Multi-Channel Networks in SEA: How will they flourish?
By James Phang & Sudhir Syal July 24, 2014
- Despite YouTube and potential demand from young viewers, MCNs yet to catch on
- Partly due to infra, partly because emerging MCNs have not organised their content
MULTI-Channel Networks (MCNs) are emerging to capitalise on rising digital video trends in South-East Asia.
However, to achieve sustainable growth, MCNs need to develop core competencies within specific verticals, expand their reach beyond their domestic markets, and build downstream revenue streams to monetise their traffic.
So how can South-East Asian MCNs achieve sustainable growth?
Digital video is experiencing strong growth in South-East Asia, with Vietnam and the Philippines experiencing highest growth in the region (refer to Exhibit 1 below).
YouTube, which accounts for more than 50% of the online videos viewed in South-East Asia, offers a platform for a new business concept – (MCNs) – to flourish, monetising video content through content aggregation and curation, cross-promotions and advertising.
Having already seen huge successes of MCNs in the United States (e.g. Makers and Machinima), the industry could be looking at South-East Asia for potential opportunities for new MCN players to enter the YouTube space.
Despite the availability of YouTube’s platform and potential demand for online content from young tech-savvy viewers in South-East Asia, MCNs have yet to catch on. These is partly due to a lack of good broadband networks and partly because emerging MCNs have deployed a wide range of content which is not yet well organised.
Therefore, MCNs need to create a strong ecosystem within specific content genres and subsequently introduce brand marketing to grow.
Focus the key
MCNs which focus on a single content genre in their starting stages find it easier to build a sticky user base as compared with those MCNs which do not specialise in specific verticals.
The Vietnamese MCN known as POPS (pic above) started off focusing primarily on music – the cornerstone of Vietnamese culture.
Although the music industry was in a slump due to rampant piracy from 2006 to 2008, POPS acted as ‘YouTube police’ for copyrighted content, and by 2009, established itself as the go-to platform for all the music platforms, building the largest network operating out of Vietnam.
Since then, POPS has expanded into video, TV networks, traditional publishers, sports and kids, with overall viewership doubling every two years.
In Indonesia, Dr.M has built a much stronger following by focusing on the music vertical, as compared with Layaria, which has diverse content offerings across entertainment, film, gaming and TV verticals.
Hahomusic, a newer MCN entrant specialising in music content, is also starting to build a bigger presence in the Indonesian market.
We believe that Layaria is facing difficulty in building scale due to poorer brand association as compared with the other two MCNs.
Most likely, lack of focus discourages content producers from joining an MCN’s network, as in this case there are limited tangible benefits from being part of the MCN’s ecosystem. With limited scale from the content supply side, poor brand association would present a big hurdle in terms of attracting eyeballs due to an insufficient ‘pull’ factor.
In Singapore, we found that despite the country having the highest average number of digital videos viewed per person across the South-East Asian region, more than one-third of the top 10 YouTube channels ranked by number of views were content from corporate and government websites.
Currently, only Garena – a game publisher based out of Singapore – operates as an MCN which manages the top entertainment channel WahBanana! as part of its e-sports and entertainment portfolio.
At present, content creation in Singapore is weak, resulting in a lack of demand for content curation. We understand that Garena is facing challenges in identifying popular channels to bring on board.
Reaching out to the diaspora
While MCNs cannot neglect their domestic markets, they also need to tap into foreign markets, reaching out to foreign consumers as well as their diaspora.
Several South-East Asian MCNs have experienced much higher revenues from digital videos consumption in overseas markets, particularly for videos consumed in the United States, United Kingdom and Europe, which typically have RPMs (revenue per thousand ad impressions) twice or thrice of those in South-East Asian markets.
For example, Philippines MCN Freedom’s (pic above) consumer base is largely based overseas, with most viewers from the United Kingdom, the United States and Germany, and only 5% of all views are consumed locally within the Philippines.
Although 80% of the content consumed is in English, and the remaining 20% being non-English, the majority of the non-English videos have been dubbed to cater to foreign consumers in international markets.
Also, POPS has seen a large proportion of viewers coming from outside Vietnam, from both its diaspora as well as foreign consumers in the Taiwan and South Korean markets.
Furthermore, Vietnamese content has become very popular with the Thailand market which has caught on to the Vietnamese entertainment wave, highlighting the importance for content to be dubbed in foreign languages to drive higher traffic.
MCNs should diversify their portfolio by gradually shifting towards content management and brand marketing to monetise their traffic.
In due course, MCNs can and should take on a more proactive approach towards content management and brand marketing, acting as an agency to cross-pollinate their managed and affiliated channels with global brands by leveraging on their scale and cross-promotion capabilities.
An illustration would be UniLever engaging with an MCN to market its new shampoo launch through various brand influencers within the MCN’s network.
A case in point is Vietnam’s POPS, which does not rely exclusively on YouTube’s platform to monetise eyeballs from overseas audiences. POPS derives most of its revenue from brand engagement and marketing given the increasing openness of brands to advertise on YouTube.
Based on our research, some of the smaller companies are willing to dedicate most of their marketing budget to advertising on YouTube; and POPS has identified this opportunity by providing a platform for content producers to work with large brands through their connections and strategic support.
On the supply side, POPS’ investment of time and resources in content producers has allowed it to achieve higher margins compared with other MCNs through more favourable revenue splits, and places it in a better position to negotiate with global brands for digital marketing in their domestic markets.
Other MCNs in the region have realised the benefit of doing so – Philippines MCN Freedom has recently announced plans to encourage cross-promotion across channels within its network, with aims to shift towards brand marketing in the long term for better monetisation.
As such, we can expect more MCNs to migrate towards integrating brand marketing into their business models as they become more mature.
In summary, in South-East Asia, digital video produces are growing and MCNs are emerging.
The article was produced by James Phang and Sudhir Syal of Venture Consulting, based in Singapore. Venture Consulting is an international management consultancy specialising in media telecoms and digital.
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