By Jun Wen Woo, analyst at IHS Markit
Malaysia-based video streaming service iflix has been expanding rapidly since its launch in 2015 with over 5 million subscribers in the Asian markets at the end of the first half of 2017. Its success in the region is the result of extensive partnerships with local operators and studios. Iflix has a competitive advantage compared to other international players in terms of localized content and more competitive pricing strategy. It offers features such as offline viewing for users who live in markets that still face limitations of slow internet connectivity. It also provides various payment options sensitive to local conditions. For example, in Myanmar, iflix partners with local payments company Red Dot that allows subscribers to pay cash in retail stores without the need of credit card.
Establishment of partnerships with local operators is an important way of geographical expansion besides reducing cost and mitigating risks. Its partnership with telecommunications service providers usually lasts about one to two years, which is considered long-term in the market. In iflix’s most recent launch in Cambodia, the streaming service inked an exclusive three-year partnership with Smart Axiata, a local mobile operator.
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Users in emerging markets are less likely to pay for streaming services and more attracted to free services for now. Without the partnership with telcos, users will need to pay for an internet plan, which could be expensive, even though iflix is offering its service at a lower price. Partnerships with telcos are also important to deliver quality streaming of the video service to users in emerging markets where internet connectivity is often a challenge.
The distribution deals with mobile and broadband operators allow iflix to be offered as part of an operator’s broadband or mobile data plan. In this partnership, telcos are committed to pay iflix for pre-determined number of subscribers. However, iflix may face challenges in sustaining its revenue growth if its revenue is continued to be coming mostly from operators. The company should continue to look at more revenue options, to be less dependent on operators. IHS Markit estimates that around 80 percent of its subscribers in 2017 are attained through bundled services from various mobile and broadband operators. It is possible that users who get the free access do not heavily use the service and turn away after the free period ends.
Localization and competitive pricing strategies are important but user engagement and retention remains the key to its success. Iflix needs to focus on building a list of “must-watch” type of content to attract users to sign up for its service. Exclusive local content deals, such as popular local shows and live broadcasts sports as well as original content, are important to attract more users.
