Tencent buys iflix, in a distressed asset sale

This article first appeared on our Chinese blog hosted on WeChat, you can read the original Chinese article here. 

The rumours have been circulating, and Variety finally broke it as news: Tencent Video will buy iflix, a video streaming platform primarily for Southeast Asia.

According to Variety article, as part of the deal, iflix brand name will be kept for 6-12 months, and majority of the emplolyees, including CEO Marc Barnett, will be retained.

The value of the deal, in ‘dozens of millions’, is much smaller than the $348 million iflix had raised from international investors. The company tried to IPO in Australia last year, and failed.

Variety article also put iflix active viewer number to be 25 million, consuming a monthly sum of 2.5 billion minutes, or 100 minutes per person on average.

iflix once expanded to Middle East and Africa as well. However, it was not smooth. Currently it is available in MY, ID, PH, BD, NP, TH, BN, PK, MN, VN, MV and KH.

Problem with monetisation 

The problem with majority of the streamers in Southeast Asia is: you can’t monetise effectively. People do not have willingness or methods to pay; channels charge a very hefty commission; and advertising is tiny.

iflix content, a mix of international and local productions, are expensive to produce or license. Netflix, since its entry, has managed to capture the portion of viewers who have credit cards to pay.

iflix competitor Hooq, with the backing of Singtel, Sony and Warner Media, could not sustain and went to retrench 100% of their employees in March this year – right before the lock downs which surely gave a rise to content consumption but probably put a further dent into monetisation.

Another competitor, Viu, built low cost local content, and is (for now) still alive.

iflix restructuring and asset sale has been months in the making. Variety said Youku, iQiyi and Tencent all received proposals.

Martyrs that educated the market

Tencent launched WeTV in Thailand last year – the same service is also available in Vietnam. Traction is limited.

iQiyi also wanted to bet big in the region, by hiring Quek Yu-Chuang, a former Netflix executive, to lead the effort. That was announced just earlier this month.

GoJek, which just retrenched 9% of its employees, is also getting into the fray. Ultimately, it has the users, as well as the ground understanding (in contrast to iflix’s international grandstanding).

Maybe, everyone has realised, as martyrs iflix and hooq have educated the market – the prospects become clearer.

Newcomers will need content that appeals to local tastes (as opposed to localised content), more optimised cost structure, and more practical expectations of the market.

Well, in theory it all makes sense, once you start executing you find all the pitfalls.

Do not forget – there is Tik Tok, right there.