The arrival of Netflix in Asia Pacific last year put the spotlight on the huge potential of online TV in the region. But given the many different languages spoken and the vast differences in internet connection speeds, it is clear the challenges are almost as large.
That has not stopped new entrants to the market. Emerald Media, set up by KKR to spot media deals, became the latest this week, announcing on Tuesday that it had acquired a significant minority stake in over-the-top content provider YuppTV for $50 million.
Over-the-top (OTT) companies are those that bypass traditional means of distribution, primarily by using the internet to deliver music, TV and film directly to audiences.
YuppTV is a reasonably mature company in the market, having been founded in 2006. It delivers content in South Asian languages over the internet to the Indian diaspora of about 38 million people.
“And they are paying for it,” said Rajesh Kamat, managing director of Emerald Media, during an interview with FinanceAsia.
A reliable fee-paying audience is not to be sniffed at in an age of cable-cutting and when many internet rivals are chasing key performance indicators such as eyeballs — industry slang for views — with no clear idea of when revenues will morph into profits.
The main combatants include Netflix, Amazon, mainland China’s LeEco and local incumbents such as PCCW Media. All are racing to attract Asian audiences who are fast connecting to the internet by mobile and fixed broadband across multiple devices.
Consultancy Gartner sees consumer spending on video-on-demand growing from $245 million in 2014 across emerging Asia to $1.068 billion by 2019. But this is being split many ways.
“Foreign OTT players and social media networks are slicing the advertising pie, and will hurt TV advertising revenues in the medium term," said Cecilia Yau, a Hong Kong and China entertainment and media partner at PwC.
But niche players need to carefully pick the most loyal and lucrative segments of the market.
The average revenue per user in the US consumer communications sector is about $20. Uday Reddy, YuppTV’s CEO, told FinanceAsia that his company was averaging around $15 to $20 of revenue per user, a relatively high amount for Asia.
“While about 6 million to 7 million people are sampling YuppTV it also has a meaningful subscriber base that pays for the rest of the audience,” he said.
Of course, this does not come without cost, which in the OTT space is mostly for acquiring content and building brand recognition to gather a critical mass of viewers.
“We have significant subscription revenues coming into YuppTV but we still need capital for the next two years to be profitable scaling up,” said Reddy.
With its new capital from Emerald Media, YuppTV hopes to attract more of the 4.9 million households in the Middle East that speak a South Asian language and the 1.6 million that do so in Malaysia.
Headquartered in Atlanta, Georgia, YuppTV’s biggest market for South Asian TV is still the US. YuppTV offers more than 250 South Asian TV channels, over 5,000 movies and 100-plus TV channels from elsewhere in the UK, Middle East, Canada, Singapore, Malaysia, Australia, New Zealand and the Caribbean.
“We’re extremely focused on linear TV and catch-up,” Reddy said, describing traditional television, where viewers watch a scheduled TV programmes at the time it's broadcasted.
Beyond capital, Emerald Media is also offering YuppTV access to its other portfolio companies including Endemol, OML, Fluence and Graphic India, something that should help it create original programming.
In September 2015, YuppTV had raised $50 million its Series A round of funding from sovereign fund Poarch Creek Indian Tribe of Alabama.
