Asian SVOD contender Iflix has raised US$50 million in its latest funding round, led by European pay-TV and broadband juggernaut Sky, which put in US$45 million.

Surya Citra Media (SCMA), one of Indonesia’s biggest broadcast groups, also took part in the round, the biggest yet for Iflix which launched its first services less than 12 months ago.

The money, which takes Iflix’s cumulative funding to US$90 million, will be used to double spend over the next 18 months in the startup’s existing markets – Malaysia, the Philippines and Thailand – while extending the footprint over the next few months to three more: Indonesia, Vietnam and, for the first time outside Southeast Asia, Sri Lanka.

It’s an intriguing play by Sky, which gets a seat on Iflix’s board and, with it, a vantage point on how video distribution and consumption is evolving in emerging markets.

The company, which is now looking for areas of possible collaboration with Iflix, has seen good traction for its own standalone streaming platform, Now TV, as part of its own ongoing expansion into OTT. Its customer base in the UK, across pay-TV, OTT and broadband, has passed 12 million RGUs.

At the same time, the SVOD battleground has become much more competitive in large APAC markets such as Australia, China and India, limiting the options and ticket sizes for incoming investors.

The deal also positions SCMA as Iflix’s key strategic partner in Indonesia, a market where a strong local presence is becoming increasingly important for international internet firms.

Cam Walker, formerly head of content development for SCMA’s parent Emtek, is joining Iflix as head of Indonesia.

For Iflix, the new investors provide further fuel and strategic input, as wider access to affordable broadband opens up new entertainment opportunities for hundreds of millions of consumers.

Executives want to sustain the current investment drive for another year at least, before introducing a tighter focus on margins and profitability.

“I don’t think the investment ends for 5-10 years,” says Iflix’s CEO, Mark Britt.

“On the other hand, the organization will shift from focusing on building awareness and trial and education to start focusing on monetization and yield over the next, probably, 12-18 months.”

Extra capital will help boost headcount from about 230 people today to 400 by the end of the year, to accelerate localization in areas such as subtitling (with dubbing on the way), censorship and the domestic and regional content on offer.

The content portfolio will deepen but the current balance will stay in place, with just under half of the catalog from Hollywood, a third to a quarter representing regional fare such as Chinese movies, Japanese anime and Korean drama, and the rest made up of local shows.

TELCO COLLABORATION

Iflix has seen promising momentum in its subscriber growth so far, thanks to tie-ups with local telcos. These will remain vital conduits for both payment and distribution for the foreseeable future.

The streaming service has inked three telco partnerships so far, with TM and Digi in Malaysia and with PLDT in the Philippines. More are on the way in Indonesia and Thailand, which should go live in the next couple of weeks.

For consumers, there are some good deals on offer, as telcos also experiment with different data bundles and subsidies to drive both fixed and mobile broadband consumption.

Some telcos bundle Iflix with existing services for some of their customers, usually high-end fixed broadband subs. Other customers are given special offers in areas such as pricing and data allowances to entice them to sign up, using carrier billing as a payment channel.

Over time however, subscribers will start bearing more of the costs themselves, testing consumer loyalty for specific SVOD services.

“We’re realistically in the first six months of this process,” Britt says. “It’s going to be three to five years before we’ll really understand what works or not.”

For Iflix, it’s still the start of a long runway, working alongside other Asian SVOD players on an alternative model of media consumption, designed for countries where physical piracy is widespread, and digital piracy is starting to take off.

There will be 220 million wireless broadband subs and 27 million fixed line subs across Southeast Asia by the end of this year, according to estimates from Media Partners Asia.

However, 2016 SVOD revenues for the region are projected to come in at less than US$50 million.

A bigger footprint

Next up for Iflix will be deeper penetration in South and Southeast Asia, before venturing further afield.

India is off the radar however, in the short and longer term.

“The scale you need to focus on as a tech company is customers actually using and paying for the service,” Britt says.

“Markets like India look fantastic on PowerPoint but most companies in India really struggle to get the scale.”

Existing investors include Iflix’s founding company, Malaysia’s Catcha Group, which retains a majority share in the business, PLDT, the biggest telco in the Philippines, and Hollywood studio MGM.

Catcha is known for aggressively scaling up ecommerce businesses in Southeast Asia for a market listing.

Iflix has a different blueprint, however. “We would IPO in the event that the time is right and the valuations make sense but that’s not the plan,” Britt tells Media Business Asia.

“The plan is to continue to execute at 1,000 miles an hour like crazy and build a product that people in emerging markets love.”

Iflix has also attracted backing in earlier funding rounds from investment firms Evolution Media Capital, a merchant bank set up by entertainment and sports agency CAA and private equity firm TPG; Capricorn Investment, a vehicle for Jeff Skoll, eBay’s first president and employee; media investment veteran Gordon Crawford; and Jungle Ventures, a Singapore-based VC firm.

Local and international celebrities have also bought into the company, including Will Smith from Hollywood, Maya Karan from Malaysia, and members of the Gutierrez family from the Philippines, adding some stardust to viral marketing efforts.