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19 December 2019

Tables turn as Netflix forces Viu out of India

Global streaming forecasts are being frantically rejigged for the new year as not only has Netflix lifted the lid on regional subscriber numbers, but Viu – the PCCW-owned OTT video success story – has pulled out of India.

That’s right, since around 2016 Viu has been a trailblazer and above all else, its retreat from one of the world’s most fearsome and under-saturated streaming markets marks a victory for Netflix.

At a time when investing in the booming Indian video market looked a no-brainer, Viu’s departure is ultimately as a result of struggling to match US content spend. In truth, Viu wasn’t even anywhere close to matching the likes of Netflix and Amazon, which are spending as much as $10 million on a single show, while Viu’s entire annual content budget is reportedly in the region of $15 million.

Crucially, while Viu is among the top 5 video streamers in many of Asia Pacific’s markets, it was floating somewhere around the halfway point of India’s 30 or so established OTT video app options.

Figures from Faultline’s research arm Rethink TV places Viu on 2.1 million paid subscribers in India today (about 0.15% of the Indian population), neck and neck with Netflix. Compare this to its native Hong Kong where there are some 5 million Viu viewers from a population of approximately 7.44 million (a crazy high 67% penetration). Being a needle in a haystack isn’t the life for everyone, particularly when prices remain so competitively low in a country like India.

Insiders told the Economic Times of India, “Arun Prakash, chief strategy officer of Viu, told the employees that the company has decided to fold India operations.”

Viu has a projected 11.2 million viewers across its 6 main APAC markets (Hong Kong, Indonesia, Malaysia, India, Singapore and the Philippines), rising sharply from the 6 million monthly active users reported in 2017, just 18 months after launch. That’s not including the 11 Middle Eastern countries where Viu is available.

For the past three years now, since Netflix launched in India, we have been imploring that if Netflix was going to stand any chance in a cutthroat market like India, it would have to commit to aggressive price cuts together with increased investments in locally produced original content. We can’t help feeling partly responsible for Viu’s exit, because Netflix did both.

For India’s notoriously low ARPU market, Netflix was forced to cut its subs to the bone of around $2.90, given that even some full-blown pay TV packages cost little more than that. The added worry for Viu and other established local APAC firms like iflix, is that Netflix is expanding this strategy, most recently in Malaysia with a mobile-only service just three months after the Indian equivalent, albeit at a slightly higher rate of just over $4 a month.

At least Malaysian ARPUs are a little higher but even there Netflix has been forced to mix it with local operators coming in around that price or even a bit less. It will still find the going tough given that Malaysia is the home of iflix, with 25 million subscribers as of Q1 2019, although this was before iflix pulled out of Africa – reducing its footprint from 22 countries down to 13.

Edgeware and Massive Interactive (now owned by Deltatre) are among PCCW’s key vendor suppliers for supporting OTT video delivery, so that’s some 2 million less viewers to their names following this week’s news.