The Future Of Online Content Delivery In Asia: Boom Or Bust?

The internet has prompted an exciting revolution in content delivery. Internet video streaming and downloads are on track to account for over 80% of all consumer internet traffic by 2019. As an entrepreneur, this is a huge opportunity!

As the Co-Founder and Chairman of Asia’s fastest-growing subscription video service, iFlix, which launched operations in 2015, the media and entertainment industry in the region is on the verge or significant disruption.

But, without the proper support of governments and policy makers the full potential for this unprecedented opportunity will never be realized.

Nowhere is the potential for robust growth in this sector more attainable than Asia. Roughly 61% of the estimated 950 million homes here now receive multi-channel TV and the region accounts for well more than 1 billion internet users. More than 280 million smartphone subscribers are located in the ASEAN region, well more than in the United States (210 million) or the European Union (200 million). Audiences in Asia love staying connected and being entertained. The three cities with the highest penetration of Facebook users are Jakarta, Manila, and Bangkok. In fact, iFlix subscribers in the Philippines – one of our four markets today – spend more than three hours on average per day viewing movies and television programs. The Internet TV revolution has begun!

Because the world is a smaller place than it was 10 years ago, consumers in Asia can access this content in greater volumes, at greater speeds, earlier, and in different formats that can be consumed across any number of devices and platforms when and where they decide. Most of these new media services arrive over broadband data lines, which has given rise to ‘OTT’ video, meaning content delivered ‘over the top’ of broadband data. So the business of delivering video and television programming to consumers is in the midst of a sea-change driven by new media devices, growing broadband penetration, and particularly in Asia by the emergence of a new generation who consume media for several hours at a time via multiple devices and in multiple settings.

Industry is quickly responding by creating better, more compelling content and launching new services through which content can be delivered to consumers quickly, securely, and at a reasonable price. iFlix, for example, now proudly operates in Indonesia, Malaysia, the Philippines, and Thailand, enjoyed by millions of consumers for roughly USD 2-3 per month. Research undertaken by the Motion Picture Association estimated that in addition to iFlix there are now about 74 other legitimate online content services operating throughout Asia.

OTT service providers employ a wide variety of business models that that all depend heavily on technological protection measures and digital rights management technology to facilitate different consumer experiences. This is why modernizing copyright laws to incorporate WIPO Copyright Treaty protections into national legislation is imperative, because a primary challenge to the continued growth of the pay-tv industry and legitimate OTT services is rampant online piracy. Nowadays consumers can access illegal content through cyberlockers, live streaming sites, and peer-to-peer networks just as easily as they access legitimate offerings through catch-up television, or transactional or subscription-based video on demand services. It’s often said at iFLIX that are number 1 competitor is actually piracy.

Some jurisdictions around the world, including a growing number in the Asia Pacific region, employ site blocking remedies to restrict consumers’ access within their borders to blatantly infringing sites located outside of the authorities’ jurisdictions. Australia, India, Indonesia, Malaysia, Singapore, and South Korea, are useful examples in this regard. It’s great that two of the four regional markets in which iFlix where we operate offer this kind of protection but we need others in the region, particularly the Philippines and Thailand, to follow suit, because the results are encouraging. Research from Carnegie Mellon University focusing on the United Kingdom, showed that following blocking orders against a limited number of sites there in 2014, consumer traffic to legitimate streaming sites experienced a corresponding increase. Yet the UK Intellectual Property Office’s Online Copyright Infringing Tracker report reflects that overall numbers of film and television downloads is constant, suggesting that despite the availability of legitimate alternatives, inveterate infringers are accessing even more illegal content from alternative (i.e. un-blocked) pirate sites.

Because in addition to pirate websites another phenomenon particular to the film and television industries and increasingly popular in Asia is the sale of “black boxes” that allow users to receive streams of virtually any unauthorized video content on demand from unlawful external servers. These boxes are all too easy to purchase, install, and set up and they make available large volumes of programming (both live broadcast channels and video on demand) to less tech-savvy consumers who would traditionally not have viewed it on a computer. These devices and apps effectively take piracy straight into the living rooms of average families.

They steal revenues not only from producers of premium programming like movies and sports, but also from everyday broadcasters, who lose the ability to generate income from advertising on their own terrestrial channels or their own websites, and from governments to whom they pay no taxes or licensing fees. It’s usually not the boxes themselves that infringe, but the applications loaded into them. The boxes instead usually serve as a conduit through which infringing content can be accessed. Some of the infringing Apps require a subscription fee in order to access channels, but certainly no license fees are ever paid to the copyright owners!

Because of this so-called ‘mere conduit’ concern, some regional governments take the view that their national laws insufficiently protect content providers and authorized licensees against proscriptions to address the proliferation of black box devices and this is yet another reason why copyright laws need to be modernized. For example, the 1996 WIPO Internet treaties require that an exclusive ‘communication right’ be extended to copyright owners, with related criminal penalties, to prevent streaming copyrighted works without the copyright owners’ consent.   Authorities in some jurisdictions claim that the lack of such a right in their copyright laws hinders their efforts to mount effective prosecutions. Hong Kong is notable example here, and it’s lamentable that amendments to Hong Kong’s Copyright Ordinance that would have helped in this regard first promulgated in 2006 failed yet again to pass through the Legislative Council.

The offshore dimension of online piracy also makes enforcement of national laws difficult. Notice and takedown schemes are irrelevant if operators intentionally set up in territories with no such infrastructure, or if the operators simply don’t care about compliance because they want to instead make money off of pirated content. But as mentioned earlier, a number of jurisdictions across the region have adopted mechanisms to block access to non-compliant offshore websites. Internet intermediaries can also play an important part in addressing piracy by cutting revenue flows to pirate sites and restricting payments by advertising services and credit card processors. Search engines can remove pirate programing and sites from their search results so that they’re less accessible to ordinary consumers.

Governments must therefore address the growth and proliferation of illegitimate OTT services, particularly those located off-shore, if they want to see us survive and contribute to their national economies. Legal OTT is a welcome development and legitimate service providers throughout Asia, particularly iFlix, are making good use of it. Our goal at iFlix is in fact to revolutionize internet TV in emerging markets globally. But illegal OTT is hugely damaging and will prevent content and service providers like us from generating the revenues necessary to support the future of the industry if solutions to these problems are not found and implemented.

Patrick Grove is the co-founder and Chairman of Catcha Group’s business, iFlix, Southeast Asia’s leading Internet TV service.