Television is dead. Long live television.

Moderated by: Gervin Yang & Ian Sikora

It has been an eventful year for media in Southeast Asia. Regional streamers HOOQ and iflix both went bankrupt and sold assets to international firms in liquidation. Netflix has strengthened its market position with a US$3 mobile only plan in Indonesia. Disney+, Prime Video, iQiyi and WeTV have started to push into the region. Meanwhile, TikTok has exploded in most markets. In the midst of all this change Openspace has made its first two media bets: GoPlay and Kumu. 

Openspace has a long history with content. Hian Goh founded Asian Food Channel and ran the network for a decade. Ian Sikora was on the founding team at HOOQ and helped build its first technical system. Jessica Huang Pouleur ran business development & strategy at Disney across APAC and was deeply involved in the Disney-Fox merger. The firm is intimately aware of the unique challenges building a media business in Southeast Asia. It’s safe to assume that between Hian, Ian and Jessica, Openspace has seen every media deal in the region. So it’s curious that only now, in the face of fiercest competition to date, Openspace has made two investments. To fully understand the thesis, one must first understand some macro shifts in the context landscape.

Macro Shifts in Media

The content value chain has been transforming for the last decade. As broadband speeds have improved and smartphone ownership has become pervasive, the distribution paradigm has moved from a few entrenched television broadcasters to any website or app with a video player. Content owners and tech companies have seen this opening and are all fighting to win eyeballs in the massive broadcast market. Broadly speaking there are three main battlegrounds across the world:

  1. Content owners going D2C
  2. Tech companies bundling content with existing services
  3. User generated content (UGC) eating into traditional media

Content Owners going D2C

For the last 24 months, major American content owners have been pulling assets off aggregators like Netflix in favor of their  own direct to consumer offering. Disney has led the charge with Disney+, which has amassed 55 million subscribers in its first 6 months since launch. The growth has been driven by it’s strong IP library, very competitive US$6.99 price point and ability to bundle with other owned streaming platforms, Hulu and ESPN+.

Beyond Disney, most other incumbents have struggled to launch a similarly successful offering. HBO has confused consumers with three very different brands with unclear differentiation: HBOMax, HBONow and HBOGo. Both HBO and NBCUniversal were in disputes with streaming set top box providers over platform fees and app requirements so they were simply not available to customers with devices like the Amazon Fire TV or Roku. As a result, they remain far behind Disney in their subscriber count. HBO has 33 million subscribers through cable bundles and HBOMax, but only 4.5 million subscribers have activated HBOMax (customers with cable bundles can activate the service for free). NBC Universal has only amassed 10 million users across it’s free to air and premium streaming service.

This will continue to play out for several years, but it is very likely that most of these content owners will fail to gain enough independent traction and will ultimately move back to aggregators.

Tech Companies Bundling Content

Apple Enters the Streaming Wars With Apple TV+ and TV Channels | PCMag

Tech companies looking for new sources of advertising and platform revenue have started to launch their own streaming aggregators. The model was pioneered by Amazon and its strategy for Prime Video. Back in 2006, Amazon licensed and produced a small library of streaming video on demand (SVOD) content, which it bundled into its core Prime membership. It was not a particularly compelling library, but it was essentially “free” and enough of a carrot for some Prime members to try the service. As more users came to the service, Amazon had more leverage to license better and more content. This flywheel allowed them to methodically build a large streaming audience and expand into premium original content, ad supported video (AVOD), rentals (TVOD) and aggregation of premium channels like HBO & Showtime. 

Other tech companies have seen the advantages of the Prime “video super store” and started leveraging their own distribution advantages to build similar offerings. Apple has launched its own narrow library called Apple TV+ and bundled 12 months of free access with every iOS device purchase. Google has developed an 85+ channel cable bundle called YouTube TV, which it aggressively advertises on it’s free YouTube properties. Facebook and Twitter have both experimented with licensed shows and live sports in its own TV offerings. The tech companies that can achieve critical mass will effectively become the new cable broadcaster and capture a portion of a $170 billion industry in the US alone.

