Philippines

Contributed by Michael Kho Lim (Monash University)

Updated March 2018

Key Takeaways

  • Filipinos are not used to the idea of paying for content because of their perception that the internet is free and thus, everything in it must be free.

  • Piracy is rampant and has led to the late introduction and slow uptake of video-on-demand (VOD) services in the Philippines.

  • While the Philippines enjoys an increasing internet subscription rate, the country’s poor infrastructure, slow internet speed and bandwidth limitations pose a significant challenge to an uninterrupted content streaming.

  • The Philippines runs on a cash economy, where majority of the population does not maintain a bank account and only a small percentage of the Filipinos own credit cards.

  • However, there are now alternative local online and mobile payment platforms for prospective subscribers who need to get past this hurdle to avail the services of most, if not all, online content providers that require credit card payments.

Market

Internet-distributed television was introduced in the Philippines as early as 1994 through The Filipino Channel. It is the flagship project of the country’s major broadcast network ABS-CBN and caters to mostly overseas Filipino migrants. In July 2005, ABS-CBN pioneered international content distribution by partnering with America’s leading direct-to-home (DTH) provider DirecTV to distribute the TFC package through its platform, and TFCNow was born. It has later evolved to its current state as a subscription-based video-on-demand (SVOD) and live broadcast service called TFC.tv, which provides local news, television programs, and movies that the network produces and distributes.

blink.png

Several local players entered the market but were unable to sustain their businesses. These included mypinoy.tv (2009-2016, but with a relaunch plan), which utilised a freemium business model by offering ad-supported and premium content; clickplay.ph (2013-2015) and taranoodtayo.tv (2014-2017), which followed a transaction-based VOD model; and blink-now.com (2013), which announced the cessation of its operations on 6 October 2017 on its official Facebook page, despite employing both TVOD and SVOD business models. Its failure can be attributed to the insufficient number of subscribers, transactions, ads and possibly ineffective business models or strategies.

The online space of transactional and/or subscription-based VOD services gained a stronger hold of the market when bigger multinational companies like Hooq and iFlix began offering their streaming services and set up offices in the Philippines in 2015. This was followed by the launching of Netflix the following year, as part of the company’s attempt for global expansion. To date, these companies are regarded as the “big three” players in the Philippine market today. However, Cinetropa, a new and small local player established offices in New York and Manila in 2015, in its attempt to represent and bring independent Filipino films to a global audience.

The (late) arrival of Netflix in the Philippines can be seen as a very timely and strategic decision. It would seem that Netflix had waited for other entrants to do the ‘dirty work’ first of setting up the infrastructure, testing the market, and creating the business environment in the Philippines before entering. Nonetheless, Hooq and Iflix welcomed the arrival of Netflix, as a competitive force that might lead to faster market development.

Since the content-streaming business in the Philippines is still in its nascent stage, the business strategy of Hooq and iflix is centred on partnering with the country’s telecommunication giants, so that they automatically get whatever market share their telecom partner has and its existing subscribers become a captive market. In this case, Hooq is partnered with Globe Telecom, iFlix works together with the Philippine Long Distance Telephone (PLDT) Co., while Netflix has an agreement with both telecom companies. A common approach is to create a bundled package that ties the streaming service to the telecom subscribers’ existing data plans as a freebie or an add-on service.

There are two other reported new SVOD players: Tribe from Malaysia (also partnered with Globe Telecom) and PrimeTime from Thailand, although they remain largely unknown or unpopular choices.

Regulation

While the Philippine media industry is generally free from state control and censorship, there are various regulatory bodies that govern it. The National Telecommunications Commission (NTC), created through the Public Telecommunications Policy Act (Republic Act 7925) in 1995, is mandated to oversee radio and television broadcast stations, cable television, and pay television. It is in charge of the frequency allocation for radio and television, but now also includes broadband wireless access technologies.

The Movie and Television Review and Classification Board is responsible for regulating content by ensuring that films and television programs are age appropriate and classified accordingly for public consumption. Meanwhile, the Optical Media Board, created through the Optical Media Act of 2003, has the power to regulate and license any entity that engages in the distribution and manufacture or duplication of any optical and magnetic media.

The Kapisanan ng mga Brodkaster ng Pilipinas (Broadcasters Guild of the Philippines) is a private trade association of broadcast operators. While it is not a government-mandated body, it serves as a self-regulatory board of the industry and upholds the standards in programming practices through its Broadcast Code of the Philippines.

At present, the Philippines has no specific policy that regulates online or mobile content. As such, any individual or company is free to distribute such content without the need to secure a government license. There is only a policy (Memorandum Circular No. 05-08-2005) that regulates internet service providers, which are regarded as telecommunication entities that provide Value-Added Services (VAS). This circular was later updated to include other services that NTC considers and classifies as VAS (Memorandum Circular No. 02-05-2008).

While Article XVI of the 1987 Philippine Constitution prohibits foreign ownership of any mass media, NTC Memorandum Circular No. 03-11-2005 allows foreign companies that will offer voice-over internet protocol services or VAS in the country a 40 percent ownership cap. Meanwhile, no law restricts any foreign entity to engage in a content supply agreement in the Philippines, except when entering into exclusive contracts between CATV and DBS operators that are anti-competitive, as stipulated in the “Implementing Rules and Regulations Governing Community Antenna/Cable Television (CATV) and Direct Broadcast Satellite Services (DBS)” (Memorandum Circular No. 10-10-2003).

