|This article was originally published on March 13, 2015. Since that time, PCCW has closed its Vuclip acquisition and is in gestation mode for content acquisition (including pan Asian OTT rights) for Korean and Chinese IPs. The world awaits Vuclip monetization and integration as SVOD-based OTT battles intensify across Asia Pacific.|
PCCW Media’s regional ambitions came into sharper focus this week, after the group announced plans to buy a majority stake in Vuclip, a seven-year-old mobile VOD platform with seven million quarterly subs, mostly in Asia.
Acquiring Vuclip allows PCCW Media – the multimedia and entertainment arm of Hong Kong telco PCCW – to fast-track development and roll-out of its own regional OTT offering, leveraging Vuclip’s in-house technology, as well as existing relationships the startup has forged with 13 carriers, to do so.
At the same time, the tie-up pitches PCCW into head-to-head competition with Hooq, a mobile SVOD play also designed as a value-add for local telcos facing price pressure on voice and SMS.
Hooq – developed and backed by Singapore telco Singtel, with Sony and Warner Bros on board as minority partners – made its commercial debut in the Philippines via Singtel associate Globe this week. Similar launches in India, Thailand and Indonesia are lined up to follow.
Singtel associates in all three countries – Airtel in India, Telkomsel in Indonesia and AIS in Thailand – already have working relationships with Vuclip however, along with others such as Vodafone (India) and Indosat (Indonesia).
This adds another layer of competition to an emerging OTT marketplace, where the battle lines and price points are still taking shape.
As of today, paid video sites in South and Southeast Asia tend to offer non-exclusive library content, leaving little room for differentiation in terms of what to watch.
Those dynamics may shift, as large domestic broadcasters move on their own OTT ambitions, potentially weakening the product that content aggregators have to offer.
Star India, for instance, has launched Hotstar in India, anchored to sports, Hindi and regional content, and is edging close to 10 million downloads a month after launch.
A Growth Markets Footprint
That said, Vuclip has a proven track record, already working with carriers in Egypt, India, Indonesia, Malaysia, Thailand and the United Arab Emirates, with an eye on further expansion in Africa, the Middle East and Southeast Asia.
Vuclip provides telcos with a suite of content packs, including low-priced transactions for short-form video, tailored for people trying out data services for the first time.
This mass market, aligned with telcos’ subs bases, could represent an untapped market for paid video that telcos can unlock via existing billing relationships. Carrier Arpus for Vuclip stand at around US$1.50/quarter.
Some content owners, however, are reluctant to entertain the pricing such a business model entails, at least during this early stage of market development.
Analysts from Media Partners Asia (publisher of Media Business Asia) estimate that Vuclip’s annualized revenues were approaching US$15 million for CY 2014, mostly from consumer payments.
Those will likely have to rise sharply to help offset rising costs, as competition starts to intensify and content bets start to scale up.
Vuclip makes some money from advertising, but the mobile ad market remains nascent for mass market audiences. That may change in the medium term however, fostering a more balanced dual revenue stream model over time.
One key selling point from Vuclip is its technical know-how, announcing plans last month to hire 100 engineers to work in a new facility in India, the firm’s third R&D center alongside existing labs in Silicon Valley and Beijing.
The company markets itself on delivering smooth streaming, including devices on 2G networks, which make up the bulk of internet-connected phones in Asia today.
PCCW is effectively buying into Vuclip’s customer base, its management and its engineering capabilities and systems, focused on securing an early foothold in a fledgling market for mobile video.
A telco's bet on media
PCCW Media, led by MD Janice Lee, was created to house PCCW’s domestic pay-TV platform Now TV, plus digital assets, such as a domestic SVOD service (media.now.com), a directories business (Yellow Pages) and a music steaming offering (Moov) that has expanded its footprint into mainland China.
The division's international push began in earnest around three years ago, when it started aggregating and distributing Chinese-language channels outside Hong Kong.
More recently, PCCW has started co-producing big-budget dramas for distribution in mainland China, while also setting up a production fund in Hong Kong to make content that can be monetized overseas as well as at home.
At the same time, PCCW Media has been aggressively buying rights for Chinese, Japanese and Korean content to support its planned OTT service – content which could give Vuclip a helping hand in Southeast Asia.
PCCW's ambitions don’t stop there however, highlighting expansion outside Asia in the press release announcing the Vuclip deal.
New distribution channels opened up by broadband give new and existing players a chance to lay claim to an emerging new landscape for video distribution, where companies that can leverage scale have a better chance of success.
PCCW is the latest to declare its regional intentions, for Asia and beyond. It won’t be the last.