Malaysia-based streaming service iflix, which is often viewed as Netflix's Southeast Asian rival, has been in an unfavorable position for years, posting a net loss of $ 158.1 million in 2018.
As of September 2019, the company had only $ 12.7 million in cash reserves, which the company estimated would provide just enough capital for ongoing business and administrative expenses by November 30, 2019.
In April 2020, iflix announced that it would lay off more than 50 people in different locations due to the effects of the coronavirus pandemic in order to cut costs.
It was also faced with an impending debt crisis just a few weeks before today, in which it would have had to repay convertible bonds of just over USD 47.5 million if it had not been listed by July 31, 2020.
Dictionary time: Convertible loans are loans that your company believes investors can choose to convert to equity or equity.
iflix was already expecting to be unable to meet its planned IPO in April, but now Chinese internet giant Tencent Holdings (which owns brands like WeChat, JOOX and Riot Games) has confirmed the purchase of the company.
At first glance, you may be scratching your head, why, because the gradual decline of iflix so far should appear unattractive.
However, here are some reasons why Tencent still sees an opportunity in iflix.
1. It exists in several global areas
iflix is available in 13 countries across Asia, including Malaysia, Indonesia, Bangladesh, the Philippines, Thailand, Brunei and others.
With an established presence in these countries, Tencent's purchase of iflix will enable the giant to expand its influence and reach a wider audience in these countries as well.
In fact, Tencent said that this move was in line with plans to expand its own international WeTV streaming platform across Southeast Asia, leveraging iflix's content, technologies and resources.
However, iflix will initially be run as an independent brand before it is merged with WeTV as the ultimate goal.
2nd It has an extensive library of curated content
Working with over 150 studios and content distributors worldwide, iflix has collected thousands of TV shows and films on its platform that can be viewed for free or by subscription.
They range from local to western and even Asian regional content, although it cannot be said that iflix has always focused on hyperlocalized content.
The offer was very well received by viewers, most of whom preferred Asian shows, such as those produced in South Korea, Thailand, Indonesia and even the Philippines.
Following his previous track record, Tencent will be able to take a back seat and commission iflix to continuously build its own library, which means less work for the internet giant.
3rd It is able to produce original shows
Similar to how Netflix produced its original shows, iflix also started to examine the possibility of producing originals for its platform in 2017.
The dedicated short-form production studio Studio 2:15 was well on the way to producing a total of 2,500 individual episodes in 2018.
By the end of 2019, iflix wanted to include at least 12 original television series and 30 films in its library.
Some of his originals include the Indonesian original "Magic Hour: The Series" and the Malaysian originals "KL Gangster: Underworld" and "Ombak Rindu: The Series".
Photo credit: iflix
In 2018, iflix stated that each of its published iflix originals had reached the top 5 status in its release week on the platform, which indicates a welcome reception by the audience.
Here, Tencent can also give iflix the opportunity to produce more originals, possibly with some budget injections, to improve the quality of the productions.
After the merger, WeTV could easily take over the existing resources and produce originals under its own brand.
4th It still hits goals
Despite the overall gloomy prospects for iflix before the purchase by Tencent, iflix CEO Marc Barnett reported in his letter to shareholders in April that the company had done well.
He reported that their monthly active users reached a record high of 21 million, up 42% since early 2020.
He added that iflix had achieved its sales target for the first three months of 2020. Of course, one could say that the pandemic has had an impact on increasing these numbers.
5. Tencent does not assume any debts from iflix
According to anonymous sources who are familiar with the matter, Tencent will appear to play no role in debt relief from iflix.
They asked for anonymity because they were not authorized to speak publicly about the business and gave no further information.
At the moment it does not seem that iflix Tencent's debts are a major concern.
With Tencent's extensive experience in purchasing companies of all kinds, they have most likely already calculated the risks of acquiring iflix and developed a strategy to ensure financial stability in the future.
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In May, the Financial Times reported that Tencent had actually made a $ 4.1 billion profit that exceeded analysts' forecasts.
The pandemic worked in its favor and increased sales by 26% in the first quarter as customers were quarantined at home and all types of entertainment were sought within the company.
These numbers put Pony Ma, the CEO and founder of Tencent, now valued at $ 50 billion, in the top group of the richest in China, and dethroned Alibaba's Jack Ma, who is valued at $ 48 billion.
With all this information, it can be assumed that Tencent is not worried about purchasing loss-making iflix, as it may have the ability to turn things around for the streaming service.
It is also not the case that iflix has nothing to offer. Thanks to its efforts so far, Tencent can now penetrate the Southeast Asian market relatively easily.
Therefore, the potential of iflix, WeTV and Tencent to involve future companies in this region outweighs and outweighs its losses.
Now is also a good time for Tencent to take this step, as online entertainment companies are undoubtedly still growing thanks to the changing behavior of consumers in the new normal.
- Read more about what we wrote about iflix here.
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