Taiwan
Contributed by Yu-Kei Tse
March 2017
Key Takeaways
The peculiarity of regulation of competitors from China (iQIYI) has created a specific dynamic in Taiwan.
Netflix’s pricing represents a new business model to the Taiwanese market, in which consumers have long been used to consuming internet-distributed entertainment for free.
Market
The introduction of legal, internet-distributed, video-on-demand (VOD) service in Taiwan is a relatively slow progress, with few long-lived, established players in the market. Before Netflix launched its service in January 2016, only a few local legal providers were in the business, many of which focused on movies, especially Hollywood productions, and were still in the process of making their services available on multiple screens.
Meanwhile, the legal television systems have been relatively slow in developing multiscreen VOD platforms. In terms of IPTV services, the largest telecommunication and ISP provider Chunghwa Telecom launched its IPTV platform in 2004, and it has yet to make a profit and still struggles to obtain desirable content and provide a comprehensive multiscreen service to attract audiences. In terms of broadcast television systems, before the middle of the 2010s, few channels had launched internet-distributed applications that allowed audiences to access their content on multiple screens. Even when they did, they tended to provide short clips of partial content (e.g. trailers), rather than complete series or entire episodes of a given programs (as opposed to services such as Hulu, BBC’s iPlayer). It was even less common to see a channel live stream its broadcast online. It was not until roughly 2015 to 2016, and after Netflix’s arrival, that the local television networks and systems became more active in launching/improving internet-enabled platforms and making more content available on multiple screens.
Numerous news outlets and surveys indicate that Taiwanese consumers are accustomed to accessing internet distributed audio-visual content for free (e.g. finding a program uploaded informally on YouTube or watching a program on a legal, ad-supported platform). Paying for such content, in turn, is relatively a new practice not yet adopted by the majority of Taiwanese consumers. Corresponding to this condition, most Taiwanese video streaming services do not adopt Netflix’s subscription, ad-free model.
The Taiwanese standalone streaming platforms featuring television programs tend to operate either as ad-supported free services, or services offering both free and subscription-only content. The platforms featuring movies in turn tend to operate as digital rental stores or subscription services combined with one-off rental (transaction) of new movies and unlimited viewing of older productions.
The South Korean information technology company Naver introduced the video streaming platform LINE TV to Taiwan in April 2015.[1] While the local platforms featuring movies tend to endeavor to provide their contents on television screens, LINE TV targets smaller screens with applications only for mobile devices and computers at the moment. It features the most up-to-date Korean dramas alongside Taiwanese dramas and variety shows. It also partners with young, local producers to create original Taiwanese variety shows and dramas. All of them are formatted—in terms of content and the short length of each episode—specifically for mobile-device and online viewing. Instead of running as a paid SVOD service, it operates as a free, ad-supported platform that requires registration.
The Taiwan-based streaming platform Li TV launched in February 2015 is the only company simultaneously offering internet-distributed and broadcast television delivery. It is one of the earliest local platforms that features both local and foreign (mainly East Asian) television programs, ranging from variety shows, dramas to animations. Thanks to its partnership with local cable television providers, it offers livestream channels alongside a standalone streaming service across different screens, with various bundles (ranging from 99 to 199 NTD per month) from which users can choose.[2] While Li TV has fewer live channels than cable systems, with roughly 70 channels available, it still provides the most developed internet-based platform through which audiences can consume live broadcast television. Different from LINE TV, however, Li TV has not yet self-produced original content. It is subscription-based, but it also offers a small amount of free content – a business model many succeeding models adopt.
Following Netflix’s arrival, the China-based iQIYI, one of the largest Chinese video platforms, launched its service in Taiwan in March 2016, its only market outside mainland China. It also offers both free and subscription-only content (239 NTD per month). Besides offering a large amount of Chinese content, it provides audiences with some of the latest trendy Korean and Taiwanese dramas. Specifically, iQIYI heavily promoted its early and free availability of the Korean drama Descendants of the Sun (2016) and the Taiwanese drama Rock Records in Love (2016) – two well-received productions available on other local channels months and weeks later, respectively. Both dramas’ popularity helped iQIYI become one of the most popular streaming platforms in the island.[3]
In August 2016, The Taiwanese music streaming service KKBox launched its video streaming service KKTV, featuring the latest Korean and Japanese television dramas (alongside Taiwanese and Chinese ones). With its 149-150 NTD monthly subscription fee, KKTV is one of the cheapest stand-alone internet-distributed services in the market. It is currently the only local service that endeavors to offer the latest Japanese dramas, with a small number of them being released within hours or days after their premiere on the Japanese television networks.
