Will video on demand kill free TV?

By Zsarlene B. Chua, Reporter

“They should be scared.”

That was how a March 6 story published on Fortune magazine’s Web site described the effects of streaming/video-on-demand services (VOD) like Netflix towards networks and cable television in the United States.

It cit ed a study from MofettNathanson (Is Netflix Killing TV?) which revealed that Netflix and its rivals are slowly — but surely — eating away TV audiences, making them turn away from their flat screens and onto their laptops and mobile devices as in 2015. “[R]oughly half of the 3% overall decline in US TV viewing” can be blamed squarely on Netflix’s shoulders, the study said.

The streaming giant’s continuous release of original and licensed content, is giving audiences “more and more viewing options for viewers who might otherwise be surfing hundreds of cable channels,” the study added. “Hours of video streamed on Netflix will continue to increase in coming years, growing to represent 14% of overall TV viewership by 2020.”

As of April, Netflix is available in 190 countries and has 81 million subscribers, 46 million of which are in the US.

When Netflix went live in the Philippines — and more than a hundred markets simultaneously, on January 6 — analysts predicted that cable TV companies will take a hit since their content is similarly offered by the global streaming service. Netflix’s entry is “expected to pull Filipinos away from cable television,” said an article published by BusinessWorld the day after the Netflix launch.

However, the players themselves — streaming services, cable companies, and local television networks — think that the Philippines will not so easily follow the US lead and will, in fact, build a complementary relationship in a market that has so much room for growth.

“I personally think Asia will evolve differently than North America. And here’s why: in the Philippines today, great broadcast content — take SkyCable for example or pay TV — is only available in two million households and there are 20 million households so there’s plenty of room for both linear channels to grow as well as us,” Peter Bithos, HOOQ CEO, told BusinessWorld in an interview.

The Singapore-based service, which launched in February last year, boasts of more than 180,000 paying subscribers in the country alone. It is currently available in Thailand, India, and Indonesia and is looking to expand in South America and Africa.

Pay TV, streaming to grow together but up to a point

Both ecosystems — streaming and cable — will grow at the same time in Asia, Mr. Bithos said, citing the region’s economy, which is growing much faster than North America or Europe.

His view is shared by David Goldstein, the Asia head of iflix, a similar service launched a few months after HOOQ. It has 1.5 million users and seeks to expand in Africa and the Middle East.

iflix users’ peak viewership times are “different than broadcast,” Mr. Goldtein said. “So [broadcast] has their primetime from maybe 6:00 p.m. to 9:00 p.m., we actually peak from 9:00 p.m. to 1:00 a.m. So it’s very complementary.”

According to RTL CBS Asia Entertainment Network — an English language entertainment channel serving Southeast Asia that was launched in September 2013 — its Nielsen ratings in the Philippines increased for the past six months, despite the entry of video streaming platforms.

“Existing in the same environment, we’ve seen our Nielsen rankings rise in the last six months with viewership increasing three times over,” said Rene Esguerra, Philippine country head of RTL CBS Entertainment, a joint venture between RTL Group and CBS Studios International.

Exclusive TV events like award shows aired via satellite and “watch-a-thons of popular series such as House of Cards (a Netflix original)” are driving viewers to the network, Mr. Esguerra said. Talent shows such as Britain’s Got Talent, The X Factor UK, among others, also helped viewership numbers, especially since Filipinos love talent shows, he added.

However, the environment might change in the next five years.

By that time, video streaming services might already make a dent in Filipino cable and local television networks, Mr. Bithos said.

But for Dingdong L. Caharian, general manager and senior vice-president of GMA New Media, Inc., it may still be too early to tell.

Although the rise in viewership of on-demand services is inevitable, “we have yet to determine whether the proliferation of VOD services in the Philippines will affect traditional TV viewership negatively,” Mr. Caharian said.

The platform’s “viability is largely hinged on the speed and affordability of internet access in the country. We have yet to see it making a dent, so to speak,” he added. (Content from local networks such as GMA, ABS-CBN, and TV5 are currently available in both HOOQ and iflix, though ABS-CBN maintains a separate catch-up service called iWantTV).

Mr. Goldstein echoed Mr. Caharian’s sentiment saying, “I think it comes down to the availability of infrastructure in the country — if it’s consistent. It’s challenging to get it all the way across the Philippines whereas Filipinos are used to watching TV.”

“I actually equate VOD

to the evolution from fixed to mobile. Original pay TV was delivering content to the household, as for us, we’re delivering content to the individual and we’re going the same penetration growth,” he added.

Netflix, ABS-CBN, and TV5 declined to comment on the matter.

Content is king

Without any clear winners — or losers — so far in the evolving battleground, all players nevertheless agreed that whoever has the best content will win.

“At the end of the day, it’s still all about content,” Mr. Esguerra said, adding that VOD and pay TV are just platforms for delivery.

Mr. Goldstein added: “What enabled to content to become king is that networks now allow a decent user experience (the speeds of the mobile networks, availability of Wi-Fi, penetration of home broadband). You can actually deliver a decent user experience over the Internet.”

Following the lead of Netflix with its cache of original productions that swept its market by storm (House of Cards, Orange is the New Black, among others) VODs operating in the Philippines have also started creating their own, with HOOQ recently announcing a six-episode mini-series based on Erik Matti’s 2013 film about convicts-turned-assassins, On the Job.

The series is slated for release in the fourth quarter of the year.

iflix revealed that it is planning to do the same next year just as soon as they find the right content.

Similarly, Netflix is also preparing more original Asian productions, a CTV news report said.

However, both HOOQ and iflix don’t consider Netflix a competitor.

After all, the service “is more expensive than us,” offers “less local content” and is becoming “more [into] creating content and then distributing on their network, whereas we’re an aggregator of content for emerging markets and it’s very customized market to market,” said Mr. Goldstein.

Netflix’s basic plan starts at P370 a month (the premium plan is at P550/month) while iflix and HOOQ subscriptions are at P129 and P149, respectively.

Whether Netflix makes it big in the Philippines or not, it’s not going to break its business, said HOOQ’s Bithos, adding that niches have yet to be exploited.

For his part, Mr. Goldstein sees that the platform still has room for many other players.

Video streaming services “are becoming individual products,” he said. “There’s so many varying tastes so you can have many types of OTTs (over-the-top content, another name for VODs) to serve the different needs of people.”

Zsarlene B. Chua (@zsazsa_chua on Twitter) covers travel and entertainment for BusinessWorld’s Arts and Leisure section. BusinessWorld Researcher DINDO F. PARAGAS (@dindo_paragas on Twitter) helped provide data to the infographics.