Online video competition poised to turn up Asia subscription economy

Subscription may be a dirty word for content proponents who believe the industry should be free of walled gardens, but this business model is touted to offer valuable insights and a way to build better customer relations.

Asia's online video space, in particular is set to heat up with Netflix expanding its presence into the region including Singapore, Hong Kong, South Korea, and Taiwan where its services will launch in early-2016. It launched in Australia and New Zealand this March.

"We're seeing a lot of reaction in the market from players that want to be competitive with Netflix," said Michael Greco, Asia-Pacific vice president of Vindicia, pointing to over-the-top (OTT) video services as a key growth area.

A study conducted by the subscription services vendor and Ooyala revealed that 1.6 billion people worldwide actively watched online video via various connected devices, of which 900 million were viewers of TV and movies. This audience segment was expected to reach 1.3 billion by 2019, driven by the increasing number of market players offering OTT services, Greco said.

Speaking to ZDNet in an interview, he explained that the subscription model could be applied to pretty much any business segment, including media, security services, and even retail, especially products that had to be regularly replenished or replaced. Consumers, for example, can set up a subscription account to receive new bags of coffee beans or sets of razor blades. More importantly, this would allow organisations to build a profile of their customers and glean valuable insights on their business.

"It changes the commerce model for a lot of these companies because now their business becomes predictable, and they have loyal customers and are able to add value to the member-subscriber relationship," he said.

They could offer subscription members regular updates, free shipment, or exclusive information about the product, he added, noting that these added services would go a long way towards building customer loyalty and relationship.

Combining subscription transaction data with actionable business insights would better enable organisations to identify trends and patterns, Greco said. He pointed to the emerging Internet of Things (IoT) market as another growth potential, where subscription services could be spawned from home security, healthcare, or automotive concierge service offerings.

Vindicia opened its Singapore office in January this year, which serves as its Asia-Pacific headquarters overseeing markets in Asean, Japan, Korea, Australia, and New Zealand. The subscription services vendor believes the entrance of Netflix will fuel the OTT video market, hence, driving the need for subscription management tools.

Citing stats from Digital TV Research, Greco noted that the Asia-Pacific region would have 68.83 million subscription video-on-demand homes by 2020, with Japan the largest market. Some 7.7 percent of the region's TV households would subscribe to a VOD package by 2020, when revenues would hit US$4.76 billion.

To tap the expected growth, Vindicia is looking to expand its presence in the region where its customers currently include Telstra and Foxtel in Australia, and Media Prima in Malaysia. The Malaysian media company taps Vindicia's platform for its range of content offerings including video as well as newspaper and magazine, providing its 4 million registered subscribers the option to buy through Media Prima's TonTon credits.

"One significant difference we're seeing in Asia-Pacific is that credit card penetration is pretty low, compared to a market like the US where this mode of payment would satisfy the majority of consumers," Greco said. "So we need to support different payment modes here, including mobile carrier billing to allow customers to pay through their telcos, either post- or pre-paid. This is becoming critical to our clients' ability to acquire customers."

He added that Vindicia charged its customers a fee for each successful transaction and depending on volume.

US subscription services vendor, Zuora, in March this year raised US$115 million in funds from Silicon Valley and public market investors. In May, the startup launched a new app marketplace offering more than 55 apps from its technology partners.