and Line Pay.
Mark: On our platform, the pivot from Western to local content was by far the best decision we’ve made. Not only did it make the most sense in terms of catering to what our audiences wanted to watch (the engagement numbers spoke for themselves), but the move was also aligned with our values as a company – to empower and promote local content creators and to support a growing creative industry that for the longest time was thwarted by rampant piracy. As a business, even the bad decisions weren’t really “bad”. We’ve just had to learn some lessons the hard(er) way by trying first.
Mark: Ultimate, no. But the best possible option for reaching as many people as possible, yes. We think everyone deserves access to amazing entertainment, but the reality is not everyone is prepared to or wants to pay for it. Brands and partners are now playing an integral role in making content available to customers and also enabling the creative industry to monetise on merit. It’s a winning combination on both sides.
Ultimately, the choice lies with the customer, and we’re proud to offer that flexibility.
Peter: This is a false choice, we believe. We believe the right model for emerging markets blends both a paid and free layer into a seamless freemium experience. If you look at China or India, both markets have followed a freemium model. Perhaps the only difference in our view is that for emerging markets, we strongly believe that (in addition to annual and monthly premium packs) ‘bite size’ sachets play a critical role in monetizing the low GDP/capita mass market beyond AVOD. At HOOQ, our #1 selling SKU by volume is our one-day sachet, which we pioneered globally, priced at ~25-35 US cents per day.
We have not nor will not “pivot to AVOD”. If you offer a pure AVOD play and rely on distribution of other people’s content, then you are either (a) trying to compete with YouTube or Facebook and will never get to their scale, or (b) will get caught paying high license fees for a business model that will never invert into positive territory. Both options, we believe, lead to dead ends. A freemium experience which drives to a locally differentiated premium layer (with the right international content) is the model which will scale.
Mark: Technically, iflix is both. We began as an aggregator – iflix combined the best of on-demand entertainment, including direct-from-cinema movies and box-sets of TV series, with the convenience of catch-up TV from some of the region’s biggest media companies. Since 2017, we’ve also offered some of the best live sports action too. In that sense, we’ve aggregated the best of on-demand, linear and live in one place.
Our service has also been a value-add offering with most of the region’s top telcos. We’re moving beyond that, and making our original productions, for which we own the rights, available on other platforms including Twitter and SHAREit as well.
Peter: Ummmm… how about making premium content providers understand that it serves no-one’s interest (especially theirs) to extract large fixed fees in the early years of OTT development? To date, the premium content providers have redirected millions of capitals from equity investors up the value chain rather than deploying that capital towards building a business model to build effective, sustainable, healthy distribution. As a result, no one in Southeast Asia is – as of yet – fully sustainable or fit for the ecosystem for the next 10-20 years.
At the ecosystem level, the pay TV providers will not be able to make the jump to digital due to capability gaps; only Disney, Apple and Netflix will (try!) to go direct in Southeast Asia – and in a very focused manner. What choice do all the other premium content providers have? I’d use the analogy of killing the goose that laid the golden eggs, but in this case, the goose is way younger than even a little gosling. The premium content providers run the risk of cracking all the eggs while they still lie in the nest and scrambling them before they even hatch.
Mark: Going back to your first question, our best decision was that we listened when our users told us what they wanted more local and regional content. We were flexible enough to accommodate that. The popularity of streaming has seen an influx of players, and that in turn has driven demand for exclusive rights and premium original content as a way to differentiate from the competition. In that sense, we’ve committed to more on these original movies and series, to give our users more options to choose from.
Peter: It is a mix and both play a role. Across Southeast Asia we’ve seen a significant uptick in local content viewed year-on-year for the past three years. From January through September 2019 alone more than 55% of total playing minutes come from Southeast Asia content. These consumption habits drive our decision to keep laser-focused on building strong partnerships with the biggest studios, networks, production companies, screenwriters and directors in order to bring our customers the best of local, regional, Hollywood movies, television shows and short form.
A hybrid approach to our content curation is critical, blending the best HOOQ Originals with the best licenced movies and television available in the market. This paves the way for people across Southeast Asia to view truly innovative and unique Asian stories like no other service has delivered. So, to answer your question. While producing our own shows is critical to some extent, it cannot be the sole answer. We want to give our audience the opportunity to watch what is important to them whether it is licenced or created by us.
Peter: Yes, but it depends on what horizon. Linear “Free to Air” TV will play a role for the next 10 years, but its growth days are numbered (most are still growing!) and we believe structural decline will commence over the next two to four years, we believe, depending on the country. But, in general, decline will be slow for the first five years with major change being forced upon the industry in the 5 to 10-year horizon.
On a digital platform, with an EPG properly executed and a great customer experience, we still believe the old fashioned “Free to Air” TV linear stream has a bit of legs left in her. We aim to play that role and prove that out. As for linear pay television? Declines are already here; that’s a very tough future to navigate indeed. Irrespective, whether you are an OTT or a linear player, the key to success is consumer relevance. Knowing your customer, what they want, carving out a meaningful space in their already cluttered lives, is critical to survival.
