News analysis

Singtel buys itself time through tie-up with Netflix

Move gives telco room to assess online broadcaster's impact on market here

Singtel has finally signed a deal with Netflix to make the latter's video-streaming service, launched here last week, available with a click on the telco's familiarset-top box.

On the face of it, Singtel's offer may not be the most attractive to consumers, but analysts say it is a smart move. Under the deal, consumers get up to nine months of Netflix subscription - worth between $11 and $17 per month, depending on the number of devices connected - for free. But they have to commit to a two-year mobile, or fibre broadband and television, service contract.

This is akin to making a two-year commitment in exchange for a free budget handset.

Already, Netflix users can access the service through their computers and devices such as the PlayStation 4, Xbox and Apple TV, which are connected directly to television sets.

With virtual private network (VPN) services, users could even tap Netflix's fuller library of content meant for the United States market - although such access will soon be cut off.

While users can now tap Netflix's fuller library of content meant for the US market using VPN, that access will soon be cut off. PHOTO: BLOOMBERG

But media lawyer Bryan Tan of Pinsent Masons MPillay believes Singtel's move is a strategic one.

"There is a saying: Keep your friends close, and your enemies closer," he said. "Corporations are concerned that market disruptors would eat their lunch... Singtel's move could be seen as an attempt to buy time to assess the impact of Netflix's entry into that business."

StarHub is expected to announce its own tie-up with Netflix soon.

Mr Ramakrishna Maruvada, telecoms researcher from the Daiwa Institute of Research, said that by embracing a potential competitor, the telcos should be in a better position to mitigate longer-term threats.

In the short term, however, the telcos have little to fear.

"Any negative impact is likely to be limited in the short term. Similarly, any telco gains from the Netflix tie-up would be marginal for now," said Mr Maruvada.

Mr Greg Unsworth, the technology, media and telecommunications industry leader at consulting firm PricewaterhouseCoopers Singapore, concurs.

"I don't think Singtel or StarHub are at significant risk for the next three years, provided they keep responding adequately to customer expectations," said Mr Unsworth.

Singtel's and StarHub's pay-TV subscribers have stabilised at 423,000 and 542,000, respectively.

The biggest contributor to this is pay-TV operators' unrelenting grip on football content such as English Premier League and Uefa Champions League.

Sports content is not available on Netflix, or other legitimate over-the-top (OTT) services that have threatened the livelihood of traditional broadcasters with their movies and TV series streaming service. Football broadcasting is advertising-heavy and is controlled by advertisers to a certain extent. In contrast, Netflix carries no ads.

But it is only a matter of time before Netflix gets around the restrictions of its current business model.

"The moment Netflix selectively accommodates advertisements, perhaps via a dedicated Netflix Sports platform, sports content owners will be interested to work with Netflix to distribute their content," said lawyer Rajesh Sreenivasan, a technology and telecoms partner at Rajah & Tann.

By then, Singtel and StarHub may have enough original content and souped-up online and mobile platforms to better compete with OTT providers. Either way, consumers will have more choice and stand to benefit.


A version of this article appeared in the print edition of The Straits Times on January 16, 2016, with the headline 'Singtel buys itself time through tie-up with Netflix'. Print Edition | Subscribe