Micro Audience UGC Eating into Traditional Media

In the background of these mega shifts in the traditional media, YouTube, Facebook, TikTok, Instagram, Twitch and countless others are redefining what consumers fundamentally expect from media. They’ve enabled creators to easily produce snackable content, distribute it around the world for free and monetize with a broadening set of tools. Consumers can easily find content that satisfies their niche interests that simply would not be available in the traditional television paradigm. The platforms capture daily active audiences that are larger than Netflix’s monthly paid subscriber base in any given country. Moreover, they command an average of 30-60 minutes of time spent per DAUs. Though unlikely to fully supplant traditional media completely, for many Millennials and Gen Z it is becoming a preferred form of content and serious view-time competitors for long-form professional content providers.

The State of Southeast Asia

It is worth noting that these examples are US companies largely focused on US audiences. Each Southeast Asian country has its own nuances, but broadly speaking we see the similar macro trends playing out across the region. However, Southeast Asian players not only have to compete amongst themselves, they must also compete with American and Chinese incumbents that have entered the market. It may appear as insurmountable competition, but Openspace believes there are still opportunities for local companies to succeed. 

GoPlay

With only 9 national free-to-air broadcast channels and less than 10% TV household penetration of pay TV, there has been a natural limit to available “shelf-space” and distribution for content creators. In addition, movie distribution has been heavily constrained by low theater count across the country. Indonesia has only 0.6 movie screens per 100k citizens, compared to 2.4 screens per 100k in Malaysia and 5.1 screens per 100k in Singapore.

Due to these constraints, local content creators have struggled to find sufficient distribution. American and Chinese tech companies have offered new avenues, but online advertising CPMs are only around $1-2 so it is difficult to produce mid to high quality content profitably. 

GoPlay aims to fill this gap in the market. Similar to Amazon Prime, GoPlay bundles its streaming subscription with existing Gojek products and offers a revenue share to creators that get eyeballs in its service. Through this bundling, GoPlay can offer a larger revenue pool for creators that produce high quality content. Over time the company will expand into additional formats including ad-supported content and live streaming so creators can have an increasing set of tools to monetize their content. 

As an investment, GoPlay is not without risks. Disney and Netflix have entered the market aggressively with meaningful spend on local content. WeTV and iQiyi are also heavily rumored to be planning a market entry. YouTube, Facebook and TikTok continue to diversify the monetization tools for creators who distribute content through their platforms. However, we believe there is still a challenge for high-quality local content creators to find sufficient monetization and distribution though these players. GoPlay, with the support of Gojek, GoPay, GoFood, GoShop and many other “Go” Businesses, can offer a broader range of tools for creators to engage with and monetize their audiences.

Kumu

The Philippines has long been dominated by traditional free-to-air channels that have taken the majority of ad spend in the country for many decades. However, secular trends in new media that we have seen in other markets have started to play out in the country as well. The availability of low-priced smartphones has allowed the general population to access social networks like Facebook, and free streaming services like YouTube. This has changed the way Filipinos consume content–shifting time spent to digital media over traditional content.

Media conglomerates like ABS-CBN have started its digital offerings to maintain its leadership with the launch of its streaming service “iWant”. iWant quickly became one of the most popular streaming platforms in the country, alongside Netflix and YouTube, and has become one of ABS-CBN’s core offerings for the wider market, including Filipinos living abroad. Other local television networks such as GMA7 leveraged on the reach of YouTube and Facebook, and has made much of their content available on these platforms. 

The need is now to create new forms of content as Filipinos, particularly the younger generation, are swiftly shifting time spent and focus on new forms of digital platforms, away from these popular and established social networks and streaming services. This trend is magnified with fake news and politically charged messages prevalent in these established networks. 

Kumu is at the forefront of capturing these secular trends with its platform that puts authentic and positive content at the center of its value proposition. As one of the founders puts it: “The only political debate we want is about whether McDonald’s or Jollibee has the best fried chicken. If users want other kinds of politics, well, that’s what Facebook is for.”. The live streaming platform has captured more than 5million users in more than 20 countries globally and continues to attract some of the best content creators in the industry. As the company celebrates its 2nd anniversary, Kumu is doubling down on its core strategy and remains as the fastest growing content platform in the country.