netflix effect in thailand

Telecommunications Policy 45 (2021) 102156

Available online 14 April 2021 0308-5961/© 2021 Elsevier Ltd. All rights reserved.

“The Netflix effect” in Thailand: Industry and regulatory implications

Pirongrong Ramasoota *, Abhibhu Kitikamdhorn Faculty of Communication Arts, Chulalongkorn University, 254 Phayathai Road, Pathumwan, Bangkok, 10330, Thailand

A R T I C L E I N F O

Keywords: VoD OTT Globalization Thailand Netflix Content streaming

A B S T R A C T

This study examines the economic, technological and cultural implications of Netflix in Thailand on local content industries and regulators. It also explores industry and regulatory responses to Netflix’s emergence in a small market like Thailand. The study finds Netflix has markedly affected the industries’ value chain but with contrasting impacts for broadcasting and film. Broadcasters have migrated online either by establishing their own platforms or by repositioning themselves as content providers for international streaming players in addition to acquiring business deals with other OTTs or broadcasters in regional markets. For film, a window of op- portunity has been created by Netflix for small and independent filmmakers wishing to bypass the long-standing monopoly in the Thai film industry. Meanwhile, the country’s regulator has looked for ways to bring foreign OTTs like Netflix under its oversight and may adopt a reward- based scheme while promoting local content industry with capacity-building and promotional measures.

This article studies “the Netflix effect” in Thailand, examining implications of the global platform’s inroad into the country in technological, economic, and cultural terms as well as effects on local broadcasting and content industries in addition to regulatory and policy challenges posed by this globalizing media phenomenon.

The account, based on secondary data and primary research – content analysis and key informant interviews – are provided in the below sections.

1. Netflix and success factors in Thailand

On January 2, 2016, Netflix entered the Thai market as a part of its global expansion into 130 new countries (Bangkok Post and AP, 2016). With the country’s high rates of internet penetration and online video consumption (the highest in Southeast Asia), robust

* Corresponding author. , E-mail addresses: [email protected], [email protected] (P. Ramasoota), [email protected] (A. Kitikamdhorn).

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https://doi.org/10.1016/j.telpol.2021.102156 Received 30 August 2020; Received in revised form 1 March 2021; Accepted 26 March 2021

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digital infrastructure,1 and a rather relaxed regulatory environment for internet-distributed media,2 Netflix anticipated good business prospects here. The records in the subsequent four years have confirmed this expectation with the number of subscribers which have more than quadrupled (Statista, 2016) (see Fig. 1 below).

Since Netflix’s arrival, the Thai Video on Demand (VoD) market has also experienced a steady rise in value. Within two years, Netflix managed to gain a market share of 25 per cent for the SVoD (Subscriber-based VoD) segment, the largest when compared to other international and local players such as Hooq, iFlix, and Hollywood. That is, in 2018, Netflix accounted for about US$ 17.25 million of the Thai SVOD market (Office of The National Broadcasting and Telecommunications Commission, 2018).

Notably, while the global COVID-19 lockdown in early 2020 earned Netflix an additional 16 million new subscribers worldwide (Zeitchik, 2020), the revenue from Netflix in Thailand in the first three months of 2020 also rose from US$167.09 million to US$182.86 million as more people confined at home signed up for the service (สำนกัส�งเสรมิการแข�งขนัและกำกบัดูแลกนัเอง, 2020).

Fig. 1. Estimated number of active streaming subscribers to Netflix in Thailand (2017–2020).

1 Countrywide internet penetration rate is estimated at 75 per cent in January 2020 while the number of mobile connections is 134 per cent of the total population (Office of The National Broadcasting and Telecommunications Commission, 2020). Fixed broadband has been expanding at a steady rate with 46.8 household penetration nationwide or around 10.1 million subscribers in the last quarter of 2019. There are four major service providers in the fixed broadband segment while mobile broadband is provided by five large players. The cost of broadband internet services is quite low averaging at 4.34 baht (US$0.14) per Mbps or 588 baht (US$18.65) per month. In addition, a total of 17 operators serve as International Internet Gateway (IIG) and simultaneously as National Internet Exchange (NIX) (สำนกัวชิาการและจดัการทรพัยากร โทรคมนาคมสายงานกจิการโทรคมนาคม, 2019). The latest statistics from 2020 show a high number of average daily internet use (9.01 h) via mobile phones, tablets, and computers with VoD content consumption accounting for the largest proportion (99%) compared to other types of online content including vlogs (53%), music (68%), online radio program (52%), and podcasts (44%) (Kemp, 2020).

2 The country’s communications regulator, the National Broadcasting and Telecommunications Commission (NBTC) only regulates licensees that are local operators of broadcasting and telecommunications services on business and content issues. Meanwhile, the Ministry of Digital Economy and Society has legal authority over computer-related offences which spans over online content. However, cross-border streaming data like video- on-demand has not been clearly addressed in terms of jurisdiction and regulatory oversight since they are not registered businesses in Thailand and not license holders of the NBTC.

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Apart from a clear comparative advantage in terms of investment capital, content resources and AI-based user engagement scheme, Netflix’s success in Thailand could also be attributed to these factors: pricing strategies, synergy through platform effect, globalization of content and data-driven content harnessing and design.

1. Pricing strategies

Netflix has relied on competitive pricing to attract new subscribers while maintaining the loyalty of existing customers. Apart from free trials and reducing the minimum subscription rate to only US$3 per month, Netflix also uses tiered pricing to cater to different needs of customers. (See Table 1). This pricing strategy clearly appeals to the local audience who have migrated from traditional linear television to VoD in favor of a wider content variety and more flexible viewing experience.

