A compelling OTT video proposition in emerging markets

A compelling OTT video proposition in emerging markets

The Delta Perspective

Getting It Right


Authors: Michelle Gwee and Saahil Malik 

The OTT video market is brimming with potential – particularly in emerging markets. Driven by factors such as smartphone and Internet adoption and based on both paid and ad-supported models, the emerging market opportunity is projected to reach approximately US$12bn by 2019 [Exhibit 1].

EXHIBIT 1: Online video opportunity & drivers in emerging markets
Source: eMarketer, Pyramid, Wells Fargo, PwC, Delta Partners analysis

In a previous post, we explored three ways in which telcos in emerging markets can capture this opportunity: organic development, partnerships and M&As. In all three scenarios, it is arguably crucial to develop a compelling OTT video value proposition. How then can we ensure this is well-tailored to emerging markets?

The emerging market challenges

Emerging markets possess several unique challenges [Exhibit 2]. The more prominent ones are highlighted below, with examples from emerging Asia:

  • The pervasiveness of piracy, partially driven by the relative absence of strict piracy laws and insufficient IP rights education. Torrenting is particularly rampant in emerging Asia with torrent websites often emerging among the top in traffic rankings1.
  • Access to truly differentiated content – It is challenging to strike quality content partnerships, as incumbent local cable/Direct-to-Home (DTH) players often already own premium local content or have exclusive distribution rights to such content. Consequently, new OTT video entrants may be left with aggregating second-tier content which is not compelling to many viewers.
  • Low affordability – Consumers are often hesitant to pay high (and recurring) amounts for content, especially since piracy seems like a viable alternative. For example, the average spend per Pay-TV account is approximately US$4/month in emerging Asia Pacific2 versus the global average of ~US$20/month3. This makes it harder for OTT players to achieve sufficient scale, particularly without similar (or differentiated) premium content as that provided by Pay-TV operators.
  • Slower network speeds, which threaten to undermine the user experience. For instance, average broadband connection speeds in India and Indonesia (2.3, 2.2 Mbps respectively) are approximately half the global average (5.0 Mbps)4.

Ingredients of a compelling proposition

In order to develop a compelling OTT video proposition, several key success factors should be in place. Some of these are ‘table stakes’ i.e. common to both emerging and developed markets (e.g. a good user interface and an effective windowing strategy). Beyond that, several key enablers or success factors are relevant to tackle the specific emerging market challenges [Exhibit 2]:

EXHIBIT 2: Additional considerations when moving from Developed to Emerging markets


Some players (telco and non-telco) have already recognised these challenges and are specifically incorporating some of the above enablers into their overall proposition [Exhibit 3].

EXHIBIT 3: Zoom-in – Selected OTT Video Players’ propositions
Note: As of Aug '15, Vuclip has a significant presence in India & SEA; HOOQ has launched in Philippines, Thailand and India; Netflix has yet to launch in emerging Asia; iFlix has launched in Philippines and Malaysia; 1Work-in-progress as of Apr '15 (Tech in Asia article); 2For Samsung Galaxy Tab S2 tablets sold in Malaysia

Many of these propositions are differentiated either by service delivery or customer experience:

  • Digital Rights Management (DRM): To address the challenge of piracy, HOOQ has invested in robust DRM to protect content from unauthorised redistribution and enable better negotiation for exclusive content.
  • Short-form (and differentiated) content: Since long-form content is not optimal for mobile viewing (and data costs are high), Vuclip focuses on short-form content. In addition, OTT video players can further differentiate their proposition through ‘content exclusivity’ via partnerships with production house (similar to Netflix’s approach).
  • Differentiated business models: To cater to lower affordability, iflix bundles content with PLDT’s mobile and fixed internet services. Also, iflix has no minimum contract length, giving customers financial flexibility. Similarly, Vuclip offers a pay-as-you-go model, where users pay for premium content when desired. In addition, players can consider hybrid AVoD and SVoD5 models, whereby ad revenues subsidise subscription fees.
  • Network-based differentiation: To address network-related challenges, Vuclip has proprietary video compression technology, to enable a zero-buffering experience across devices and networks.6 In contrast, HOOQ provides in-app features (e.g. network strength indicator, offline viewing option). In addition, OTT players should also consider providing Wi-Fi hotspots (through telco partnerships), and QoS prioritisation to improve user experience.

Opportunity Still Evolving

In summary, developing a compelling proposition in emerging markets requires an unrelenting focus on removing barriers to adoption (e.g. privacy, pricing) while retaining customers through a stellar experience (e.g. compression technology, engaging content for mobile, etc.).

This new wave of OTT players are adapting their approach. However, additional opportunities clearly exist (as described above) to develop an even more tailored proposition. While these players have seen some initial traction, we are still in the early days to assess who will serve up the winning OTT video ‘recipe’.

1Sandvine 2014 H2 Global Internet Phenomena Report: BitTorrent accounts for the highest share of traffic (32%) on fixed networks in Asia Pacific
2Pyramid 2014 Media Forecast
3Average in US is $50+/month - taking into account Time Warner Cable (Standard - $40/mth; Preferred - $50/mth) and Comcast TV Digital (Starter - $50/mth; Premier - $70/mth)
4Akamai 2015 Q1 State of the Internet
5AVoD = Advertising video on demand; SVoD = subscription video on demand.
6Even on feature phones and 2G connections

About the authors

Michelle is an Analyst with the Delta Partners’ Advisory team. With a focus on strategy development, customer proposition definition and international expansion opportunity assessments for both Telecom and Digital players, Michelle's project experience lies across various Asian markets. Prior to joining Delta Partners, Michelle has interned with the Joyful Frog Digital Incubator (JFDI.Asia), 3M and Deloitte Financial Advisory Services. Michelle graduated from the Singapore Management University with a double major in Accountancy and Marketing.

Saahil is a Manager at Delta Partners with focus on Digital, Media, and Telecom commercial areas. Saahil has over 10 years of consulting experience across North America, Middle East and Asia with a functional focus on strategy development, new market entries, new business development, business planning, and due diligence. Prior to joining Delta Partners, he worked as a consultant at L.E.K. Consulting, Duff & Phelps LLC (and its predecessor companies). Saahil has an MBA from Kellogg School of Management and a Bachelors of Arts Degree in Economics Honors from the University of Texas, Austin.