CATCHA GROUP is eyeing one million subscribers in Asean by the end of the year for its internet TV service product iflix, which will be launched within the next few weeks, says group CEO and co-founder Patrick Grove.
In other words, the group has only slightly more than six months to hit that target. Nonetheless, Grove is upbeat about iflix as its monthly subscription fees will be lower than that charged by its Western counterparts — Netflix and Spotify.
“We will be cheaper than Spotify and Netflix. We haven’t finalised the exact launch price,” Grove tells The Edge.
US-listed Netflix charges about US$10 (RM36) a month for unlimited access to 10,000 titles while UK-based Spotify offers unlimited music downloads for RM15 per user.
To match the growth of Netflix in the past seven years, Grove is optimistic that iflix will be able to achieve a 40% penetration rate or 120 million subscribers out of the region’s 300 million smartphone users in the next seven years.
At present, Netflix reaches 40 million homes, representing 40% penetration of US households, he notes.
“Our aim in 10 years is to reach everyone with a smartphone in Asean,” he says, adding that the soft launch of iflix, a partnership between Catcha and Hollywood’s Evolution Media Capital, will be within the next few weeks, followed by a hard launch a month later.
“Right away, we are going to have probably about 8,000 [hours of content], and then the final balance [of 2,000 hours of content] will be added over the next 30 days.”
For iflix, each subscription gives the user access to its services on five devices and allows him to download content to his mobile, tablet, computer or television set, for viewing anytime, anywhere.
iflix will first be launched in Malaysia and the Philippines before expanding to other Southeast Asian markets like Thailand, Vietnam and Indonesia, says Grove. “We look at where download speeds are strong in the emerging markets.”
Additionally, iflix’s partner and investor Philippine Long Distance Telephone Co (PLDT) has 66 million mobile customers and over one million broadband subscribers, giving iflix a good base to market to.
On April 23, iflix raised US$30 million from Catcha and PLDT (contributing US$15 million).
PLDT, the largest integrated telecommunications company in the Philippines, is the minority shareholder of iflix while Catcha is the majority shareholder. It has also been reported that group CEO Mark Britt and newly appointed group chief operating officer Azran Oman-Rani (former AirAsia X Bhd CEO) also took part in the investment.
Grove says the funds will be used to acquire rights to new content and produce original programming or local content.
He acknowledges the prevalence of pirated content in Malaysia but says, “We believe in being a better-value proposition to consumers … We know that piracy is free, but it comes with issues like viruses and inconsistent and bad quality.”
He adds that Netflix and Spotify’s success stories in fighting piracy bode well for products like iflix. “People always get pirated content because it only costs them RM10 [per DVD]. But if the legal DVD is RM10, won’t you [the consumer] buy that instead?
“If we offer an amazing product at the right price, we believe very strongly that people will not indulge in pirated content.”
Grove opines that with products like iflix, people will stop spending on pirated box sets and movies.
iflix’s partners include Twentieth Century Fox Television Distribution (Fox), Warner Bros International Television Distribution and BBC. iflix will be announcing more partnerships with Hollywood studios in the coming weeks, bringing the total to 30.
The catalogue includes BBC’s Sherlock Holmes, Fox’s Modern Family and Sons of Anarchy, and Warner Bros’ The Big Bang Theory. About 60% of the content is from the West, with the rest from Asean.
However, iflix is not the first Netflix-like project in the region. Philippines-based Globe Telecom and Singapore Telecommunications Ltd (Singtel), together with Sony Pictures Television and Warner Bros Entertainment, have already launched their video service Hooq in the Philippines.
On the competition, Grove says, “We think many will launch such services but we can offer a better range of content.”
According to previous reports, Hooq costs PHP199 (RM16) per month.
On whether internet TV services would alter the country’s viewership pattern, Grove says, “I don’t think iflix or Netflix killed FTA (free-to-air) or cable TV. I think it’s complementary.”
Nonetheless, statistics from the West have shown that the introduction of Netflix has caused a decline in the viewership of FTA and cable TV.
Grove says the main reason for the decline in viewership is the popularity of internet TV, namely YouTube and Netflix. The fact that people do not want to follow fixed schedules to watch shows has also contributed to the rise of internet TV.
While Netflix has secured 40 million paying customers in the last seven years, cable TV lost about four million. “Yes, some people will cut the cord, but many will live with both,” says Grove.
In the first few months of its launch, iflix will track and analyse the viewers’ top favourites, which will enable the company to decide what kinds of local content to produce later on.
Grove estimates iflix will be able to garner some 50,000 viewers within the first month. “That’s enough to decide what [kinds of content] to make,” he says.
Catcha has a 57.22% stake in ACE Market-listed Rev Asia Bhd (fundamental: 1.05; valuation: 0), which provides digital marketing solutions. Catcha has three companies listed on the Australian Securities Exchange — iProperty Group Ltd, Ensogo Ltd and iCar Asia Ltd.
Note: The Edge Research’s fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.
This article first appeared in The Edge Malaysia Weekly, on May 11 - 17, 2015.
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