2. Platform synergy and leveraging with local players

Relevant literature shows that many disciplines have used the conceptual framework of “platformization3” to study the influence or impact of the globalization on technological platforms. From the business studies’ perspective, platforms assume an intermediary role in connecting institutional actors with end-users, and constitute a complex “multisided markets,” in which powerful platform operators can gain a dominant position in the multisided markets creating “network effects.”

The network effects can be “direct or indirect and positive or negative” (Nieborg & Poell, 2018). For instance, Netflix’s trans- national expansion can directly cause TISPs to upgrade or adjust their connectivity to match Netflix’s requirements4 in order to maintain their quality of service (Lobato, 2019).

One of the strategies used by Netflix in its internationalization is through strengthening of technological infrastructure for its global platform and using that as leverage with local players. Back in the 2000s when Netflix began its international expansion, the streaming service was relying on local ISPs and soon faced problem of overloaded data traffic to the point of system crash in 2008. Thereafter, Netflix discontinued the use of physical data centers and ISPs and instead shifted to Amazon cloud computing services or AWS (Amazon Web Services5). On top of AWS, Netflix established a new fast lane by setting up its own content delivery networks (CDNs6).

Through AWS and CDNs, Netflix has managed to secure its own internal infrastructure but on a global scale. This infrastructure consists of two levels through which the content flows (See Fig. 2 and Text box 1 which together explains about AWS and CDN as well as content requesting process on the platform).

For Thailand, Netflix is clearly in the dominant position using network connectivity standard to the platform as a leverage. For example, Netflix publishes the ISP Speed Index on a website that allows subscribers to find out if the network connectivity they have is compatible with Netflix’s streaming service or not, and provide updates when TISPs adjust their available bandwidth. Some TISPs in Thailand such as AIS Fiber, a leading local TISP, have adjusted their marketing strategy by referring to information on the speed index website that their network has the highest speed compared to other TISPs in Thailand. AIS also collaborated with Netflix in many areas. For instance.

• AIS added Netflix service as a menu in its AIS PLAYBOX for convenience since February 2019 (PR News, 2019).

Table 1 Netflix Thailand’s tiered pricing schemea.

Mobile Basic Standard Premium

Monthly cost* (Thai Baht = 0.033 USD) 99 THB 279 THB 349 THB 419 THB Number of screens you can watch on at the same time 1 1 2 4 Number of phones or tablets you can have downloads on 1 1 2 4 Unlimited movies and TV shows Watch on your mobile phone and tablet Watch on your laptop and TV HD available Ultra HD available

a Netflix’s plans and pricing for Thailand (Netflix, n.d.).

3 Platformization refers to “the penetration of economic, governmental, and infrastructural extensions of digital platforms into the web and app ecosystems, fundamentally affecting the operations of the cultural industries” (Nieborg & Poell, 2018).

4 Netflix’s recommendations of internet speed are as follows: the recommended speed for stable use is 0.5 Mbps, for HD streaming is 3.0 Mbps, and 5.0 Mbps is for Super HD streaming (Lobato, 2019).

5 AWS is a cloud computing technology that utilizes microservice architecture. Microservice concept was created to support software that was written in such a way that it can be broken into smaller pieces and run on multiple servers (Tabora, 2019).

6 CDN is designed in such a way that there are a number of servers with requested content located near where the user is so that network latency is acceptable. AWS provides service based on concept of regions. Subscribers anywhere in the world are served by AWS servers in the closest regions. For instance, subscribers in Europe, the Middle East, and Africa are served from Ireland. Subscribers in Latin American and the US subscribers are served from Northern Virginia or Oregon. Subscribers in the Asia-Pacific region are served from Oregon (Lobato, 2019).

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Fig. 2. Netflix’s logical network diagram and content requesting process.

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•

AIS customers can pay their Netflix bills via AIS Fibre bills and can upgrade their Netflix account type through “AIS-Netflix” promotion campaign (AIS, n.d.; AIS Fibre, n.d.). • In November 2019, True, another major TISP in Thailand, also added Netflix service as a menu in its TrueiD TV box (Techsauce

Team, 2019). 3. Globalization of content and data-driven content harnessing and design

In line with its global marketing and content strategies, Netflix has tried to appeal to local Thai audience with its GLT (global- ization/internationalization, localization, and translation) approach (Lobato, 2019). A Netflix representative in Thailand echoes this “globalize to localize” approach in a seminar with local movie directors in 2020 (Thai Film Director Association, 2020).

The globalizing element is clearly reflected in the platform’s key resources – content library. Based on an analysis of Netflix Thailand’s content library from 10 August to October 8, 2020, using country of origin as criterion, we find a global mix of 5800 titles. The first top five countries in the ranking are the US, with 1952 titles (33.66 per cent), India with 775 titles (13.36 per cent), South Korea with 344 titles (5.93 per cent), Japan with 298 titles (5.14 per cent) and UK with 273 titles (4.71 per cent). As for content from Thailand, a total of 240 titles are found, representing 4.14 per cent of the entire catalogue (see Fig. 3).

Apart from the overall content library, we also examined content under Trending Now and Top 10 in Thailand for one week, using newly subscribed accounts to get as close to the program’s default as possible. From a total of 421 titles analyzed, the US also topped the chart with 182 titles (or 43.23 per cent), followed by South Korea with 61 titles (or 14.49 per cent), Thailand with 55 titles (or 13.06 per cent), Japan with 43 titles (or 10.21 per cent), and the UK with 20 titles (or 4.75 per cent). See Table 2.

