Nickhil Jakatdar, Vuclip

Feature

The Other OTT: Hi-speed not required

10 million paying subscribers and 270+ content partners across Asia and the Middle East says Nickhil Jakatdar and his best tech friends were onto something eight and a half years ago when they first came up with his "problem statement" – “How do you provide the best possible mobile video experience for consumers for emerging markets?” – and started figuring out possible answers.

Today, Jakatdar, the founder/chief executive of video delivery platform Vuclip, leaps nimbly over the holes being poked in Asia's OTT growth story because of challenges such as under-developed broadband/network infrastructure and consumers ability to pay for streaming video. 

His tech solutions have been – and are being – proven. Users in Malaysia and Indonesia are watching between 300 and 400 minutes of video on their smartphones a month. And new markets are being added at a rate of one a month. 

In between, a majority stake in Vuclip was acquired last year by Hong Kong telco-turned-entertainer, PCCW Media. Vuclip now powers PCCW's OTT brand, Viu, in emerging markets, and works closely with PCCW to align both OTT video technology, services and experiences with all user segments across both developed and developing markets in Asia and the Middle East. 

Vuclip has also established original content creation unit, Vuclip Studios, which premiered its first series, "What the Duck", a combo cricket/comedy show for India, earlier this year. Vuclip Studios plans to produce about 10 hours of original online content a month, using data-based insights gleaned from the thousands of hours of third-party content already streaming. 

At the same time as eyeing the enormous potential, Jakatdar is open about the end game: an environment in which Vuclip, with all its promises of "an elegant, unbuffered user experience regardless of device or network" to lower-end users, is no longer necessary. 

Over time, as consumers in developing markets grow comfortable with apps, they will migrate from Vuclip to high-end sister platform Viu,  he says. 

The migration from Vuclip to Viu could be a decade away. Meanwhile, emerging markets with mobile data newbies and starter smartphones remain Vuclip's sweet spot. 

"The reason Vuclip will still be valid over five to seven years is because the penetration of data in these markets is still low," Jakatdar says. Today 20% of people in emerging markets use mobile data. "Between 70%  and 80% have no clue what data even means," he says.

Things will change – slowly. "They will get into data, but they will start with something simple. Data is still not affordable for them, and affordability will not go through the roof in five years. It will take time," he adds.  

For now and maybe the next 10 years, the winds will be behind Vuclip's back. "There is still a lot of penetration still to be had," he says. 

Happy bedfellows Viu and Vuclip have divided the mobile/OTT world between them and clear lines have been drawn – at least internally – between Viu and Vuclip. "Each market is very different," Jakatdar says. 

Vuclip, with all its sexy compression tech and micro-transaction savvy (the official description is "dynamic adaptive transcoding technology"), runs PCCW's Viu services in emerging markets such as Malaysia and Indonesia, where Viu launched at the end of May. Vuclip also offers video/content services to telcos across the region as either Vuclip-branded value-adds or as white label services.

PCCW Media operates Viu in markets with high-speed broadband/mobile and high smartphone penetration, such as Singapore and Hong Kong.

In some places, Jakatdar adds, the two audience sectors – those with high-end smartphones and the ability to pay for connectivity and those with starter smart-phones and the ability to micro-pay – co-exist. 

Like the technology, content is tailored for different demos. Viu's biggest selling point is a treasure trove of rights to Korean series, which air on Viu with subtitles only hours after their Korean telecast. For now, Viu has no original production. 

Vuclip is well on its way into the original space. Jakatdar says the success of "What the Duck" has been encouraging. A second season has been commissioned from a local production house in India and three or four new shows are in development. 

"We wanted to see whether we had the capability to produce," he says of the move into originals. Part of that is using data insights to keep risk and costs low. Production budgets, he says, are way lower than television budgets, perhaps by a factor of 10. 

At the 10 million mark and growing, Jakatdar talks easily about all the things that could have sunk the dream. 

These included under-developed infrastructure, high-cost data, general affordability, a gap between what consumers said they wanted on mobile and what they actually watched, the lack of proven business models, billing mechnisms...

Although the situation is improving, even today Jakatdar says mobile access means different things to different users. "People talk about 3G and 4G, but in some markets, it's hard to even make a phone call," he says, pointing out that video is a "data hog" that can be terrifyingly expensive. That, by the way, was the Original Observation #1, followed by Original Problem #1 – "providing a great – and affordable – experience with mobile networks nowhere near as good as in developed markets". 

Original Problem #2 was the difference between what users said they wanted to watch on their mobile devices – and what they actually did. The gap, as the founders found out quickly, was yawning. Users said they would watch movies, TV shows and other long-form content. In reality, they only watched for a few minutes before a phone call came in or they were distracted in some other way. "We saw consumers consuming more short-form content, and that went against what they were telling us," Jakatdar says. 

He's learned a lot about asking questions. 

These days, his favourite question is: "Which app do you use to watch video?"

"When I ask consumers in these markets – all markets – which app they use to watch video, they say, 'YouTube, I guess. Or Netflix. Very few people say Facebook." A few answers on, it turns out that a lot of their consumption is on Facebook with multiple short-form video. "Before they know it, they have watched hours of video on Facebook," he adds.

Problem #3 was monetisation. Jakatdar says while it's true that consumers in emerging markets may be reluctant to subscribe to SVOD services, freemium models are a lot more palatable.

Vuclip's challenge is the same as everyone else's. "The moment you tell a consumer that it’s pure subscription, they run to the next free site. But if you make it free, there’s no way to make money," he says. The answer is half way between the two – offering a certain amount of content for free, bringing users to the site without "being scared that we will start charging them". And then trying to upsell with premium services.

This leads to Problem/s #4 and #4.5 – "If we want the consumer to pay, how are we going to bill them?" and "how much can we charge?".

Carrier billing is the best answer to the first. Jakatdar says integrating directly into telcos' billing systems "gives us almost 100% access". The second is microtransactions of between five and 10 cents, rather than the five or seven dollars in more developed areas.  

Is all this working? There's no way to tell because financials for Viu/Vuclip are not public. What Jakatdar will say is that Vuclip is integrated into the systems of 14 telcos across Asia and the Middle East, with 10 million subscribers who pay for short-form content via browser-based mobile services. 

"When we we made this bet eight and a half years back, a lot of people called us crazy. They said there was no hope. Move on to today. We have got 10 million people to pay. People in Malaysia and Indonesia are watching 300-400 minutes of mobile content on their phones a month. These numbers are amazing. No one expected this," he says.

He sounds as astonished as anyone. "There's a very fine line between being stupid and visionary," he says.  "When I see the numbers, I know that we made the right bet... what we bet on is coming true in a massive way".  – Janine Stein

3 June 2016