Disney to Tailor Streaming Content for Competitive Asian Markets After Shuttering Linear Channels

Disney Plus Hotstar
Courtesy of Disney

Barely five years ago the Asia head of Fox Networks Group was able to boast that his cluster of linear channels made more in annual profit than his rivals saw in revenues from the region.

That was before 21st Century Fox was sold to Disney, before the executive in question left the group, and before linear channels became liabilities to be got rid of quickly.

Last week Disney did just that. It announced that it will close 18 channels in South East Asia and Hong Kong, including many of the Fox-branded channels it acquired in 2018. (Less remarked, it closed several of the same ones in Taiwan last year.)

The near-term effect is to rip a big hole in the programming bundles offered by the region’s pay-TV operators, throw hundreds of jobs into question and raise doubts about long-term sports rights contracts.

But the writing has been on the wall. At a time when audiences are fragmenting, Wall Street has valued income from direct-to-consumer businesses more highly than from anachronistic broadcast businesses, where single feeds of barely localized content were expected to serve many countries in a region.

The investors have also rewarded a string of media mega-mergers. These give the upsized media conglomerates more firepower to do battle with the tech giants, Apple, Google, Amazon and Facebook which are coming at streaming from other angles.

On the ground, it is becoming ever clearer that Disney expects to replace channel bundles that pay-TV companies resell on its behalf with its own streaming services. These give it direct relationships with consumers, server farms full of data and a greater share of revenues.

Netflix has been the pioneer of the ‘all you can eat’ streaming model, of simple user-interfaces and personalized recommendation engines. Disney, arguably the world’s most recognized media brand, is now moving fast to make sure that its Disney Plus streaming offshoot is one of the next must-have SVOD services in every cord-cutting household. And on every smart phone in Asia, which is a mobile-first market.

Localization in new markets requires more than just sub-titles and technical solutions to overcome bandwidth issues. Branding and content mix will play a big part too in a region which varies enormously in wealth, language skills and openness to western programing.

James Lamberti, CMO at research firm Conviva, says that international operators’ still-incomplete footprints in Asia reflect their starting positions and the slow build-up of localization.

“Moving away from syndication and going direct-to-consumer is all about the content,” says Lamberti. “They started in the markets you’d expect, where they have the content. (As they move into other markets) it is going to be a battle of content, acquisitions, localizing content and developing local shows in language. Their ability to do that will determine the winners in those markets.”

The inability to quickly pivot away from an initially Hollywood-centric slate was at least part of the reason for the 2020 downfall of both multi-territory Asian streamer Iflix and Hooq, and the loss of some $500 million of corporate and venture investment.

For viewers in many Asian markets Korean drama is the top viewer priority. A recent survey showed those programs account for an average of 34% of viewing time in the four wealthiest markets in Southeast Asia, ahead of U.S. and local content.

Understanding that has helped Hong Kong-based regional streamer Viu reach 45 million monthly active users and survive the arrival of Netflix and Disney Plus. It acquired dozens of Korean shows on contracts which allowed simultaneous or rapid upload, and has now commissioned its third Viu-branded Korean original. Similarly, China’s iQIYI green-lighted its first Korean original show in December as it ramped up its rollout outside Greater China.

Disney Plus this week unveiled its first Korean production alliance, a five-year pact with Studio & New, an affiliate of NEW, the studio behind “Train to Busan.” But one Korean original per year is unlikely to be enough if Disney Plus is to be pitched to Korean viewers as anything other than a U.S. product, or for iQIYI to cater to anything wider than a Chinese diaspora audience.

Netflix’s nearly half billion dollars per year investment in South Korea and its success at exporting Korean shows, has already made the country a streaming battleground. While Netflix has raced to market leadership, it has frenemy relations with local broadcasters over content. Now a handful of well-backed local companies including Wavve, Tving and Coupang are fighting back as OTT players. But the battle may become more intense.

“HBO Max, Disney Plus and Apple TV Plus are expected to launch their services in Korean this year and big three mobile service providers with IPTV offerings (SK, KT, LG) are competing to partner with them,” one Korean content owner told Variety this week, with a hint of glee.

Disney Plus has not announced a date for a Korean launch date, but other moves are also afoot. Last month it canceled its deal licensing Disney Animation, Lucasfilm and Marvel films to Wavve.

Traditional Hollywood studios have tried and repeatedly stumbled as they attempted local production in Asia. Disney pulling out of the Indian film production sector where it once had market leadership is one of the most notable retreats. Sony Pictures (then called Columbia), similarly, pioneered production efforts in China, but ran out of patience.

But they are not alone. More recently, Twentieth Century Fox ground to a halt as a local film producer-distributor in Korea. So too did Warner Bros., though it has persevered as a film financier and distributor in Japan and Taiwan. And its WarnerMedia sibling company HBO Asia has been active as a local producer in Asia, albeit working on significantly lower budgets.

Disney may have more local content success as a streamer than as a tentpole- and consumer goods-obsessed studio. Not least because its APAC head of content and development is a veteran Asian film producer who cut her non-linear TV teeth as head of original production for HBO Asia.

Disney also appears to be operating a sliding scale of localization within the Asia region. In English-language territories Australia, New Zealand and Singapore the Disney Plus service has little to distinguish it from that in North America.

In India, on the other hand, Disney Plus Hotstar is a mélange of Disney Plus offerings folded into Hotstar, an already successful, mass market platform that was launched in 2015 and which was acquired from Fox. It has sports as its driving engine and is offered at a significantly lower price point.

Hotstar was a latecomer to the original production scene, but under Disney ownership it has accelerated and now boasts more than 20 local series and a host of acquired movies branded as originals.

In Indonesia and Malaysia, to debut on June 1, 2021, Disney is taking a middle path between the platform’s western and Indian models.

It borrows the Indian brand name Disney Plus Hotstar though Indian shows are a small minority of the content. It launched instead with a large swath of acquired local films and TV shows, and distribution deals with leading local media operators, Telkomsel in Indonesia and Astro in Malaysia. To keep the local content offering fresh, Disney has signed more than a dozen supply deals with local studios in each country.

Local content deals can also help smooth political feathers, a secondary advantage that is far from negligible in Asian territories which are touchy about culture and taxation of foreign-owned streamers.

For more than two years, Netflix was effectively prevented from operating in Indonesia by state-owned Telkomsel, ostensibly on grounds that its content supported terrorism and pornography. These objections melted away in June last year after Hooq and Iflix collapsed taking with them Telkomsel’s deals.

And in Australia, which has already forced Google and Facebook into paying local companies for news, there is mounting pressure to impose local content quotas on streaming platforms. These could specify minimum numbers of Australian-made shows on the platform, or minimum volumes of local commissioning. Or both.

This week Disney Plus announced the commission of its first locally-made documentary series “Shipwreck Hunters Australia.” With Paramount Plus next to launch as competition Down Under in August, it is unlikely to be Disney Plus’ last move.