Meanwhile, Netflix is the only streaming platform focusing on non-Taiwanese and non-East Asian content. iQIYI has always featured Korean, Taiwanese and Chinese dramas and variety shows, and it recently obtained the exclusive right of the American network ABC’s latest docudrama miniseries When We Rise (2017). The miniseries was released on the Chinese platform alongside its US premiere schedule (February 27 to March 3, 2017). This marked iQIYI’s first substantial move on obtaining the up-to-date American programs for its serving territories.
Regulation
The Radio and Television Act, Satellite Broadcasting Act, and Cable Television Act govern the radio and television businesses in Taiwan. IPTV businesses, in turn, are governed mainly by Telecommunications Act. Netflix, alongside other internet-distributed services are not perceived as “television businesses” (more precisely, broadcast television business) and not governed under the current regulatory structures. Aiming to respond to media convergence, the National Communication Commission (NCC) has drafted the Convergence Communication Bill, which was designed to replace the existing four acts listed above. Nevertheless, according to the former Chairperson of NCC Howard Shyr-hao Shyr, the drafted bill, mostly designed before Netflix’s arrival, still does not contain relevant regulations to govern internet-distributed businesses.
The new Chairperson of NCC Nicole Chan, who took over the office in August 2016, is set to revise the drafted Convergence Communication Bill. Many questions remain regarding how Netflix and other OTT services are to be governed in the near future.
It is worth noting that, given the geopolitical tension between Taiwan and China (concerning Taiwan’s legitimacy as a sovereign state), the public discourse on regulation of the internet-distributed market is focused mainly on how the Chinese businesses and investment may be governed. In turn, it is not Netflix, but the Chinese company iQIYI that has raised more concerns over the island’s regulation of internet-distributed businesses. Foreign operators are not required to register their business in Taiwan under the current regulatory structures. While Netflix had registered its business before launching its service to Taiwanese consumers, iQIYI did not do so when expanding to Taiwan. Many legislators voiced their concerns about iQIYI’s unregistered status, questioning if this made it even harder for the government to govern iQIYI’s operation (especially in terms of tax liability and content availability). Ironically, however, iQIYI applied to set up an information service company as its subsidiary in Taiwan in August 2016, but the Investment Commission rejected the application in November in the same year.
In consultation with the Ministry of Culture and the Mainland Affairs Council, the Investment Commission cited two reasons for its rejection of iQIYI’s application. First, Chinese companies are not yet allowed to set up subsidiaries in Taiwan and directly run their businesses as content providers under the Act Governing Relations Between the People of the Taiwan Area and the Mainland Area. Despite iQIYI’s claims to set up an “information service company” in its application, it was considered by the Investment Commission that the Chinese platform’s subsidiary was set up to operate as an internet-distributed content provider – a controversial operation that is against the above act and therefore should be banned. Second, the fact that Taiwanese companies are not yet allowed to enter the Chinese market was also taken into consideration as another key factor justifying the Investment Commission’s decision against iQIYI’s application. Netflix, in contrast, neither faced the same challenges nor caused similar regulatory concerns as iQIYI did.
Viewing Habits
Due to the significant lack of relevant data, it is unclear whether there is a particular screen that dominates viewing of Netflix.
Internet Pricing and Availability
Due to Netflix’s late arrival and the lack of relevant data, it is unclear how norms of Internet pricing and availability affected Netflix’s use.
In Taiwan, the fixed broadband (fiber, ADSL, cable, etc.) is commonly priced with unlimited data usage. In terms of the mobile broadband (3G and 4G), unlimited data plans are also common in the market. Specifically, when the 4G network was introduced in 2014, most telecom providers offered various unlimited 4G data plans with price tags very close to existing 3G plans in order to compete with their contenders. This pricing war of 4G services is widely considered as a key factor contributing to the rapid 4G adoption in recent years. A brief report on the telecommunications market in 2015, conducted by NCC, indicates that the penetration of mobile broadband in 2015 was 81.2 percent, with 59.1 percent of mobile internet users on unlimited data plans.[4] Specifically, while the 4G adoption was 18.3 percent in 2014, it promptly reached 59.1 percent a year later. The same report also suggests that 66.8 percent of Taiwanese households had fixed broadband internet access (fiber, ADSL, cable, etc.). In terms of internet speed among these households, 40 percent of them were under 10Mbps; 24.5 percent were between 11 to 49 Mbps; 12 percent were 50 to 99Mbps, and the rest 23.5 percent were over 100Mbps. However, due to Netflix’s late arrival and the lack of relevant data, it is unclear how the internet pricing and availability in Taiwan, which features low cost, high penetration and a high adoption of unlimited data plans, may affect Netflix’s use.[5]
Content
With plans ranging from 270 to 390 NTD (roughly equivalent to 8.5 to 12.5 USD) – Netflix is Taiwan’s most expensive internet-distributed service and more expensive than it is in some wealthier countries (e.g. the US, Japan). Despite its high price tag, however, the size of its content library is significantly smaller than that in most countries. The number of titles available – roughly one-tenth of that in the US – has always been the bottom 10 to 15 in the world. For instance, according to the report conducted by Exstreamist, an entertainment news website featuring streaming platforms, in February 2016, Netflix Taiwan’s content library, which contained only 520 titles, ranked 7th from the last in the world. In comparison, the libraries of the US (ranked no.1), the United Kingdom and Australia (tied 58th) and Japan (95th) offered 5750, 2028 and 1574 titles, respectively. The long absence of Netflix’s famous original series became one of the most frequently cited consumer complaints against the platform in the news coverage, although as Netflix first original series, it did not secure global first window rights and was therefore only available in the US catalog.
