According to Patrick Grove, CEO of Malaysia-based Catcha Group, “more than 90% of Association of Southeast Asian Nations households currently consume pirated content”. He adds: “This has been an enormous problem for American content producers, who create the high-quality entertainment that Southeast Asian consumers’ desire, but rarely receive the financial benefit.”
In March 2015, serial tech entrepreneur Grove co-launched, alongside a management team and merchant bank Evolution Media Capital, an internet TV platform in Southeast Asia called iFlix.
Catcha Group is an international investment firm focused on disruptive digital business models in emerging markets. Catcha’s holdings include four publicly-listed entities and more than 50 additional private investments in the digital space, with a portfolio of online assets worth in excess of $1bn.
Grove has a track record in publishing and TV in Asia. He served as a judge, alongside Sir Richard Branson and Steve Wozniak, in the 2014 Talent Unleashed Awards, and also on the judging panel for TV series Angel’s Gate, which was broadcast on Channel NewsAsia in 2012.
Mass appeal
The subscription video-on-demand service is targeting more than 600 million people in key Southeast Asian markets, including Malaysia, Thailand, Philippines, Indonesia and Vietnam. iFlix will “fight entertainment piracy” and provide an entirely new and legitimate way for the region’s hundreds of millions of internet users to enjoy their favourite films and TV shows.
Evolution Media Capital, a merchant bank focused on the media, sports and entertainment industries, and its managing partner, Rick Hess, have joined the iFlix board of directors.
Grove says he and his partners believe they finally have the game-changing solution not only to combat piracy, but also to allow consumers access to incredible content on every connected device, whenever and wherever they want it, for “less than the price of a pirated DVD.”
In April, iFlix closed its second round of funding, bringing its total to date to $30m. The round was led by Catcha Group and Philippine Long Distance Telephone Company (PLDT), the largest integrated telecoms company in the Philippines. The funds will be used to continue to roll out the iFlix service across Southeast Asia, acquire rights to new content, produce original programming and market to potential customers.
PLDT invested $15m in a previously announced round of funding, according to Mark Britt, iFlix CEO. “We will be announcing other participants in the near future,” he tells Global Corporate Venturing.
Content aggregation
Ariel Fermin, executive vice-president and head of PLDT’s consumer and home businesses, says: “PLDT has been on the lookout for potential partnerships with content aggregators, so that it could elevate its value proposition to the consumer beyond broadband access.
“iFlix brought an opportunity that was of potentially high value to PLDT, with Hollywood content from all the major studios. iFlix management had the expertise in the content arena, and its vision to be the Netflix of Asia through superior value offerings fitted PLDT’s business thrust.”
Of the benefits PLDT expects in terms of boosted revenues from the use of iFlix, Fermin says: “PLDT expects both its fixed and mobile businesses to significantly benefit in delivering iFlix content over broadband. This model does not only help sell value-added services, but also helps PLDT sell more of its core broadband product. iFlix will be hard bundled with existing fixed and mobile products, and will also be offered as a standalone.”
Fermin says entertainment is a key use of broadband, and iFlix builds on this habit with its more than 10,000 hours of Hollywood content. “Binging, for fixed, and time-fillers, mobile, are existing consumer habits that we leverage on with content from iFlix. With the service sold at great value compared with alternatives available in the market, we are confident that we have a value proposition that mainstream consumers will appreciate.”
The strategy
iFlix CEO Britt says: “Fundraising is a constant process for a new, growing business. At an operational level, we are currently in discussions with a number of leading brands we are looking to collaborate with on distribution, including telcos that bring tremendous access to a connected customer base and a method of billing.”
Britt says that since the launch he has been “phenomenally excited” about the uptake of the service in the company’s markets of operation. When asked for target customer figures for 2015 and 2016 he says: “We do not think about targets in those terms. We believe that in five years’ time the leading subscription video-on-demand service in the region will have 30 million subscribers. We aim to be that service.”
One of my doubts over the adoption of the service in markets, such as Malaysia, was how a startup could outprice the pirated content marketplace and keep overheads low. Britt explains the company’s formula for kicking the pirated content out of Asia. “We are a mass-market, high-volume business. Our objective with pricing is to offer general entertainment to the 250 million smartphone owners in Southeast Asia at the most affordable price possible. Well-established and highly profitable companies like Air Asia and Walmart have proven this can be a highly successful model.
“Like other internet businesses, cloud software and services mean we probably have lower fixed costs than more traditional businesses, but we are obsessed with operating on a low-cost base right across the board. Every dollar we save, we invest back into content for the service.”
And who are iFlix’s competitors? Britt says the business is “not thinking a lot about competitors, but about customers”. He adds: “There are other startups trying to do similar things, and some larger traditional players testing new ways of working on the internet. They will all help to grow the market and educate customers as the industry develops.”
The biggest challenge
Britt says: “Billing and collection in southeast Asia remain a challenge. Trust of online payments in the broader community is growing, but still low compared to more mature western markets. So we will work every day to find different ways to help people find ways to pay that work for them.”
iFlix adverts are popping up on Facebook. Things are happening fast. But where are they getting their content from? And can it compete with the popularity and frequency that the content pirates are making available in Southeast Asia?
Britt says: “So far, we have partnered with more than 30 of the top content providers in the world, many of which we are still to announce. Our diverse and extensive library of over 11,000 hours of popular Hollywood, regional and local film and television content currently sets us apart. We are also at all times adding to that offering. Furthermore, we will be announcing our plans for original content and many iFlix exclusives in the near future.”
Outsmarting the pirates is a constant process. In June iFlix partnered enabler of global digital video services Vimond Media Solutions to establish a jointly-operated development centre in Malaysian capital Kuala Lumpur.
iFlix Group chief technology officer Ash Crick says: “With this initiative, we aim to provide an attractive return path for highly-skilled Malaysians who have been studying and working overseas. It is our intention to increase the brain gain in Southeast Asia, particularly Malaysia, through creating exciting opportunities for skilful individuals from around the globe to join us in revolutionising the entertainment industry.”