The rapid growth of OTT video services has pushed pay-TV operators around the world to rethink the business. This has resulted in new services, from slimmed-down pay-TV packages to operators launching their own OTT services. (See Will the 'Slim' TV Business Model Really Retain Cord-Cutters? and Is Comcast Right to Reject OTT?)
Hong Kong incumbent PCCW Ltd. (NYSE: PCW; Hong Kong: 0008) was one of the first telcos in the world to launch a pay-TV service and create a triple-play bundle. It's also been one of the first to offer an OTT service, launching Viu last year and rapidly gaining over a million downloads of the app in just over six months. It is now available in Hong Kong, Singapore, Indonesia, India and Malaysia. (See Singtel Uses 4G to Launch Streaming Video Service.)
The service offers thousands of hours of content, with a heavy emphasis on Asian programming. The service is managed by Janice Lee, managing director of PCCW Media Group, which includes PCCW's pay-TV business, nowTV and its music service MOOV, as well as Viu.
Lee offered her thoughts on the launch of Viu, PCCW's long-term strategy and major challenges presented by emerging markets in this exclusive, two-part interview.
Telco Transformation: Why did PCCW decide to launch Viu? What was the strategy/thinking at the time?
Janice Lee: Well, PCCW had great success with the launch of Hong Kong's first IPTV service (nowTV), followed by the music platform MOOV. We're always looking for ways to create new services for emerging consumer needs, and the Viu OTT service was launched because we felt there is rising demand for mobile video entertainment, especially with Millennials. The paradigm shift is significant, and so is the business opportunity in terms of subscription and advertising revenue.
Emerging markets represent over 60% of the broadband population, and there's a report from Pyramid Research saying that SVoD services such as Netflix in emerging markets are expected to balloon by about five times by the end of 2019. Revenue will ramp up to US$18.8 billion in the next three years.
So it just makes sense for us to look at the opportunity there -- OTT video has grown not only in developed regions, but also in emerging markets, both as an alternative and as a complement to established free-to-air and pay-TV platforms.
TT: Were there natural synergies with nowTV that you were able to use? How did that help?
JL: Obviously our past experience and ongoing involvement with nowTV helped us take advantage of an already developed network of broadcasters, who are our content providers. As well, we do have curated content produced in Hong Kong with interesting vignettes/info bites on South Korean culture to complement our archive of the newest popular South Korean drama series. The production facilities and expertise of our TV production team can also be leveraged.
TT: How important was monetization/business model at the start, what models did you consider, and how did you decide?
JL: Viu is launched as a Freemium model which means that it will be free for viewers to view the content across devices even with multiple log-ins. It will be supported by advertisers.
Of course, for avid fans, we also offer an upgrade to Premium Service. This has various additional features -- unlimited downloads and earlier access to new content.
In this case, the revenue stream continues to be dual - there is subscription income from Premium Service subscribers, as well as revenue from advertisers.
We feel the Freemium model tackles issues of low affordability in the region, while more affluent and engaged viewers can upgrade to premium service.
TT: What device platforms do you support today and what drove your selection?
JL: The Viu OTT app can be used for both iOS and Android systems on smartphones, tablets and via the web. We know that consumers these days own multiple devices and their lifestyle is a very mobile one, so it is important to optimize their viewing experience and make it possible for them to view their favorite content across multiple platforms and devices.
TT: What kind of content is mostly being consumed on Viu and has that changed over time?
JL: Our Acorn research (commissioned by PCCW for its own internal analysis) conducted last year showed an overwhelming preference for South Korean content, which is regarded as killer content. It is highly preferred by the majority of online drama viewers. Over 58% of them preferred that, versus US, UK, or content from other countries.
We also noticed that viewers prefer to view the content in their own local languages, which is why we are committed to fast turnaround. As fast as four hours after South Korean telecast in some markets, we can provide the local language versions to viewers.
TT: Are you looking for ways to integrate the service with existing operator services? Or with other partners?
JL: We are always exploring ways on how we could collaborate with our strategic partners. We have already forged alliances with telco networks, as they are key to content delivery and with creative bundling and marketing. They help to extend our offerings to get more views.
Meanwhile, we are also developing partnerships with handset manufacturers -- in Indonesia for example, we have been working with Samsung. New Samsung Galaxy customers get 12 months of Viu premium service for free in Indonesia.
We also have similar plans in Hong Kong, with Xiaomi, and in Singapore with Singtel.
We'll have the second part of our interview with Janice Lee up in a couple of days, where she will discuss what makes an OTT video service a success and the challenges confronting providers in emerging markets.
— Aditya Kishore, Practice Leader, Video Transformation, Telco Transformation