April 2015: Korean drama distributors might be weeping over China right now, but on the whole rights owners are revelling in new online opportunities that continue to open up across Asia. Even in China, many expect the online love fest with international content to continue despite a hiccup here and there and some stern official responses to platforms who push the envelope too far too quickly.

Some say China continues to be their top market for on-demand rights, and that multi-year output deals remain in place at healthy licensing fees that top anything being offered in the linear space.

China, "by a large margin", made the biggest different to all kinds of on-demand licensing in 2014, says Annie Yim, executive director, business development and corporate finance for Celestial Tiger Entertainment (CTE), which represents U.S. studio Lionsgate's content in Greater China/Southeast Asia/Japan/Korea.

New mainland Chinese rules, effective this year, require prior approval of entire series. This will delay airdates, perhaps by six months or more. On the most optimistic end are those who predict the new censorship requirements are a moving target that will drift away sooner rather than later, setting rights fees free to return to previous highs.

Constant change has become a hallmark of China's media landscape. As one international distributor says: "There's always the risk of a shifting regulatory landscape in China. It's that sort ofenvironment".

In the short term though, some distributors are taking a hit in China, with licensing fees collapsing to about 30% of what they were during the year before the regulations were announced.

An example is simultaneous/day-and-date releases of current Korean drama series, which insiders say have dropped from US$280,000 an episode to about US$100,000.The reason is that every day a release is delayed, is a win for piracy, and few are willing to pay top dollar for programming that has already been pirated.

There's also no telling what censors will cut - another win for piracy as audiences go after original versions.

Piracy remains the biggest fight rights owners face in Asia. "One of the best ways to combat that is to, as much as possible and within the bounds of laws and regulations, make our content available as easily and quickly and legally as we can so that people who want to enjoy it can. That will continue. I think technology presents both challenges and opportunities and it's our job to be wise and navigate through them," says Sony Pictures Television's (SPT) president, international distribution, Keith Le Goy.

Whatever the risks and challenges in Asia, demand for legal content from online and over-the-top (OTT) platforms is booming, blooming and flowering through every crack in the video entertainment asphalt across Asia.

"We are certainly seeing a significant increase in OTT services in the region and are excited about the opportunities they bring to the industry, including providing more platforms for consumers to view our content," says CBS Studios International's Asia Pacific sales director, Nicole Sinclair.

"People are getting the chance now to enjoy a wider range of content in a way that is more convenient to them than they have ever had before. It's a great opportunity for us," SPT's Le Goy says.

LINEAR VS NON-LINEAR

The impact on the traditional linear business isn't necessarily negative.

"We have seen around the world that with the appropriate windowing of content, both OTT and traditional linear businesses can coexist and occasionally be complementary," Sinclair says.

In addition, there's a cultural influence in Asia that mitigates any negative impact on linear services.

"TV viewing in much of Asia is still a shared experience," says Ganesh Rajaram, FremantleMedia's executive vice president for sales and distribution in Asia. "The environment will change but for a lot of people, watching telly after dinner and sharing news of the day is culturally ingrained," he adds.

Traditionally linear programmers and platforms with strong linear offerings are stepping up as aggressively as any of the new digital-native platforms to stake their online claim.

"A lot of businesses are saying, 'what are the new ways we can use content to drive businesses, find new relationships and new revenue streams," Le Goy says.

Lines between old and new continue to blur. "The Nine Network in Australia launched on-demand service Sam this year. What are they? Traditional or new," Le Goy asks, adding: "We are looking at the totality of the way in which to work with partners and our content to give the most options for consumers and partners".

FremantleMedia's Rajaram says linear and digital work hand in hand. "They're complementary," he says. At the same time, he highlights moves such as SingTel's Hooq, which foreshadow the arrival of Netflix. Rajaram calls Hooq a "pre-emptive strike" and expects "bigger pan-regional players going into partnership to protect their turf".

This doesn't have to pose a conflict for rights holders. "Linear pan-regional channels are quite happy to take linear rights and we can sell digital rights to someone else. It's complementary. We expect them to coexist," Rajaram says.

FEES & PRICING MODELS

Distributors say money is definitely changing hands for online content, and that digital distribution is a significant and growing part of the licensing business.

Rajaram says between 25%-30% of FremantleMedia's distribution business in Asia now purely digital (online/ on-demand).

CTE's Yim says digital-only platforms are licensing the most amount of Lionsgate content for on-demand distribution in Asia.Perhaps the biggest difference over the past five years is that broadcasters are acknowledging that content for online platforms has a value.

"One of the big differences now is that people understand what the rights are about and that there's a value to these rights," Rajaram says.

"In the past people thought that pay-TV included everything. In the last few years, we have been very clear about carving them out and allowing non-linear platforms to acquire our top shows if the price points are good enough," Rajaram adds.

He also says consumer take up and advertiser shifts are boosting confidence in online consumption. "A lot of the established players are paying licence fees, sometimes the same as linear and sometimes more... It's a sign of where on-demand is. There's appetite and advertiser support. That's what's giving the portals the strength to go out and pay proper fees rather than rev share".

CTE's Yim says licensing revenues for on-demand services in Asia are growing at double-digit rates "and we foresee continued growth. It's definitely a boom time. In addition, on-demand platforms are licensing more content than the traditional platforms, so we see growth from volume as well".

