Hong Kong-based telco and pay TV operator PCCW made an aggressive OTT play this October when it launched the Viu service. Building on the mobile VOD Vuclip platform, which PCCW acquired earlier this year, Viu will be pan-regional OTT offer, programmed with first-run Korean and Asian series. With Netflix on the horizon and the Asian OTT market looking increasingly crowded, PCCW Media managing director Janice Lee tells Stewart Clarke about the plans for Viu
TBI: You are a telco and pay TV company in Hong Kong. Why are you launching Viu, a pan-regional OTT service?
JL: When Now TV started eleven years ago we were a disruptor so [disrupting] is a philosophy as a company and a business. We are very conscious, almost paranoid, about being aware of new technology and consumer behaviour, and we want to get ahead of it.
We saw a state where if we – and our industry, including our content providers – didn’t evolve the core pay TV offering, and move it onto various connected devices, we were going to lose out to piracy, and were going to lose our customers’ share of viewing to other new players. That’s why we started looking at OTT.
TBI: Aren’t you concerned about fragmenting the audience?
JL: We have seen that the usage of [multiscreen] does not diminish the time people spend on TV.
For example, people now watch news on the go. News viewing has doubled or tripled as people watch throughout the day, whereas they used to just watch the morning and at night [bulletins], which they still do as well.
TBI: How will the Viu OTT service sit alongside the traditional pay TV offer?
JL: Pay TV tends to be a premium product with a big bundled offer, and this typically increases over time, and subscribers and ARPU go up. However, we don’t want to create room for a low-priced entrant.We don’t want to leave a void where we don’t attract new segments to the market.
We we want to continue to grow in a couple of segments of TV and we recognise that there is a segment of customers that may not ever become [traditional] pay TV users, so that is why we launched Viu.
TBI: So you can target a wider range of consumers than with Now TV?
JL: With pay TV we target the 2.4 million households in Hong Kong, but the OTT offering targets the 7.8 million individuals here. Every single one of them can become a user, so it is part of our strategy to change the addressable market by reaching out to individuals rather than households.
TBI: From launch you have said Viu will be a pan-regional service. What are your goals beyond Hong Kong?
JL: Because Hong Kong is a small market we have looked at how we grow beyond that. OTT allows us to be network-independent and it allows us to get into other markets. The job for us was, ‘how do we define a consumer proposition that appeals regionally?’
TBI: You already had the Vuclip service. How does this feed into your OTT story?
JL: Viu is a product of two things: our own organic efforts, and our investment in Vuclip, a mobile video company that was based in Silicon Valley and VC-backed, and which we acquired. It has eight million subs in ten markets. We’re now evolving Vuclip into Viu.
[Vuclip] was mainly mobile and mainly shortform content, but the company also has a patented technology that allows encoding on the fly, so customers don’t suffer from buffering. We are now putting premium content on Vuclip and rebranding it as Viu, so there will be one core service.
TBI: Why have you opted for a freemium and not a subscription, model?
JL: We see that the multiscreen viewer is spending close to half of their time away from the TV screen, but at the same time the actual time spent on TV hasn’t declined. Monetisation in terms of advertising, however, is still catching up with that, but the ad revenue on non-TV screens is increasing very fast.
TBI: Freemium is then about ensuring you get a piece of that fast-growing digital advertising pie?
JL: This is not the year 2000 dotcom bubble. Changing consumer behaviour is real, and it is not going away; people are going to consume a lot more outside of the TV screen. The ad revenue hasn’t caught up yet, but the growth is accelerating and we want to capture that digital ad market. The growth is phenomenal – 20-30% a year.
TBI: You have acquired a lot of Korean content. What is the programming strategy and approach for a pan-regional OTT service?
JL: We are looking for content that can travel and Korean content is one category that does that pan-regionally. Even though only 22 million people in the region speak Korean, the K-pop culture, whether that’s music or TV series, is quite a phenomenon.
We also have Japanese, Chinese and Taiwanese titles, but we recognise the current content that is currently trending is Korean. We also want a balanced portfolio as 20 years ago Japanese content was all the rage and the landscape may change again, especially with more top-dollar production coming out of China.
TBI: What rights are you buying?
JL: For Hong Kong we try to look at all rights because we can use, let’s say the Korean content, on the pay window, free window and OTT window. Regionally, we are only buying OTT rights.
TBI: The OTT market in Asia is increasingly crowded with numerous local players and now Netflix moving in. How will Viu compete in this landscape?
JL: For one, the market big enough for multiple players. I also see two types of [OTT] proposition. I believe ours is more Asian focused as we see that the market for Hollywood content is quite cluttered.
I think there is space for Hollywood content, and we will also look at that, but in each market there is also a strong pay TV operator who has a lot of international content already. If you do offer the Hollywood content it is going to be about how you differentiate.
TBI: Are there technical constraints to a region-wide OTT offering?
JL: Asia is not a homogenous market in terms of mobile rollout, the handsets used, and fixed, and broadband, penetration.
Hong Kong and Singapore are very lucky and you can have a very feature-rich product in both, but if we just put that into some other territories only a very small group of of customers will be able to access it. While 3G and 4G is growing rapidly, a lot of users in some territories still have 2G phones and with [the Vuclip] technology you can view content on 2G phones.
TBI: And you can view content offline with Viu?
JL: The team created a new rights window with the content providers, which is download to stream. In many markets data is no longer unlimited, and users don’t want to be surprised or use all of their data, so we allow them to download content and then watch it offline. Secondly, in the emerging markets where bandwidth over mobile is not consistent, then download-to-stream ensures viewers can enjoy their content on their handset.
TBI: How big can Viu become across the region, what is the expectation?
JL: I can’t give a projection as we only launched two weeks ago and it is too early to say, but we’re looking for increased penetration across our existing base with this premium product, and to reach customers in new markets like Hong Kong and Singapore.
The freemium model means we have some flexibility for each market; in some the subscription model is more mature, in others it just isn’t developed yet.