Are Filipinos cutting the cord?

By Zsarlene B. Chua, Reporter
IN 2015, Filipinos were introduced to a new way of watching movies and TV shows. Subscription video-on-demand (SVoD) services pitched a novel kind of content consumption, empowering viewers to watch whenever and wherever they want, provided they have a strong-enough internet connection.
First came HOOQ in February 2015, followed by iflix a few months later, shaking up the established order. But instead of leading people “to cut the cord” and shift to SVoDs, both the service and pay TVs have formed some way to coexist.
HOOQ, an Asian SVoD venture by Singtel, Sony Pictures and Warner Brothers, came to the Philippines in 2015 to become Asia’s first SVoD service — a decision driven by the Filipino obsession with social media (2018 figures from WeAreSocial say Filipinos spend up to four hours a day on social platforms), and their being early adopters of new technologies.
“There wasn’t really a big and dominant player when it came to giving long form and premium video [in the region],” said Sheila Paul, HOOQ Philippines country manager, in an interview in late May in their office in Bonifacio Global City (BGC) in Taguig.
CHALLENGES
While being the first had its benefits, it also came with the challenge: to educate consumers on SVoDs.
Another problem was the payment scheme — the country, after all, had a 11.5% credit card penetration in 2015, according to a Visa study — which was solved by a partnership with Globe Telecom to allow paying for services through load credits.
For his part, Sherwin dela Cruz, iflix Philippines country manager told BusinessWorld in a separate interview in late May in their office in BGC: “A big challenge is the lack of ways for people to pay online and the behavior to pay for something that’s not that tangible.”
But aside from the burden of introducing a new product to consumers, it was also a challenge to get content.
“[ABS-CBN and GMA] had the content we wanted to show in the Philippines,” he said. “ABS-CBN initially felt they were being disrupted.”
It took a “three-year journey” of “building a relationship” before ABS-CBN finally allowed iflix to license and stream ABS-CBN TV series.
SVoDs, HOOQ, iflix and even streaming giant Netflix, however, clarified that they don’t think they’ll ever replace TV viewing.
“It was never really about displacing them. There’s about 100 million people in the country and I’ll be happy with about 20% of that,” said Mr. Dela Cruz.
Ms. Paul echoed the same, saying that all these services can coexist because they serve fundamentally different markets largely because not all Filipinos are connected to the internet.
According to statistics portal Statista.com, in 2018 the country will have an estimated 52.3% internet penetration rate, a number projected to grow to 55.39% in 2020.
“Pay TV, which mostly serves mostly linear channels, really serves a different need compared to the SVoDs,” said Guido Zaballero, first vice-president and head of marketing at Cignal TV, Inc., in an interview with BusinessWorld in May at their offices in Mandaluyong City.
“I think the keyword is ‘coexisting.’ It’s been a few years since they entered the market and it’s proven that the two services — SVoD and pay TV — can coexist,” he added.
Cignal TV, introduced in the market in 2009, is expected to reach two million subscribers in the first half of the year. Mr. Zaballero said that this is an indication that there is still room to grow.
The Philippines currently has two major pay TV providers — Sky Cable and Cignal TV — as well as a host of smaller providers. The country is estimated to have around 20 million households with TV and Mr. Zaballero pointed out that the pay TV penetration rate is less than 20%.
While both SVoDs and pay TV still continue to grow, the same cannot be said for the US as Fortune reported on April 2018 that US cable companies are feeling the competition from SVoDs and are seeing a decline in subscribers — Charter Communications lost 122,000 customers in the first quarter of 2018 while Comcast announced they had lost 96,000 subscribers (their fourth straight quarter of loss) in the same quarter while AT&T’s DirecTV satellite service lost 188,000 customers in the same period.
MULTI-SCREEN VIEWING
While SVoD maintained that they are not replacing pay TV, what they did introduce was multi-screen viewing.
“When it comes to the [SVoD] or the digital platform. Instead of looking at it as a threat, we actually look at it as an opportunity. It is a platform that we believe can coexist with our linear and pay TV business,” said Armi C. Malaluan, director and business head at Sony Pictures Television Asia, Philippines, in an interview with BusinessWorld in May at their offices in Makati City.
“The needs of our viewers are changing or becoming more sophisticated — they actually enjoy the multi-screen environment,” she added before explaining that many households maintain a pay TV subscription while having SVoD subscriptions because pay TV is aspirational and the first step to getting more content free channels don’t have.
