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You know HOOQ? We don't either. But it's bringing the Asia Pacific OTT fight to Netflix

U.S. network giant hasn't even ARRIVED yet

The winner needs local content and quality of service

Netflix might actually benefit from the piracy in the region; it has enabled brand recognition for its flagship shows House of Cards and Orange is the New Black (above)

Success will come down as much to making the right calls on local content as being able to offer high enough QoS. When it comes to infrastructure, SingTel is strongly placed - not just in Singapore, but most of the other target markets. In Australia it owns Optus, the country’s second biggest telco after Telstra, with about 30 per cent share of mobile subs and 16 per cent fixed broadband. This at least gives it a sizeable captive market to attack with bundled deals, although Netflix will also be able to ride over Telstra’s network, which accounts for 50 per cent of broadband subs.

Telstra also has substantial investments in five key regional telcos or mobile operators, including Telkomsel (Indonesia), Advanced Info Service (Thailand), PBTL (Bangladesh) and Globe Telecom (Philippines). Globe Telecom was therefore the infrastructure partner for the recent Philippines HOOQ launch and similarly these other telcos will be in their markets.

SingTel also has investments in Bharti Airtel, covering India, which has a significant presence in Bangladesh, Sri Lanka and Africa.

What is interesting in the Asian markets is that HOOQ could be more of a mobile than fixed broadband play, especially across the vast rural but still quite densely populated areas of India. Here 4G/LTE rollout is key since it enables sufficiently high bit rates for premium video reception on tablets and smartphones.

In India this is happening quite fast, with 15 million LTE connections expected by the end of 2015. That may still be a small percentage of the country’s 937 million base of mobile subscribers, but is still plenty for HOOQ to chew on given that 4G/LTE deployment will accelerate anyway during 2016.

The overall size of its internet base, whether mobile or fixed, will make Asia the world’s biggest battleground for OTT over the next few years. Netflix was driven to international expansion partly because it saw a future for global OTT, but also because its domestic US market was becoming saturated. This has already been reflected in Netflix revenues, which soared internationally by 76 per cent year over year to $388m for the last quarter of 2014, accounting for 30 per cent of the total, while US revenue growth was confined to 24 per cent reaching $917m.

Netflix is predicting both international and US growth to slow this quarter to 59 per cent and 22 per cent respectively, highlighting the importance of the Asian market. The number of Internet users there is still climbing steeply, as is the penetration of sufficiently fast broadband for premium TV, although from a low percentage base. In Q2 2014, 46 per cent of the world's Internet users were in Asia, yet this was still only 35 per cent penetration, so there is plenty of room for rapid growth to continue. Penetration rates across North America, Europe and South America stand respectively at 88 per cent, 71 per cent and 57 per cent.

Asia will soon become the world’s biggest market for streaming services, with SingTel well poised to take a major share, having established its tentacles in all the key markets and a subscriber base of 500 million. But this is hardly an homogeneous market, with far more substantial cultural, linguistic and market differences between countries than exists say in Latin America.

India has its great Bollywood empire, whose films Netflix distributes around the world and not just to diaspora. It is also characterised by chronically low average revenues per user (ARPUs) below $5 a month that would mean Netflix would probably have to cut its usual subscription prices to gain traction there. By contrast Singapore enjoys relatively high ARPUs, such that Netflix itself could prove disruptive to SingTel’s MIO video on demand service, which costs considerably more than Netflix’s prevailing $9 a month subscription. So we are likely to see a range of outcomes across the Far East in the battle shaping up between Netflix and HOOQ in particular.

Copyright © 2015, Faultline

Faultline is published by Rethink Research, a London-based publishing and consulting firm. This weekly newsletter is an assessment of the impact of the week's events in the world of digital media. Faultline is where media meets technology. Subscription details here.

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