Catcha Group-backed on-demand video streaming startup iflix will be looking to raise at least two more financing rounds before considering going public, its co-founder and group CEO Mark Britt told this portal on the sidelines of Wild Digital 2018 in Kuala Lumpur.
Britt declined to reveal further details on the next fundraising round. Kuala Lumpur-headquartered iflix last raised $133 million in September 2017 in a round led by US-based Hearst Communications and Singapore-based EDBI as well as clients of DBS Private Bank.
The on-demand video streaming platform has reached 15 million subscribers base as of this year, where 2.2 billion minutes streamed monthly on its platform since January 2018. Britt also said that iflix has broken even in its fastest-growing and largest market, Indonesia, last year.
Let’s start with the reported cash crunch that iflix is facing. What’s your view on that?
In any moment of significant industry disruption, you go into investment mode. Any startup — iflix, Grab or Go-Jek — is willing to invest into losses because the disruption in terms of market value is enormous.
We are still in the investment mode. And I think we will be like that for the next three to five years. Once you’ve proved the model, and you get to break even in Indonesia, the addressable market is about 45-50 million people.
Indonesia is by far our best-performing market. There is a unique condition in Indonesia right now: You have a millennial population, high smartphone penetration and rapid adoption of new business models. The market has a history of very aggressive early adoption.
With falling mobile data prices in the last 24 months coupled with a sophisticated user base, we’re seeing an explosion in adoption of video services. For iflix, it’s not only our biggest market but the fastest-growing market in terms of volume for every single day. So we have more customers in Indonesia than three to four markets combined.
What about Thailand? Smartphone and internet penetration rates are very high in Thailand as well.
Thailand is an extraordinary country from a cultural perspective but the entertainment industry is very challenging. One, piracy is prolific. And, two, getting people to pay for content is more challenging in Thailand than anywhere else.
Thailand is a great market where we believe the freemium model – a combination of advertising plus premium monetisation – is very well set up. It has the sophistication and a very low propensity to pay whereas a market like Malaysia has a less vibrant advertising industry. So, we try to structure our business where we can be very flexible, finding the right price points, business models and right window and content.
What is your view on mobile payments?
We have a better payment infrastructure as compared to a few years back with the entry of mobile payments and digital wallets. iflix has now come to the point where you can pay 6 cents a day to enjoy our content. That means we have now reached the mass market.
We’re very bullish on the opportunity for mobile wallets like AliPay and others. We see these software-driven mobile wallets that allow customers to make very small payments and to be in complete control of their budget. That’s a powerful step for the ecosystem.
We read that Catcha’s co-founder and group CEO Patrick Grove said that iflix is not looking to raise more funds.
iflix is always raising funds, there’s never been a suggestion that the round we raised last time will be anything that is close to the last round that we will raise. When the value of the disruption is billions of dollars, the questions for investors is: are you on track? Are you on track to gaining audience share, customer care, reducing customer acquisition cost, driving lifetime value?
We’re now at Series D, we will raise at least one or maybe two more rounds before we think about going public or even start to look like a mature business. The timing of the round will be dictated by shareholders we’re speaking to. We haven’t stopped speaking to potential investors since the day we founded the business. And I don’t think we will.
What about iflix’s path to profitability?
I’d like us to be profitable before we reach a user base of a billion. We’re profitable in Indonesia at about 3.5 million users. And we decided to double down. There are a billion people in the emerging market with smartphones and probably are not able to afford pay TV. Our business plan is to reach them. Look at success stories like iQiyi in China. We look at Netflix in mature markets. We kind of predicate our business plan on becoming 20 per cent as successful as iQiyi.
What about the industry buzz that Baidu-backed iQiyi will be investing in iflix?
I think iQiyi is the highest quality service in terms of delivering value to the customer, anywhere in the world. We don’t usually comment on rumours or speculation. We know the iQiyi team pretty well and they’re an extraordinary company.
Let’s move on to the competition in the space you’re in then. With the entry of so many players into the region, how does that affect iflix?
The competition is actually decreasing, not increasing. So if you go back to four years ago, it was intensely competitive because many people were launching something similar in the same region.
In most markets, you have three or four local entrepreneurs or local services they’re also competing for the same content. And for the past three years, many people in the industry, including us, made the mistake in believing that Western content was very important. And so in that world, you have lots of people competing for Western content and the competition is very intense.
Now, we realise two things: local or regional content is far more important and that actually created an overlapping between iflix and Netflix. In terms of content types, it’s 1 per cent of our libraries.
So the reality is if you’re upper socio-economic/Apple iPhone user, Western-educated, Netflix is an extraordinary service. If you like Korean, Chinese and Malay content, then iflix is an amazing accompaniment to that.