The general shortage of the latest Hollywood productions as well as Taiwanese and other East Asian content is still frequently regarded by the local media as Netflix’s weakness in the island’s OTT market competition.
In response, Netflix has partnered with the Taiwanese cable network SET TV and purchased the streaming license of the network’s idol dramas (roughly 20 titles produced between 2008 and 2015). These dramas have been available globally since September 2016.
In August 2017, the Taiwanese company Q Place Creative Inc. announced that it will distribute its TV series Q Series (2016-2017) on Netflix in territories including North and South America, Australia, New Zealand, and select Asian and European countries.[6] The Ministry of Culture subsidizes Q Series (with a total amount of 55 million NTD). It includes eight separate television series, each of which consists of six to seven episodes. Four of the series were already available on Netflix in August 2017, and the remaining ones are scheduled to be released between September and November in the same year. It is the first government-subsidized production distributed globally via Netflix.
Netflix announced the first Chinese language original series from Taiwan named Bardo on August 4, 2017. Similar to the worldwide release of other original series, Bardo will be available on Netflix across the world at the same time. Netflix is partnering with IFT Media for the production of Bardo. IFT Media recently worked with HBO Asia and the Taiwanese public television service PTS to produce the Taiwanese series The Teenage Psychic (2017), HBO Asia’s first Chinese language (Mandarin) original television series available in 23 Asian countries and territories.
Netflix and Chunghwa Telecom, the largest Taiwanese telecommunication provider, have also reportedly discussed teaming up to expand their share of the internet-distributed marketplace. It remains to be seen whether the two companies will eventually partner with each other, or how their future partnership may shape the development of the internet-distributed market in Taiwan.
Consumers and Press Reaction
The media discourse on Netflix’s launch in Taiwan focus mainly on the following issues:
Possible impact (or lack of impact) on Taiwan’s internet-distributed market and media landscape at large
A key concern for Netflix lies in the extent to which the US-based company, as a foreign, globally leading streaming platform, may influence Taiwan’s market and media landscape as a whole. Some Taiwanese media covered how Netflix’s possible impact on the domestic television industry in Japan was dubbed as “Black Boats” or “Perry Expedition” (see Dr. Baudinette’s dossier for details), before discussing if Netflix also represented a foreign powerhouse challenging the Taiwanese industry.
Following the arrival of iQIYI, the majority of news coverage focused on discussing how local internet-distributed services and other television services were to respond to the OTT “war” triggered or intensified by Netflix and iQIYI – whose expansion in Taiwan were often described as a foreign “invasion.” On the one hand, it was common to see news analyses arguing that audiences might benefit from the arrival of foreign providers, because they may free their viewing from the “outdated” cable television systems offering channels filled with poorly made, low budget local content and endless reruns of old programs. On the other hand, most Taiwanese internet-distributed services argued that they were not worried about their businesses being significantly affected by Netflix because their business models were more tailored for the Taiwanese market. The abundance of content (especially dramas and variety shows from Taiwan and Korea), the availability of free content and the low subscription fee were often cited as the local players’ strength when competing against the US streaming giant by both Taiwanese companies and other media,.
Accordingly, it became more common to see news coverage discussing how Netflix failed to attract Taiwanese consumers, due to its significant lack of content and relatively high subscription fee. This tendency became more apparent after iQIYI’s launch in March 2016. Netflix was frequently compared with iQIYI, and considered less popular, as its Chinese counterpart was equipped with a vast number of free and paid Taiwanese and Korean content, in which a larger number of Taiwanese audiences were interested. Netflix, in turn, was often considered as a platform for a niche market made up of audiences with strong interests in American (or English-language) television series.
However, as mentioned earlier, in August 2017, Netflix announced its plan to co-produce its first Chinese language original series Bardo with Taiwanese producers and the local production Q Series is available to Netflix’s subscribers across the world. With such development, the public discourse surrounding Netflix’s influence on Taiwan’s media landscape is expected to change continuously in the near future.