While the analysis of all three catalogues shows the US-originated content as foremost, reinforcing the Hollywood brand at the center of global entertainment flow, the findings from the tally of the two popularized catalogues also indicate elements of cultural proximity and multi-centers of global cultural influence with the presence of South Korean and Thai titles in the top tier. Since the subscribers’ accounts used to access content are brand new, they are less likely to be affected by algorithmic calculations based on user preference and viewing history. Hence, the result captured here should reflect localized tastes as well as the platform’s predisposition towards micro-marketing. Notably, Thailand is deeply dominated by Hallyu or the Korean cultural wave. A good supporting evidence lies in the fact that tweets about K-pop on Twitter in 2019 originated most from Thailand (Bernardo, 2020). Netflix’s prioritizing South Korean content on its Thai platform is, therefore, understandable.

Overall, Netflix has acquired its streaming content which vary in genres – movies, series, documentaries, animations, and cartoons – from three main sources:

1) Syndicated content that has been aired (via broadcasting channels) or screened (in movie theaters); 2) New content (not yet aired or screened in any media outlets) that Netflix has purchased copyrights from content creators; 3) Netflix original content that the platform developed in collaboration with local producers from different countries around the

world.

Text Box 1 Description of Netflix’s logical network diagram and content requesting process.

The basic part of Netflix software that users see before they hit the “Play” button such as user interface, customer/subscriber data, run efficiently on AWS. Instead of using major CDN providers such as Akamai or Level3, Netflix builds its own CDN, called Open Connect. Netflix has struck deals with internet service providers (ISPs) to have its Open Connect box installed next to ISPs’ servers. These Open Connect boxes download the Netflix library for their region from the main servers in the US — if there are multiple of servers, each will rather store content that is more popular with Netflix users in a particular region to prioritise speed.

The process of content request on the platform can be explained accordingly:

1) A subscriber requests video content. The request will be sent via local ISP to the Netflix network. Netflix can learn from the IP address of the subscriber’s device which region the user is in then route the request to the “closest” servers in order to achieve optimal performance;

2) After the Netflix servers analyze the request, it then begins its content retrieval process; 3) Netflix can learn about the subscriber’s device and available network speed then adjust dynamically resolution of content to

be sent back to subscriber. This process is called “transcoding”; 4) Netflix then identify which CDN that has requested content and is closest to the subscriber. The content is then streamed from

that CDN (Lobato, 2019; Nair, 2017; Netflix Case Study, n.d.; Tabora, 2019).

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Fig. 3. Content available on Netflix Thailand by country origin.

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Netflix usually acquires a two-year licensing contract for the syndicated content which accounts for the main part of the catalogue. This is to assure that there will be new content regularly circulating in the platform. As for the content that Netflix acquired copyrights, the platform would likely put the Netflix original label on the content although it bears no involvement in the production process at all. This is what happened in the case of the movie “The Maid,7” an original production by a group of Thai filmmakers.8 The movie was originally due to be screened in theaters. But due to the Covid-19 pandemic lockdown, the movie producers decided to sell the copyright to Netflix. Thereafter, the movie came to be known under Netflix’s original label.

As for Netflix’s originals, in its four-year operations in Thailand there has only been one Netflix’s original production in the form of a cinematic series “The Stranded.” The series was a collaboration between Netflix Studios, Los Angeles-based H2L Media Group and GMM Grammy’s Bravo Studio. GMM is a major entertainment conglomerate in Thailand. The story centers around a group of teenagers who are stranded on an island in Southern Thailand when a tsunami hits. The Stranded bears uncanny resemblance to an American drama TV series “Lost” which was about survivors of a commercial jet airliner’s crash. Both series also contain elements of supernatural forces and science fiction.

After it was released in November 2019 on Netflix, The Stranded was not deemed a success, with poor reviews and low viewership especially from the local market, hence resulting in its second season being cancelled.9 The series’ flop was said to be due to inadequate understanding about the Thai context and local taste, and an overzealous attempt to duplicate a popular US series in the 2000s “Lost, 10.”

Like other Netflix originals, the design of The Stranded followed a content formula that was based on machine learning of users’ data in Netflix’s database – the metadata. Story plot and actions that have proven to garner audience’s viewership and engagement are bound to be included in the formula. Furthermore, the content direction is also shaped by a globalized production alliance. Under this transnational collaboration, GMM which led the local production team was obliged to follow the planning and work system of the core team at Netflix Studio while letting H2L Studio be in charge of determining the plot and characterization. As far as casting and picking shooting location are concerned, Bravo Studio also needs the approval from the American partners who closely supervised the series’ budgeting system, partner coordination, and diversity policy (MGRONLINE, 2019; Sunnywalker, 2019; WP, 2019).

All in all, Netflix relies heavily on the use of its metadata to select content for streaming catalogues or production team to work with in developing Netflix’s original movies. Netflix’s metadata contains lists of synopses, story concepts, loglines,11 names of accredited production houses, as well as names of accredited directors, and actors from countries around the world. These data are regularly retrieved to analyze and help process decision-making on selection of content for the catalogues or local team to help develop Netflix originals. This is to ensure that the harnessing and design of content will better cater to the taste of platform users in different regions of the world.

As far as localization and local alliance are concerned, Netflix has invested significantly in the customization and localization of content, subtitle, translation, interfaces and artworks (Lobato, 2019). In May 2020, as Covid-19 lockdown was being eased in Thailand,

Table 2 Content ranking in Netflix Thailand’s Top 10 in Thailand and Trending Now based on country of origin.