Ms. Paul of HOOQ was of the same mind when she explained that their entry spurred channels, local or international, to adopt the multi-screen experience.
Now, pay TV subscriptions are bundled with internet plans and SVoD subscriptions.
“It is now up to consumers what they want to watch, where they want to watch it and when,” said Ms. Paul before adding that the battleground is now in providing the kind of content people want to watch.
“Content providers should be visible in all platforms and should be device-agnostic,” she added.
And it is the same knowledge and understanding of what Filipinos love watching that allows TV to continue to flourish in the country.
“In my whole stint in iflix, I have come to respect ABS-CBN and GMA more because they are able to understand the tastes of Filipino viewers,” said iflix’s Mr. Dela Cruz.
“You then understand why they are there and why they will still remain there,” he added.
Both HOOQ and iflix said that their most viewed content are local content including movies like Love You to the Stars and Back (2017) and TV series like Mulawin vs Ravena (2017).
But Hollywood content is also popular. “Filipinos love entertainment and enjoy good international content. They are so passionate about it,” said Jessica Lee, vice-president for communications of Netflix Asia in a video interview in June.
Netflix entered the Philippines (and much of the world) in early 2016 and noted that while coming in they knew the country loves international content, Filipinos “far exceeded expectations.”
While much of Netflix’s subscribers are now outside the U.S., Asia plays a modest role in the company’s growth story, “contributing less than 5% of the global base at the end of 2017,” said Media Partners Asia, a provider of advisory, consulting and research services, in an April 18 post on their website.
“Nonetheless, Netflix’s customer base in Asia, mostly paying direct, already makes it one of the region’s most successful SVoD services, with particular traction in recent months in India, the Philippines and Taiwan,” said the report.
Statista.com estimates that Netflix will have 104,000 subscribers in the Philippines in 2018 and is expected to grow to about 296,000 in 2020.
The same portal said that there are currently around 1.8 million SVoD subscribers in the Philippines and is expected to grow to 3.9 million in 2022.
Cignal TV is also adopting the multi-screen treatment through their recently-launched their own video-on-demand service, Cignal Play, which comes as a free add-on to their postpaid subscribers (and soon for prepaid).
The service will include linear channels as well as original content created by Cignal Entertainment.
“We realized that SVoDs are the way of the future so we also developed our own service…[the content present in the service] we try to keep different from those present in iflix, etc.,: said Mr. Zaballero.
“We’re investing heavily in original Filipino content,” he added before noting that the content produced by Cignal Entertainment is all about “original, high-quality content” meant to cater “to more discerning Filipinos.”
Their foray in producing content happened in 2017 with the Tukhang mini-series directed by Lawrence Fajardo and Derick Cabrido. The series aired that year in May in Cignal’s own Sari-Sari Channel.
Mr. Zaballero said they are now producing the second season and aims to produce “three full-length film and eight to ten series” in the near term.
He said that their partnership with the CineFilipino Film Festival allows them to show the films on their new portal.
ENTERING THE FREE STREAMING MARKET
HOOQ said that in order to reach a bigger market, they need to go to the masses as currently, much of HOOQ’s current market are in the upper middle class segment.
And one of their newer developments include introducing free-to-air channels on HOOQ which can be viewed by consumers outside of the pay wall.
The new feature was launched in Indonesia in April and is expected to land in the Philippines in the next few months.
Similarly, iflix is also planning to launch a free tier scheduled to launch in the next months which will allow non-subscribers to watch 10,000 hours of content by year-end.
The service is also mulling having live streaming including concerts and creating original short-form content.
Meanwhile, Netflix isn’t going the same route because Ms. Lee explained that having a free tier would lead to services having ads on their platform to pay for the free content and that’s not what Neflix is about.
“Our subscribers are with us because they want uninterrupted viewing of content they like,” she said.
These services, whether pay TV or SVoD, might go and adopt different strategies in order to get to more people but in the end all of them agree that everything now lies in the hands of their growing subscriber base—what they want to watch, when they want to watch it and where they want to do it.
Cignal TV Inc., and BusinessWorld are both wholly-owned subsidiaries of the MediaQuest Holdings, Inc. which is under the PLDT Beneficial Trust Fund.