While non-linear distribution is now "a significant part of our business", pricing and models vary widely across Asia, Rajaram says.

In Singapore, for instance, online platform Toggle buys content, but the licence fees are lower than those of linear channels. Toggle, owned by monopoly free-TV broadcaster MediaCorp, supports MediaCorp's linear channels and offers free and premium tiers for a flat monthly fee of S$9.90/US$7.

In Korea as in other parts of Asia, telcos have stepped up their online video strategies and are expected to be significant drivers of content licensing for OTT.

Not all genres will fare equally though, and a close eye is being kept on the perceived shift away from some high-cost U.S. content.

Revenue share is, on the other hand, a reality in markets like India, where connectivity is a challenge, price points are minimal, minimum guarantees are miniscule, its nigh on impossible for foreign content to compete with cricket and Bollywood, and the total value of a foreign-content deal right now can be smaller than the cost of tape delivery.

CHALLENGES

If all markets in Asia share rapid growth and transformation in the way consumers are able to access content, not all online markets are created equal. Patchy infrastructure and payment models are hurdles in less-developed Asia. "Asia is certainly developing at a rapid rate compared to the rest of the world, however, we still face challenges including the speed of broadband connections to the majority of our region," CBS Studios' Sinclair says.Internet penetration in Myanmar, for instance, is 1.2% (670,000 users). Cambodia is 6% (928,000 users), according to Internet World Stats (June 2014). On the other end of the spectrum are Korea and Japan, which are highly connected, as are, albeit with much smaller audiences, Hong Kong and Singapore. Korea's internet penetration is 92.4% (45.3m users), followed by Japan (86.2%/110m users), Hong Kong (80.9%/5.8m users), Singapore (80%/4.5m users) and Taiwan (80%/18.7m users). Malaysia is at 67%, with 20 million users. China trails in penetration terms at about 47%, but tops the list in user terms with more than 642m users.

MARKETS MAKING THE MOST DIFFERENCE

"There's not just one," SPT's Le Goy says, talking about a "beautifully varied" landscape. In every country, "the growth of digital on-demand opportunities to distributors and consumer content are leading to a very rapid transformation of the way in which the business overall is evolving," he adds.

Even with the different growth rates and acquisitions habits in each market, "it all adds up," FremantleMedia's Rajaram says, listing China, Korea, Singapore and Thailand as key online licencing centres.

For Lionsgate, North Asia, and in particular China and Korea, are two of the most dynamic on-demand markets in the world, CTE's Yim says.

Southeast Asia is a few steps behind North Asia, but is accelerating, Yim adds. In 2015, she expects Southeast Asia to be the biggest on-demand growth area in Asia "as there are many new platforms that will be launching in the region in the coming year".

WHAT'S WORKING

With all the region's diversity, there's no "best way" to distribute content in a digital environment. "Each situation is individual," Le Goy says, describing the dawning environment as a "pretty unique coming together of technology and story telling... That conjunction is driving the business forward."

"People need to discover and distribute in a different way," he says. What the rapidly evolving environment has opened up is a powerful range of possibilities to "craft unique distribution channels" for everything from the animated movie to edgy premium serialised television shows. "That's the real vibrancy we are seeing," Le Goy adds.

In some parts of Asia, online habits are consistent with other parts of the world, with the appreciation of short windows and some evidence of marathon viewing.FremantleMedia's Rajaram says "anything that's big and stands out" is a winner online - "just like linear".What's working best is "relevant and engaging content, localisation and aggressive windowing," says CTE's Yim.

SPT's Le Goy says the key to a successful online content offering is choice, ease and key premium content as part of a rich and deep content offering. Content drivers are big premium movies and TV shows that "make a difference in platforms being able to drive their business and attract and retain subscribers, build loyalty and allegiance", he adds.

While big-brand reality tops FremantleMedia performance online, drama is also benefitting because viewers can go back in time to the series beginning and follow the journey from start to finish. SPT's Le Goy says comedy is also finding new laughs among online audiences in Asia. "What we are finding in the digital world is a group of younger people who are more connected and share a similar sense of cultural reference points and now have the ability to share more widely," he adds. "That's opening up a huge new range of possibility."

"For us, big shiny floor shows are always in demand, especially the latest seasons and new, fresh and happening titles. There's also a demand for classic titles, but not so much for back catalogue in Asia," Rajaram says.

For Rajaram, the key is to treat on-demand "just like we treat linear". It is, he says, "still content, just a different platform, and as we have seen it's about letting the market understand that these are rights and they do have a value."

DATA DRIVEN

For all that's been said about the role of big data in the digital world, some quarters of the entertainment industry say they're not yet receiving the levels of insights they could be getting. But not everyone is complaining - yet.

Le Goy says data quality and access to information programmers can use is improving all the time. "The more data we have the better to improve the experience and that's in everyone's interests," he says, adding that SPT spends "a lot of time trying to understand what drives people to subscribe to and carry on subscribing to these on-demand services".

Rajaram says he's happy with the usage stats he's getting from partners in Asia. "It's a situation where when you do a deal and the next deal is bigger, with more shows and higher price points. That's proof of what's working," he says, adding: "When you get to the point when doing pan-regional on-demand deals, the data becomes more important and that will impact price points. But at this stage, where still looking at country specific on demand, there is enough info".

ContentAsia Issue 1, 2015