Viewing Habits

In its most recent study, international media research firm Kantar Media reports that broadcast television viewing remains the highest form of media consumption in the Philippines, with a regular TV viewership of 96.6 percent. Filipinos watch an average of 3.7 hours of TV per day, peaking at primetime hours between 8:00 and 10:00 PM. Meanwhile, another study by We Are Social and Hootsuite gathers a slightly lower percentage of regular TV viewership at 91 percent, with only an average of 2.5 hours of daily time spent watching television.

Phil3.png
Phil4.png

This is despite the fact that the Philippines tops the list of daily time spent on social media at an average of 4.17 hours (We Are Social and Hootsuite p. 45), and daily internet usage at an average of 5.23 hours via a computer, as reported by PwC, and We Are Social and Hootsuite in its global report (p. 32). However, this figure is in conflict with the latter’s specific report on Southeast Asia, which declares the country’s average daily time spent on the internet at nine hours (p. 94).

Phil5.png
Phil6.png
Phil7.png

According to Kantar Media Philippines commercial director Jay Bautista, television continues to dominate the media consumption space because it is the most accessible medium to many Filipinos, especially for those living in the rural areas and urban poor communities. Watching television is also a communal activity, where a family or a group of people can sit together in front of a TV set. It is unlike watching online or mobile content, where it is more of a personal activity that requires a personal computer, laptop or mobile phone, and internet data connection or subscription. Hence, only 28 percent of internet users watch online video daily (CNN; We Are Social and Hootsuite p. 101), even if internet access in the Philippines has reached 42.9 percent, where 70.6 percent is concentrated in Metro Manila. However, reports a 58 percent internet penetration rate in the country.

Phil8.png

For comparison, there is no available study or industry data that accounts for the number of movie-going public in the Philippines. Based on my previous research however, different exhibitors in the Philippines claim that attendance to movie houses continues to grow despite the increasing cost of movie tickets, the rising popularity of VOD services that serve as a cheaper alternative, and the rampant piracy via peer-to-peer networks and file-sharing sites.

Internet Pricing and Availability

Internet connectivity in the Philippines is generally described as slow and expensive, although the government (through the Department of Information and Communications Technology) is now working on a national broadband plan that will resolve this issue.

Akamai’s State of the Internet Connectivity report (pp. 27-30; Rappler) for the first quarter of 2017 finds that the Philippines has the slowest internet connection with an average of 5.5 mbps among the 15 surveyed Asia Pacific countries, and ranks 100th globally. We Are Social and Hootsuite (p. 98), and PwC also indicate the Philippines as among the countries with the slowest internet connection at an even slower rate of 4.2 mbps.

Meanwhile, in a more recent report by Akamai’s sister company Speedtest, the Philippines still sits among the lowest ranking countries with a slow internet speed (despite employing a different methodology). It ranks 91st for both mobile and fixed broadband connection with an average download speed of 12.35 mbps and 14.42 mbps, respectively. This is a slight improvement from an earlier report that was published in August 2017, where the Philippines ranked 100th out of 122 for mobile connection and 94th out of 133 for fixed broadband connection.

At present, there are four main internet service providers in the Philippines. First, the country’s largest telecom company PLDT provides the widest coverage area for its LTE, DSL and fiber optic broadband packages. Its most affordable offering is under its LTE Ultera product line with different connection speeds and monthly data caps: PhP 699 (3 mbps, 30 gb), PhP 1299 (10 mbps, 50 gb), and PhP 1699 (15 mbps, 100 gb). Following this is its DSL line that ranges from PhP 1299 at 3 mbps to PhP 3499 at 15 mbps, with monthly data caps of 100 gb or 150 gb. Meanwhile, PLDT’s Fibr plans have no monthly data caps and range from PhP 1699 at 5 mbps to PhP 2899 at 50 mbps.

Second is mobile network provider Globe Telecom with broadband plans that start at PhP 1199 (5 mbps, 50 gb) to as much as PhP 9499 (1 gbps, 6 tb). Third is leading cable TV provider SKY Broadband that offers a bundled cable TV subscription with VOD plans that are limited within Metro Manila only. These range from PhP 1299 (5 mbps, no monthly data cap) to PhP 2899 (100 mbps, 300 gb monthly data cap).

A relatively new player is Converge ICT that supplies broadband internet to home and business enterprises with no monthly data caps via fiber optic connectivity only. Its (basic) FiberX plans start at PhP 1500 (25 mbps), PhP 2500 (50 mbps), and PhP 3500 (100 mbps); while its newest FiberXtreme plans are priced at PhP 4500 (300 mbps) and PhP 7000 (500 mbps). On a peso-per-mbps basis, Converge ICT undercuts its competition based on price but is disadvantaged by its limited coverage area.

Content

Initial reports suggest that when Netflix became available in the Philippines, its subscribers could only access 7 percent of the Netflix USA library. However, many people have been using proxies and VPN services to access Netflix even before its official entry to the country. At first, Netflix did not carry any Filipino content in its library. It is not until two years later when TV5 Network, Inc. partners with Netflix to stream its very first Philippine-produced mini-series and increase its competitive advantage over Hooq and iFlix.

Consumer and Press Reaction

The arrival of Netflix in the Philippines has been well received, especially since it has become synonymous with streaming of online content. Netflix’s commercial success is still something to look out for, as the company is still adjusting to new territories and its subscription fees are still considered expensive compared with its competitors.

Subscriber Estimates

While there is no official data to determine the exact number of Netflix subscribers in the Philippines, unofficial reports from online research companies like Statista and Nakono estimate this at more than 48,000 subscribers for 2017, in a country with more than 100 million people.

Local Netflix Office

Currently, Netflix has not established any physical office in the Philippines.