Since the arrival of Netflix and iQIYI, there has been much more public discourse on internet-distributed media and the future development of the island’s media landscape at large. More local businesses have also begun to show their interests in the internet-distributed market. The Taiwanese media, in turn, often dubbed 2016 as “the first year of OTT” or “the beginning of the OTT war in Taiwan,” declaring that Taiwan has (finally) entered the OTT era – a result partly owing to the launch of Netflix and iQIYI.
Compared with the media hype surrounding Netflix’s arrival, Amazon Prime video’s launch in December 2016 attracted much less attention. While the news was featured on some tech news websites, it was not as widely covered by other news media as Netflix’s launch.
Lack of content and audiences’ disappointment
In the early months of Netflix’s operation, the local media often featured stories about how Taiwanese audiences’ excitement about the US streaming platform’s arrival soon turned to a huge disappointment as they found out that the content library was extremely small and House of Cards was nowhere to be found. A number of tech news websites (e.g. Techbang, Inside) examined how small Taiwan’s content library was compared to other countries and why. Some of them also discussed how Taiwanese audiences may access more content via VPNs.
Localization and globalization
The extent to which Netflix will localize its service, or how it may help distribute the Taiwanese content, are two other key concerns in media discourse. Specifically, whether or how Netflix may collaborate with Taiwanese partners, with whom, and if Netflix is to produce original Taiwanese content in the near future are the questions that are most often raised.
Netflix’s announcement of its upcoming production Bardo in August 2017 was promptly and widely covered by the local media as the platform’s most significant effort to localize its business in Taiwan. The Q Series, which has been distributed to Netflix, is considered as one of quality television productions representing the local producers’ efforts to “revitalize the market of Taiwanese dramas.” The partnership between Q Series and Netflix was less seen as Netflix’s efforts to offer local content. Rather, it was more widely regarded in public as significant progress towards the globalization of the Taiwanese television production.
In both the Q Series and Bardo’s cases, Netflix was often positively perceived as the infrastructure that helped the high-quality Taiwanese cultural productions to be seen on a global stage.
Subscriber Estimates
Netflix has yet to disclose any detailed information relating to its business operation in Taiwan. The information such as how many subscribers Netflix has attracted, which screen subscribers prefer, what programs attract the largest viewership, or how much internet traffic it causes during a given period of time remain unknown.
Local Netflix Office
Netflix launched its Taiwan office on June 7, 2016, six months after its streaming service went live in the island. The office is near the Hsinchu Science Park – the so-called Silicon Valley of Taiwan, where many local and foreign hightech corporations and manufacturers are located. It reportedly includes 7 to 10 employees, with most of them engineers. Specifically, the engineers collaborate with Taiwanese integrated chip manufacturers (e.g. MediaTek, MStar Semiconductor Inc.) to provide certification services for IC manufacturers, smartTVs, game consoles, television boxes and mobile devices, and thereby improve Netflix’s streaming performance and viewing experience across multiple screens. The office is also reportedly responsible for working in partnership with local television networks in order to obtain more Taiwanese content.
(For reasons unknown, no exact address of its office can be found).
Notes
[1] It is unclear if there is any Taiwanese capital invested in LINE TV.
[2] One New Taiwan Dollar (NTD) was roughly equivalent to $ 0.03 US Dollar in Feb., 2017.
[3] iQIYI announced in December 2016 that it has “reached 76 million Internet traffic” in Taiwan, without specifying to what “76 million” or “Internet traffic” actually refereed. A number of (not very carefully designed) surveys suggest that in Taiwan, while YouTube is comfortably the most popular video site for online viewing of audio-visual content, iQIYI is also promptly gaining popularity.
[4] The report does not specify the connection speeds of these unlimited data plans.
[5] The data of Numbeo indicates that the cost of 10Mbps fixed broadband with unlimited data in Taiwan is roughly equivalent to USD $24.38.
[6] Q Series’ eight series were broadcast weekly on the local networks TTV and GTV from August 2016 to July 2017. They were also released on iQIYI Taiwan and Li TV. As a latecomer, the public television service PTS aired three episodes per week from January 2017. Some of the series were broadcast in Hong Kong, Singapore, and Malaysia, and/or released on Chinese streaming sites including iQIYI and Tencent in 2016 and 2017. Among the eight series, A Boy Named Flora A, reportedly not imported by Chinese sites, is the only production that is not yet available in China. The series’ leading actor Crowd Lu was singled out as pro-Taiwan independence in 2015 by the China-based Taiwanese singer An Huang, who held an anti-independence stance. This condition was rumored to be the key factor leading to A Boy Named Flora A’s absence in China. The exact reasons for its current unavailability remain undisclosed.