Origin Top10 in Thailand Today % Trending Now % Combined Total %

USA 28 40.00 154 43.87 182 43.23 South Korea 14 20.00 47 13.39 61 14.49 Thailand 23 32.86 32 9.12 55 13.06 Japan 0.00 43 12.25 43 10.21 UK 0.00 20 5.70 20 4.75 Spain 0.00 12 3.42 12 2.85 Germany 0.00 8 2.28 8 1.90 Mexico 0.00 8 2.28 8 1.90 Denmark 1 1.43 7 1.99 8 1.90 Canada 0.00 7 1.99 7 1.66 Poland 0.00 4 1.14 4 0.95 Australia 4 5.71 0.00 4 0.95 India 0.00 3 0.85 3 0.71 Turkey 0.00 3 0.85 3 0.71 France 0.00 2 0.57 2 0.48 Columbia 0.00 1 0.28 1 0.24 Combined Total 70 100.00 351 100.00 421 100.00

7 The Maid is a Thai ghost film production for Netflix original. It is directed by Lee Thongkham, a famous Thai director with Hollywood work experience from The Fate of The Furious and Spider-Man: Homecoming. The plot is about a poor village girl working as a maid for a wealthy family, and she not only learns dark secrets of the family but also faces the ghost living in the family’s mansion (Bunnag, 2020; Jang, 2020).

8 (W. Homsangpradit, personal communication, September 29, 2020). 9 (K. Rithdee, personal communication, September 22, 2020; T. Waller, personal communication, October 16, 2020).

10 Lost is a critically acclaimed American drama television series that originally aired on ABC from September 22, 2004, to May 23, 2010, over six seasons, comprising a total of 121 episodes (Lost, n.d.; VanDerWerff, 2019). 11 Logline refers to a brief summary of a television program or film, or book that states the central conflict of the story, providing the synopsis of the

story’s plot, enough to get investors interested and willing to fund the project.

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Netflix went into partnership with the National Federation of Motion Pictures and Contents Association (MPC) to support the local entertainment industry affected by the pandemic crisis with the US$ 500,000 MPC COVID-19 Relief Fund for Film and TV Freelance Production Personnel (The National Federation of Motion Pictures and Contents Associations, 2020). This gesture can be inferred that Netflix sees Thailand as a potentially long-term market.

2. Netflix’s impacts on local economy and industries

Previous studies suggest that Netflix’s global expansion has caused tremendous changes and profound transformative impacts or “the Netflix Effect” on worldwide media industry, technological infrastructure, policy agendas, and users’ mode of consumption (Smith-Rowsey, 2016). At the macro level, economic impacts have been most noted. This must be understood within the overall context of OTTs’ penetration of which Netflix is a part.

According to official statistics by the National Broadcasting and Telecommunications Commission (NBTC), the growth in tradi- tional television market in recent years has slowed down in contrast to that of transnational OTT market (Office of The National Broadcasting and Telecommunications Commission, 2018). Fig. 4 below shows the overall TV revenue trend increasing only by 5 per cent from 2018 to 2020 while that of OTTs has steadily risen by 17 per cent over the same period. Pay-TV subscription reportedly grew by 6.7 per cent while TV advertising revenue grew only by 3.8 per cent. It is predicted that TV advertising will eventually become stagnant and move to online platform. Meanwhile, more than 80 per cent of OTT revenue comes from advertsing based services such as Facebook and YouTube. From 2019 to 2022, the SVoD growth is estimated at 22 per cent and AVoD growth at 15 per cent.12

Similarly, a report by the Digital Advertising Association Thailand’s (DAAT) indicates a growth in creative production sector13 from 2018 to 2019 and forecasts an increase in expentidure of online video advertising between 2019 and 2020 (Digital Advertising As- sociation (Thailand), n.d.) (see Fig. 5). This implies a shift from television advertising to online realm, especially creative online video industry.

Furthermore, a major opportunity cost may have been incurred in the absence of taxation levied on these prolific global OTTs. According to a calculation by a local economist,14 an estimated US$4.375 million15 tax revenue could have been generated for the Thai government if Netflix had been properly levied a value-added tax (VAT) on its local income from an estimate of 560,000 subscribers in Thailand.

2.1. Broadcasting

At the industrial level, both television and film industries are disrupted by OTTs such as Netflix, albeit differently. The most obvious impact on the broadcasting side lies in the fact that Netflix has been able to secure control in almost all units along the value chain of OTT VoD (see Fig. 6). This is markedly different from the situation in the local digital TV value chain since there has not been such a powerful player holding this dominant position in the market. Even in the online entertainment realm, Netflix also exerts a more significant position than other providers. While audio platforms such as Apple’s iTunes or Spotify only aggregate music from artists and creators, Netflix is in control of production, distribution and presentation of content. Netflix not only takes on the role of content aggregator but also occupies other positions in the value chain including as content creator, investor in original content, and CDNs provider. More importantly, the global streaming service also manipulates audience’s perception and viewing experience in the form of content curation that appear on personal, national, and regional levels, as aforementioned.

More recently, as a result of the Covid-19 pandemic that gave rise to lockdown in several countries, Netflix has benefitted from a growing audience and apparently higher revenues (Zeitchik, 2020). The global streaming service has announced a US$1 billion in- vestment in new Netflix originals (Mukherjee, 2020; Zhao, 2020), thereby consolidating its global stronghold in content production.

