The research report noted that in 2019, legal online streaming services generated $560 million in Southeast Asia out of paying subscribers alone. The biggest markets were Singapore and Malaysia, where OTT pay-TV services are gathering the vast majority of paying users.

Showing the potential opportunity that is offered buy the region, Dataxis highlighted that only 3.6% of Southeast Asian households were paying a subscription for legal streaming services as of the end of 2019. At Q1 2020, US based platforms had the largest share of paying subscribers, mostly explained by a sharp increase of Netflix subscribers during the worldwide lockdown measures and the introduction of cheaper mobile plans in Southeast Asian strategic markets at Q4 2019 and Q1 2020.

Yet the study also revealed that except Malaysia, most countries in the region did not have a very high pay TV penetration and piracy is still widespread despite authorities and telcos’ efforts to tackle it. This says the analyst is why most media consumers in Southeast Asia are not used to paying to access video content. In the region, platforms offering free access to their content reach much more viewers than SVOD pure players like Netflix.]

But Dataxis noted that SVOD was not leading the development of video services in the region. It added that the video streaming markets in Southeast Asia are clearly demonstrating a viewers’ preference for AVOD (advertising video-on-demand) platforms. Even though the advertising based financial model has proved hard to turn into sustainable products.

It noted that some players that have been on the market for several years are still struggling to generate profit, as Hooq’s shut down and iFlix’ acquisition showed us last quarter. This is due to a highly competitive environment where OTT platforms have to invest in new content constantly, despite advertising revenues remaining rather low in the region. Chinese OTT might be the only actors who can afford to keep AVOD as their main model to reach a large number of viewers while still investing in valuable content without making sufficient operating margins in the next few years.

Dataxis believes that if they survive the current downturn of advertising markets following Covid-19’s impacts on the media economy, local platforms will have to face strong competition especially from Chinese OTT. It observed that Baidu’s iQiyi streaming service might be merging with Tencent’s WeTV soon to create the world’s biggest streaming service. Both brands are already gathering a growing audience in Southeast Asian markets and the large amount of regional content in their libraries is also more likely to attract customers which were not considering paying subscriptions for US platforms.

Since the vast majority of local players are based on an AVOD or a freemium model, Dataxis suggested their survival will most likely rely on their ability to generate revenues by introducing and developing paid offers.