Mark: If we’re talking about tuning into a channel at a particular time to watch whatever is being served, no. The future is on demand. People want to be in control of their lives and entertainment is no exception. On demand means that the customer is in control, not some advertising or programming executive in a big company focusing on their bonus. That has to be the future we all aspire to.
Derek: Renewal discussions with content owners have become much more multi-faceted and complex over the past few years as technologies evolved and content rights have somewhat lagged behind. It is very important for operators to understand not only the exact content rights that are associated with the programming services and programs but also what has been carved out and excluded, the windows acquired and any holdbacks the operators may have against competitive services and/or downstream rights. Operators expect content owners to be much more open with such information so that both parties can assess any missing gaps and determine the value of the programming services and content more effectively. As such, content warranties have become a must whether for exclusive or non-exclusive content.
Finally, it is no longer sufficient for operators and content owners to wait until the renewal deadline approaches to discuss the performance of the programming services / content and negotiate commercial terms. It is imperative that both parties work more closely throughout the contract term and continue to enhance the content and build value for pay TV subscribers.
Derek: Embrace is the key word especially when those DTC plans are global initiatives. Both parties should try to develop a win-win and mutually beneficial relationship as operators have competitive advantages such a ready-to-pay subscriber base, multiple customer touchpoints, marketing and promotional expertise, customer service teams, ready to mobilize sales force and local market intelligence that can be immensely valuable.
Derek: Content aggregation has become much more important over the past few years as local operators also have to prepare for the entry of new international OTT operators that have global or Asian aspirations. Some content owners develop and curate their programming services for multiple territories and hence are not always flexible or nimble enough to meet the programming needs of local operators.
Derek: First of all, we continue to invest in our UI to improve content discovery by introducing a new home page on our platform. Customers are able to discover the most popular content across different genres i.e. movie, drama, Pay per view content. We also introduced a free zone on our home page to induce trial of new content. By introducing the home page, our aim is to create an OTT-like experience on a Pay TV platform where you can see all your content, our recommendations and what’s trending, all at our home page.
In addition, we introduced a new Edutainment package, Stem Learning, to target the family segment with kids aged 6 to 12 years old. We expanded our content offering to create an environment and provide tools for parent-child learning outside of school. We introduced a first-to-offer STEM learning ecosystem to families from a Pay TV service. It includes fun learning programme both on our linear channel & on our on-demand library Now Learn, as well as an interactive app, Now Player Junior, which provides a completely safe environment for children to watch and play educational entertainment & games, and a set of STEM learning toys that inspire kids and enable parent-child learning that is home delivered to customers on a bi-monthly basis. Stem Learning has been growing in popularity and it is our aim to make learning fun for children through edutainment programs. Hong Kong parents are very willing to spend on Education and this package is highly relevant to them. It helps us improve both acquisition and retention momentum.
Derek: We are going through a stage of transformation where we are streamlining our operations such as Sales and Data analytics, to automate the process, reduce operational cost and increase our speed to market. In terms of business, we are also tapping the new market of OTT via our new app, now E, an online subscription video streaming service for selected now TV content. Through now E, we are trying different pricing models such as day pass or event pass for premium sports content to test the appetite of this new market.
In 2020, there will be new opportunities for us to pick up growth again because we have Euro 2020 and 5G launching in the first half of 2020. These events will stimulate the subscription of sports content and the demand for ultra-high definition and VR content.
Clément: WarnerMedia Entertainment Networks is the name for our new company that was unveiled in late September. In Asia Pacific, it unites Turner and HBO to create a combined powerhouse of leading brands. The new business in APAC spans 42 countries and includes channels in 14 languages.
My role is Managing Director of Southeast Asia, Pacific – which includes Australia and New Zealand – and China. And brands that I will be looking after in my territories include Warner TV, Oh!K, Cartoon Network, Boomerang and Tuzki together with HBO, HBO Signature, HBO Family, HBO Hits, Cinemax and Red, as well as the OTT service HBO Go, and 2 SVOD services HBO On Demand and 鼎级剧场 (Ding Ji Ju Chang). I’ll also be responsible for the distribution of CNN International, HLN and BabyFirst.
In terms of priorities and excitement…our biggest opportunity as a part of AT&T and WarnerMedia is the chance to do more and collaborate more with all the business units within our group. By uniting our businesses while being part of the bigger corporate entities, there will be opportunities to leverage scale and resources. This in turn will enable us to invest more in content, deliver greater value for our partners and an even better experience for our fans across all platforms. Ultimately this is what will help drive our future growth. Together we have one of the most powerful portfolio of brands in the business.
Clément: In partnership with organisations like AVIA, we’ve made progress – but there is still plenty more to be done to combat piracy, which as everyone knows, undermines our business. At the same time, it’s important for us to deliver even better value to consumers and work with our pay-TV partners to improve the viewing experience.
In the content sphere, we’ll be looking to actively encourage and greenlight more Asian original productions. And also identify local talent from within our region who have great stories to tell.
Clément: It’s not really about one versus the other. These are 2 different content delivery models. A well-curated branded linear service is as valued and complementary to the discovery experience of a deep, broad on-demand library. As a business, we need to straddle both. Together with our partners, the goal is simply to make it easier and more convenient for our fans to find and experience the content that they love however, whenever and whichever way they want it.