In the Thai context, Netflix has acquired a great number of local content into its catalogues from local content providers, television broadcasters, or movie studios. Such licensing agreement has effects in two directions. On the one hand, small broadcasters that are also content producers find themselves in a compromising situation, having to adjust their content timetable to accommodate Netflix which holds a more prevalent platform. This is exactly the case with True Visions, a digital TV operator, which had to postpone its series debut to follow that of Netflix (OTT in the New Digital Economy, 2020). This is to avoid direct competition with the global platform. On the other hand, content providers whose content have been licensed to stream on Netflix platform feel that they benefit from capitalizing on the same content product, while expanding their audience’s base to international fronts.16

12 Statista’s estimation of Thai SVOD OTT market predicts similar trend—steady growth until 2025 (Statista, n.d.). 13 Creative production, according to the DAAT, covers “online video production, web banner production, application production, and service and

management” (Digital Advertising Association (Thailand), n.d.). 14 Anin Aroonruengsawat, Faculty of Economics, Thammasat University, presentation on Economic and Social Impacts of OTT on Broadcasting in

Thailand, a research result presentation, Office of National Broadcasting and Telecommunications Commission (NBTC), Bangkok, Thailand, 23 November 2020. 15 These figures are based on the calculation that Netflix Thailand’s 560,000 local subscribers pay a minimum subscription fee of Bt279 or US$9.3

per month (Bt3,348 or US$111 per year). VAT is levied at seven per cent of the income which is estimated at US$62.5 million annually. 16 For example, according to Mr. Charkrit Direkwattanachai, Channel 3 Thailand’s EVP-Corporate Affairs, Channel 3 Thailand uses Netflix to

export their content in order to compensate a decline in advertising revenue from television broadcasting (C. Direkwattanachai, personal communication, October 19, 2020).

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Fig. 4. Comparison between growth in traditional TV revenue and OTTs’ revenue in Thailand (2018–2020).

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With regard to audience’s consumption behavior, Netflix has also reconceptualized TV-watching by dictating how the content is supposed to be viewed. In a nutshell, Netflix’s release model or the way it releases its content is a factor contributing to binge-watching. As time-shifting media, Netflix sometimes releases all or many episodes of a title at once,17 and this allows for self-scheduling and binge-watching. Netflix’s algorithm and use interface by design, particularly the autoplay, also contribute towards binge-watching by making it more flexible to resume the watch (Jenner, 2018).

In addition, Netflix has active collaboration with telcos such as AIS18 or True19 and device proividers such as Samsung (Archer, 2020). This again reflects the platform’s influence over related actors in the value chain.

2.2. Film

As for the film industry, Netflix’s effect in Thailand has created a two-pronged effect. On the one hand, it appears to have reduced the monopolistic power that has long dominated the Thai film industry, hence opening up windows of opportunity for small players. On the other hand, Netflix’s pursuit of globalized taste and heavy reliance on dataification may in turn stifle diversity in content genres and storylines.

While it is forbidden in many countries to have movie theaters, movie distributon, and movie production under one ownership, such is not the case in Thailand20. An inherited monopoly has long characterized the Thai film and DVD industries, making it unviable for small production houses and independent filmmakers to thrive despite their talent and acclaimed credits internationally. In order to

Fig. 5. Expenditure of online advertising in Thailand, 2018–2020.

17 For example, Netflix released full season of the House of Cards at once to allow users to binge-watch, and the firm also deliberately markets and popularizes the idea of binge-watching (Jenner, 2018). 18 Netflix has entered into a partnership with AIS in 2017 (Itthipongmaetee, 2017). 19 For example, True offers sale promotion with free 1-year Netflix subscription which is only applicable to customers who buy certain model of

Samsung mobile phones (True, n.d.). 20 Major Cineplex, a leading nationwide movie house chain, also owns M Pictures, a powerful movie studio, and has controlling power over movie

distributors in the provinces around the country. Similarly, SF Cinema, a rival movie house chain, also has cross-ownership with Sahamongkol Film, a long-standing and prevaiing movie production, importer, and distribution company, with widespread distribution connnection around the country.

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Fig. 6. Comparative value chains in broadcasting and Netflix-dominated OTT VoD.

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Fig. 7. Comparative value chain of Thai film industry, before and after OTT’s presence.

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get a showing spot in movie theaters (dominated by two national chains – SF and Major), smaller players have had to make many compromises.

But with the entry of new, high-funded and global OTT players like Netflix, Line TV and Viu that are willing to integrate local talent into their platform, a new display path that bypasses movie theaters has been made possible. The situation is accelerated by the Covid-19 pandemic which has diminished the role of movie theaters in audio-visual entertainment. A movie like “The Maid,” which was struggling to find a showcase in theaters, has more than recouped investment after Netflix decided to purchase its copyrights and turned it into Netflix original. Several independent movie producers with international exposure and experience have also found solace in OTT platforms for display of their works.

Tom Waller, the director-producer of “The Cave,” an action-drama film depicting the 2018 Tham Luang cave rescue in Chiang Rai Province, Thailand, said of the OTT-prevalent and post-Covid19 situation that, “The movie theaters have to be nicer to us now because the table has been turned against the mafia system.21”

Likewise, OTTs such as Netflix are seen by a number of movie producers and directors as windows of opportunity rather than threats.22 In a way, OTT platforms have replaced home video or DVD markets in the traditional film industry’s value chain (see Fig. 7). But this disruption is welcomed by the Thai film industry as it allows for distribution and display alternatives, hence contributing to the movie producers’ stronger bargaing power. This is reflected more evidently in a growing trend for simultaneous film release in multi- platforms and as the usual 90-day window between cinema and OTT or home entertainment releases is shortened.

