All is not rosy for OTT players. HOOQ, known as “Netflix of Southeast Asia” SHUT DOWN their operations in April.
HOOQ, a JV of Singtel (owes 50% of Bharti Airtel), Sony & Warner bros with a consumer base of 80M & presence in 6 countries stopped their operations due to lack of funding.
We will talk about 4 things regarding HOOQ: Flaw in GTM strategy, Piracy, Balance sheet correction & Perks of premiumization.
1) Flaws in GTM: – HOOQ focused on licensing expensive Hollywood TV shows like Flash, Big Bang Theory, Arrow, etc. & used it to attract customers. – These made the Cost of Consumer Acquisition (COCA) very high. But Southeast Asia paring Singapore is still not very affluent to be able to afford expensive plans. This resulted in less budget on advertising & branding. – As Southeast Asian consumers started to prefer local content, HOOQ tried to slowly change focus towards local content while its competition Viu, Netflix, and Iflix have acquired considerable local content faster. – SVOD (Subscription Video on Demand) model is very tough considering the level of piracy & consumer behavior which shows that consumers were still slow in migrating to streaming. On the other hand, AVOD (Ad-supported Video on demand) needs comprehensive integration & partnership with advertisers which HOOQ has started of late. – These resulted in poor subscriber growth despite first-mover advantage. So HOOQ made big bets on their international tie-ups which failed to translate into revenue.
2) Piracy behavior of consumer: – Most of the exclusive HOOQ shows they bought from WB, Sony, etc. are omnipresent on the internet. So, consumers don’t see a point in paying for it. – Ultimately, this led to an increase in the piracy of these Hollywood shows in the region.
3) Balance Sheet correction of Big Boy Singtel: – Malaysia’s biggest Telco (50% owner of Bharti Airtel) had invested heavily in the Indian venture of HOOQ, where it is facing cut-throat competition from Jio, and COVID19 would also create a big dent in their balance sheet. – So Singtel decides to pull the plug & stop further funding while Sony and WB are focusing on their partnership with Disney+. – Revenue of HOOQ grew almost 2 times in a year, but future projection & strategy to increase ARPU looked costlier than Singtel could fathom.
4) Perks of Premiumization: – HOOQ failed to create a superior branding image in any of its 6 markets, while deep-pocketed players such as Netflix & Disney+ enjoy very high brand recognition especially in Singapore (world's topmost GDP/Capita country). – This has stumped attempts of HOOQ to improve Average Revenue per user (ARPU).
Conclusion: -While the OTT market is very lucrative & market penetration is still under 5% in most markets, long term investment commitments are needed to hold their position. -Despite the huge hunger of local content, change of consumer behavior to pay for content is an uphill task. – AVOD model may be a plausible option to reach masses in developing economies.