Aspiring regional SVOD service, iFlix, became a consumer reality this week, opening for business in Malaysia and the Philippines ahead of a planned regional rollout across Southeast Asia’s major growth markets and beyond.

In many ways, iFlix is still in a soft launch however, keeping quiet on Asian and local content deals as well as distribution partnerships that could make the difference between success and failure in nascent marketplaces, where mass awareness remains low, standalone online payment mechanisms are thin on the ground and generally untrusted, and broadband infrastructure as a whole is uneven and plans are pricey for most consumers.

Nonetheless, the venture, which has already secured backing from Philippines telecoms major PLDT and Malaysia's Catcha Group as well as industry veterans from Hollywood, is here for the long run, stresses Group CEO Mark Britt.

“Our seed round was a US$30 million capital raising that we announced at APOS,” says Britt, who joined iFlix at its inception nine months ago after leading Nine Entertainment's digital arm Mi9 in Australia.

“It’s probably the smallest round we’ll ever do,” he adds.

Transforming the entertainment industry in Southeast Asia is going to be an expensive bet that will take three to five years to become a mass market proposition, Britt explains, with iFlix already engaged in “very active” discussions about its next investment round.

“In the short term, I think any new entrant will lose a material amount of money,” Britt says. “The nature of SVOD is a business model and economics that work at scale and volume.”

Britt adds: “To compete, you need to be willing to invest behind the business, and from a shareholder point of view, have a very long-term view on market opportunity.”

Gradual take-off

In the near term, expect more announcements in coming months on iFlix’s library, with 11,000 hours of content from 33 distributors secured this week, as well as billing integration with local telcos in addition to alternative ways to pay in markets with low credit card penetration, Britt tells Media Business Asia.

The start-up announced international content deals with BBC, Fox and Warner Bros earlier this month. It also has a "broad array" of Chinese, Korean, Malay and Philippine drama.

At the same time, telco partnerships will be criticial, providing a channel for both marketing and payment – echoing regional SVOD rival Hooq, backed by Singtel, which has rolled out in India, the Philippines and Thailand after making its debut earlier this year.

Britt is pursuing exclusive telco deals in consolidated markets, as well as a broader set of commercial relationships in more fragmented markets, although he declines to provide further detail. This includes the Philippines, where Hooq has tied up with PLDT rival and number two telco Globe.

“We have a very strong alliance with PLDT and a common vision on the future of entertainment, but haven’t announced the details of the collaboration at this stage,” he says.

Across different countries, marketing and promotional efforts – initially handled by iFlix in a bid to build brand awareness and advocacy among early adopters – should also become visible in the near future.

“Our aspiration and plan is that iFlix is a mass market brand,” Britt says.

“Internet brands to date are built on authenticity and passion of consumers first. They are not built on big above-the-line campaigns,” he continues.

“You will see iFlix very quickly become a very significant investor in social, digital and PR,” Britt adds. “We will make some formal announcements about our plans over the next few months.”

For now, the service is free for the first 14 days, requiring a mobile number for verification but without the need to supply payment details upfront, before going pay at a relatively affordable 10 ringgit (US$3) a month in Malaysia and 129 pesos (US$2.9) in the Philippines.

Subscribers willing to commit to an annual plan get a 20% discount in Malaysia, and 15% in the Philippines. 

“Our aspiration is to create a compelling service that everyone can afford,” Britt says.

“That’s a price where we felt we could compete effectively and operate a valuable and sustainable business. Ideally it’s a price that is almost impossible to say no to.”

Subscription buys access on up to five devices and up to two simultaneous streams, accommodating both household and individual use – the same offer as Hooq.

Over time, more price points are likely to emerge, such as a cheaper mobile-only option, or one that offers HD or 4K content.

Early adopters first

For the next one to two years, most iFlix subscribers are likely to be younger, and more affluent demos, interested in international as well as local entertainment, mainly accessing the service through WiFi and fixed line networks rather than mobile broadband.

The addressable market will expand as networks became cheaper and more pervasive in the medium term, attracting less affluent consumers unable to afford traditional pay-TV.

“For that base, you will see SVOD services becoming a primary entertainment means, and that’s when the business starts to scale,” Britt says.

With most content licensed on a non-exclusive basis to Asian SVOD platforms today, and providers facing the same constraints in payments, affordability and infrastructure, success hinges on the ability to both provide and promote the best service, Britt argues.

Southeast Asia has room for plenty of players operating targeted services, he speculates, but only enough space for a single mass market player to gain scale.

“I think it’s a winner-takes-most market,” he muses. “There are opportunities for differentiation, which means many consumers may have to have more than one service. At this stage, it’s very early days.”

With OTT providing real-time information on what’s working, speed and flexibility will be key.

“It’s going to be a process of how quickly we can all learn and differentiate and optimize," Britt says.

"Hopefully, you will end up in a world where there’s a range of OTT services, each of which meets very different customer segments.”