As far as impacts on content production is concerned, Netflix’s extensive use of viewership data to shape the content direction may indirectly curb content diversity and local creativity. At Netflix, insight on viewing behavior are regularly used as a frame of reference for budget estimation, content creation and production. This intensive dataification approach can result in the use of cliché plots based on a successful formula deriving from algorithmic-studied behavior of binge-watching audiences. There is a growing trend also to extend successful plots into series.

3. Local industry responses to Netflix’s presence

In the midst of a shifting media landscape and with the market presence of influential global players like Netflix and YouTube, local industry players are responding in the following ways:

3.1 Organizational restructuring to reduce costs, reorient business direction and reposition the organization in the market. For instance, BEC,23 a major broadcasting and entertainment concern, has relinquished two digital TV licenses and consolidated its online outlets to one single platform to unify the brand. Furthermore, BEC has also shifted its positioning from a “leading local broadcaster” to become a “leading content provider” for various platforms. Its source of revenue has become more diversified to artist management and fan-based activities to make up for dwindling advertising income;

3.2 More efficient use of content products via multi-platform outlets. Broadcasters have growingly adopted the “single content, multiple platforms” method in coping with the challenges posed by powerful foreign VoD OTTs like Netflix. Three approaches are viable here – establishing their own OTT platform, using other more established international platforms to stream their branded content, or both.

Most frontrunning broadcasters have set up their own online platforms to showcase their content, locally and internationally. For instance, Bangkok Broadcasting & TV Co. Ltd (BBTV Channel 724), which commands the largest market share in the local digital TV market, has built its online platform Bugaboo as a supplementary outlet since 2011 to exclusively stream its syndicated content for local and international audiences. On the other hand, GMM which operates GMM One or One 31, 25 and GMM 25 insists on only providing content for the channels under the same corporate umbrella as well as any other platforms, but will not develop its own OTT platform. GMM, it merits notice, owns Bravo Studio that produced “The Stranded,” the first Netflix Originals series in Thailand. A great number of GMM One or GMM 25 series have also been purchased and are licensed to stream on Netflix and other overseas OTTs. Meanwhile, BEC or Channel 3, ranked second in national market share, has embarked on both its very own branded online platform and numerous

21 (T. Waller, personal communication, October 16, 2020). 22 (W. Homsangpradit, personal communication, September 29, 2020). 23 Bangkok Entertainment Co. Ltd. is the operator of Thai Channel 3, a major television broadcasting station, having dominated the Thai analog

airwave since its beginning in 1970 before migrating to digital platform in 2014. BEC is a subsidiary of BEC World Public Co. Ltd. which was formed in 1995 by the affluent Maleenont family to combine all its interests in broadcasting and media (BEC World Public Company Limited, n.d.). 24 BBTV Channel 7 is Thailand’s first free-to-air television broadcasting station, beginning its service in Thailand since 1967 (Bangkok Broadcasting

& TV. Co.,Ltd., n.d.). Originally a concession under the Thai Army, BBTV Channel 7 has always commanded the largest market share of audience from its analog days to digital switchover in 2014. Like Channel 3 and 22 other TV broadcasters, BBTV Channel 7 won its commercial digital TV license in an auction organized by the country’s communications regulator, the National Broadcasting and Telecommunications Commission (NBTC). 25 One 31 or Channel One 31 is a Thai digital terrestrial TV channel owned by under GMM Grammy, a major entertainment conglomerate in

Thailand. Channel One 31 was first aired on December 1, 2011 (ONE31, n.d.) and later changed its name to GMM One.

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content deals with other OTTs. Thus far, Channel 3 has had its content streamed in various OTTs’ platforms – Netflix, Line TV,26

iQiYI,27 Viu TV, 28 and WeTV,29 to name but a few. 3.3 Selling the rights to broadcast or even to simulcast content to operators in other countries. Channel 3, GMM and True are

leading examples of local broadcasters that have sold licensing rights of their television content to operators in China, South Korea and countries in the ASEAN region. The revenue earned from this emerging market segment has reportedly supplanted the missing advertising revenues from traditional terrestrial stations.

3.4 Purchasing of intellectual property rights of foreign content to adapt and develop into new localized versions with more cultural proximity. For instance, Channel 3 has purchased the IPR of a number of series from China and South Korea in order to remake into Thai series with local casts.

3.5 Quality improvement in content production to cater more to international markets rather than only for local consumption. It is a common knowledge among the industry players in Thailand that Thai content still lacks global appeal. Traffic data from

Netflix shows that Thai content only travels as far as within the region30. In order for Thai content to travel further, an executive from True, a leading telecommunications and broadcasting conglomerate,

stresses that the industry needs to look beyond the local market as a frame of reference for their revenue generation. Future content direction needs to be reoriented and more research done to help determine that direction. Priming Thai culture in the content will not get very far as it can be construed as a cultural discount.31

Presently, True is experimenting with movie production, aiming primarily at the Chinese market, while the Thai market is only secondary. Meanwhile, it is using Netflix as a platform to study the feasibility of Thai-originated content in international markets. In the near future, a new movie project will be unveiled featuring a Thai story with global allure – that of the legendary Siamese twins.32

On a national policy level, the Thai Ministry of Digital Economy and Society in June 2020 brought about the idea of establishing a national VoD OTT platform for Thai content to avoid losing revenues to overseas platform operators. The envisioned new streaming platform would be called “Thaiflix” after Netflix. Nevertheless, the idea has not materialized and even drew criticism for being another policy babble (“Thaiflix ไม�ได�ลอกใคร รฐับาลเปน็เจ�าภาพทำแพลตฟอร�ม,” 2020; Khaosod English, 2020).

3.6 Online migration and content adaptation in accordance with the platform. Disrupted by technological change and globalized rivalry, broadcasters and telcos have not only migrated online with their own OTTs, but they are also trying to make their presence felt in all possible platforms, all devices, and all operation systems – whether it be iOS, Android, or HUAWEI AppGallery. In so doing, they have also adjusted their VoD content to fit with each platform such as by modifying the length of episodes in the series, highlighting certain parts of the story into a separate clip, or using social media to keep audience engaged and hooked to their content and platform.

4. Regulatory challenges in the face of OTT VoD

Established in 2011, the National Broadcasting and Telecommunications Commission (NBTC), is in charge of regulating broad- casting and telecommunications services in Thailand.33 However, entities that are under this regulatory oversight must be license holders which OTT services currently are not.

To date, the NBTC has made a number of efforts to bring VoD OTT service providers, particularly foreign ones, under its regulatory scope, in a bid to redress the imbalance felt by the local broadcasting industry. For instance, in April 2017, the NBTC set a three-month deadline for major OTT players like Facebook, YouTube, and Netflix to register for licenses or face legal barriers that will stymie their

26 Line TV is an AVoD OTT service, owned by Japan-based Line Corporation but operating mainly in Thailand, where it is the most popular online video platform for local television content, with over 40 million users. The service launched in Thailand in 2015 (Leesa-nguansuk, 2015), later expanding to Taiwan, and in 2020 to nineteen other territories, mainly in Southeast Asia, South America, and the United States. It carries pro- gramming from local television networks, and also partners with studios to produce its own original content (Kishimoto, 2020). 27 iQIYI is a Chinese VoD OTT based in Beijing which has been in operation since 2010. A subsidiary under the top search engine in China – Baidu,

iQIYI is currently one of the largest online video sites in the world, with nearly 6 billion hours spent on its service each month and over 500 million monthly active users. iQIYI made an inroad into the Thai market in 2020 (iQiYi, n.d.; Pattarat, 2020). 28 Viu is a Hong Kong-based VoD OTT service from Viu International Ltd, a PCCW Group Company. Operated in a dual-revenue model comprising

subscriptions and advertising, Viu is now available in 16 markets across Asia, Africa and the Middle East with over 36 million monthly active users. The service was launched in Thailand in 2017 (Viu, n.d.; Ho & Leung, n.d.). 29 WeTV is an international version of Tencent Video, a Chinese video streaming website (Tencent (Thailand) Company Limited, n.d.). We TV was

launched in 2018 as both AVoD and SVoD, with more than 600 million active users. In 2019, the service was launched in Thailand as the first international market outside of China (Leesa-nguansuk, 2019). 30 Based on a talk by Mr. Surin Krittayaphongphun, Director, President of TV Business, BEC World Public Company Limited (Channel 3 Thailand)

at an international seminar on OTTs and Broadcasting entitled “OTT in the New Digital Economy”, on November 17, 2020, at the Berkeley Hotel, Bangkok (OTT in the New Digital Economy, 2020). 31 Based on a talk by Mr. Birathon Kasemsri Na Ayudhaya, Strategic Content and Public Affairs and Executive Assistant to Chairman of the Ex-

ecutive Committee at True Corporation (OTT in the New Digital Economy, 2020). 32 Based on a talk by Mr. Birathon Kasemsri Na Ayudhaya, Strategic Content and Public Affairs and Executive Assistant to Chairman of the Ex-

ecutive Committee at True Corporation (OTT in the New Digital Economy, 2020). 33 The independent organization’s main function are frequency assignments for the two industries, granting licenses to broadcast and telecom-

munications (including Internet) operators, and overseeing regulatory issues from standard of services, industry disputes, consumer protection to content regulation, among others (Office of The National Broadcasting and Telecommunications Commission, 2018).

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revenue streams (through advertisement bans)34 (Tortermvasana, 2017b). The regulator also singled out 44 most popular local YouTube channels and demanded that they register with the NBTC due to their “influence to Thai economy and society.” Alongside, the NBTC’s broadcasting sub-board chairman also proposed a draft OTT regulatory framework that would be complaint-based and flexible enough so as not to hinder content creativity (Tortermvasana, 2017a).

However, all these attempts were never fully realized. Notably, the NBTC has since 2017 hired two independent consultants to carry out studies that benchmark OTT regulation in different countries and to furnish recommendation for appropriate policy and regulatory framework for Thailand. One of the studies recommends that OTTs be brought under NBTC’s licensing regime and ratings system and that local content quota be enforced. But this has not yet materialized (Mongkolporn, 2017). When the NBTC raised the issue again in early 2019, it was met with a widespread public backlash, on grounds of feared censorship and unclear regulatory authority over OTTs (Pornwasin, 2017). Until now (January 2021), there has been no significant development on the issue.

Since OTT operators can offer their service from anywhere in the world, making physical presence unnecessary, regulators must consider between two distinct regulatory approaches – 1) using the rule of country of origin and 2) using the rule of country of destination. In the former case, operators must hold a head office within the country where editorial decision is made in order for regulation to be in effect. In the latter case where regulatory framework of destination country is proffered, this is difficult to enforce in the Thai case since global OTT operators have very a high bargaining power.

Insofar as Netflix is concerned, the global streaming service does not have an office that holds editorial decisions in Thailand and only operates from the head office in Singapore. In this light, the use of the rule of country of origin together with reward measures to incentivize these operators to be physically present in Thailand may be a better option than to insist on the rule of country of destination with stringent yet unenforceable measures.

In addition to creating effective regulatory framework for OTTs, the regulator as well as related authorities and policy-makers may also consider these capacity-building and promotional measures for local operators.

• Building a home-grown content platform that could effectively market “Thai content” to international audience by learning from experiences of predecessors such as the UK’s Britbox,35 Singapore’s HOOQ,36 and South Korea’s Wavve.37 The aim here should not be to draw the audience away from major players but instead to provide integrated dissemination platform for local content;

• Implement light-touch approach in regulating OTT services to help subsidize operational costs and to incentivize operators to come under regulatory umbrella. This is similar to the model in Singapore, Denmark and South Korea where all OTTs are exempted from paying license fee and given more relaxed content regulation;

• Promoting local content by allocating funds or sponsorship, imposing local content quota on foreign OTTs as well as rendering financial support for local content creators with the potential to compete in international competition overseas;

• Promoting business alliances by organizing meetings and talent matching between local content producers and overseas coun- terparts, joint venture between state and private endeavors, training workshops for content-related or creative workforce to foster international best practice standard.

5. Conclusion

Netflix’s branding as “the global internet TV network” is not an overstatement. The giant streaming service has expanded inter- nationally using globalization of its platform to gain a dominant position over national players – from broadcast networks to local telecom operators, content creators and governments. In the Thai experience, direct and indirect “Netflix effects” can be seen not only on technological platforms but also on pricing structures, marketing and content strategies, and regulatory and policy approaches.

As a dominant global platform operator, Netflix is also in control of the labor of users in the process of cultural production – the production of meaning. This is because the platform regularly uses algorithmic audience measurement to gain insights into their use behaviors which are in turn exploited to shape the platform’s content selection and production. From political economy perspectives, Netflix’s access to and manipulation of audience’s data gives the platform power to shape the audience’s choice of cultural exposure and expression by tailoring personalized content to users as well as the power to maintain audience engagement and secure sub- scriptions (Lobato, 2019; Nieborg & Poell, 2018).

On the content dimension, the analysis of Netflix Thailand’s library aptly shows a hybridization of global and local elements. While Hollywood may lead the tally, the content pool is far from being US-centered despite Netflix being an American brand. A look into popularized catalogues – Trending now and Top10 in Thailand Today – reveals micro-marketing endeavor and content curation that try

34 The National Broadcasting and Telecommunications Commission (NBTC) called on top 50 local advertising agencies to acknowledge their proposed regulatory framework of OTT services and threatened to call upon 50 companies that spend the most on online advertising (Torterm- vasana, 2017b). 35 Britbox is an SVoD that provides video streaming services for British series and films, serving the UK, the US, Canada, and Australia since 2017.

It is a joint venture of the BBC and ITV plc (Shakhnazarova, 2020). 36 HOOQ was a Singaporean VoD streaming service. It was a joint venture of Singtel, Sony Pictures, and Warner Bros, with presence in the

Philippines, Thailand, India, Indonesia, and Singapore. HOOQ filed for liquidation in March 2020 and shut down in April 2020 (Reuters Staff, 2020). 37 Wavve is a South-Korean OTT streaming service, jointly set up in September 2019 by Korean mobile carrier SKT and three broadcasters – KBS,

MBC and SBS. The platform focuses mainly on Korean content and is keen on developing original content to fend off competition from global players in South Korean as well as making inroads abroad (Frater, 2020; Han-joo, 2019; Yonhap, 2020).

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to accommodate diversity of audience in a different locality, as evidenced in the presence of South Korean and Thai content in the top tiers.

In addition, Netflix has exhibited a glocalization strategy in its first and only Netflix original in Thailand. While not a commercial success, “The Stranded” is clearly an adaptation and hybridization of both global and local elements in terms of cultural theme, storyline, transnational collaboration, casting, and language.

Notably, the Thai content industries have been significantly affected by the presence of this streaming powerhouse. For broad- casters, the disruption already set in place by shifting technological landscape is being accelerated further with Netflix, given the superior business model, content resource, audience engagement methods, and free-riding advantage – being entirely exempt from infrastructure investment costs, local taxation and regulatory obligations.

Yet, a handful of large and high-caliber broadcasters and content producers seem to have benefitted from collaboration or content licensing deals with Netflix while smaller players continue to suffer as advertising revenues accrue to online realms and global media agencies.

The situation is quite different for the film sector where Netflix has opened up a window of opportunity for filmmakers and production houses wishing to bypass the long-standing monopoly in the Thai film industry. Yet, Netflix’s heavy reliance on successful content formula and metadata to guide their decisions may produce ramifications for content diversity and local creativity in the longer term.

Online migration and repositioning as content providers have been major approaches adopted by Thai broadcasters in the wake of OTTs’ local penetration. Regional market expansion and establishing new content direction to cope with transnational market are also adopted solutions by major players in the broadcasting industry while smaller operators have relinquished their licenses to broadcast, not being able to withstand dwindling advertising income and growing costs.

In the regulatory sphere, the country’s regulator –the NBTC – has made concerted efforts but failed to incorporate overseas OTTs such as Netflix and YouTube into its oversight, due largely to the OTTs’ transnational and trans-jurisdictional character and Thailand’s low bargaining power. Nevertheless, a reward-based scheme and light-touch regulatory approach are being considered to lure these global operators into the regulatory scheme while a series of capacity-building policies are being mapped to empower and equip local content players in light of the post-broadcasting world.

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P. Ramasoota and A. Kitikamdhorn