New ASX Listing Today: TV2U’s Next Generation Online Streaming Platform

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PUBLISHED: 09-02-2016 09:33 a.m.

14 minute read

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In the world of entertainment, the television has been a bastion of video content delivery above all other alternatives since its wide scale adoption in the 1950s.

Pretty much every household in the world has one, with huge volumes of entertainment being broadcast each day, exclusively for TV viewers.

The TV is part and parcel of entertainment culture – but that doesn’t mean it will be here forever.

Regularly scheduled TV programming is on the way out, to be replaced by a more dynamic alternative.

The writing is on the wall, or in the case of the TV, the tombstone.

Enter TV2U International Ltd (ASX:TV2) – a company which listed today on the ASX.

TV2U is determined to create a one-stop shop for online media distribution, product marketing and data analytics which can be repackaged and resold many times over.

TV2U was born after shareholders approved Galicia Energy’s acquisition of TV2U Worldwide, having reached the minimum $4M subscription.

With the deal done, TV2U now intends to bring its unique TV technology to its media partners and thus leverage increased revenue from existing subscribers, while attracting new subscribers.

It wants to become the best-of-breed provider of streaming technology to distribute content, but also, white-label to other broadcasters across the globe.

TV2U gives viewers the ability to watch what they want, when they want while giving broadcasters (TV2U’s customers) incredibly detailed analytics regarding people’s viewing (and spending) habits.

The result is a cutting-edge platform that can be scaled globally and TV2U plan to monetise from day one.

In the meantime, TV2U is also barking up the karaoke tree to get its wheels of revenue moving as soon as possible.

Before we go too far, it should be reiterated that this is a speculative stock. There is no guarantee that this company will be successful, and caution is advised if considering as an investment.

Now for the bigger picture, let’s retune into:

The problem with television

Nowadays, televisions come with all sorts of PC features included as standard such as Skype and YouTube, making teleconferencing your friends on the other side of the globe and watching videos of silly cats possible directly from your sofa.

The technical differences between televisions and computers are blurring all the time, with internet-streaming certain to take over from TV-broadcasted content in the coming years.

Even without internet connectivity, there are already so many channels out there that viewers often struggle to choose what they want to watch.

There’s a heap of content available across hundreds of channels, but none of it is tailored to the viewer and it’s all scheduled by someone else.

In other words, television is dying a slow death to be replaced by an online entertainment alternative that can be streamed to your phone, tablet or existing television.

All at the convenience of the viewer, not the broadcaster.

Taking YouTube as a simple example; it is a glorified video database updated thousands of times per day by users that upload videos. YouTube now accounts for more ‘viewing hours’ than traditional TV programming, especially amongst the younger generations.

If we look at services such as Netflix, here again the principle is the same. People much prefer to have content streamed to them on demand, when and where they want it...

...rather than at a set time on a pre-established channel, broadcast to your household’s TV set.

This trend is only going to intensify which means TV channels will see even less viewers, while online commercial entertainment platforms such as Netflix will continue to see rapidly growing subscriber numbers .

Rushing home for your favourite show broadcast at a certain time is now a thing of the past courtesy of ‘on-demand’ content that allows you to catch-up on what you missed at any time of your choosing.

TV is good at rallying everyone for a big live event, but when it comes to day-to-day consumption of video and audio, it’s behind the times.

It is behind streaming services such as Netflix.

And it is behind wholesale streaming providers such as TV2U (ASX:TV2).

Commercial companies such as Netflix, Amazon and HBO have grown from tiddly start-ups to billion dollar giants in a short space of time because consumers from all age groups are attracted to choice and variety.

Traditional TV simply cannot offer those two things, but broadband connectivity can.

With broadband speeds rising in the background across the globe, it means online entertainment providers are seeing an improving operating environment without having to do any legwork themselves.

Netflix is signing up around 17 million new subscribers every year but offering only movies and TV shows, mainly in Western countries and excluding China.

TV2U wants to improve on that by offering more content verticals such as karaoke, gaming and crowd-sourced content...

...and pierce the Chinese market as well.

It’s a big target, so it’s a good thing TV2U has a proprietary data analytics trick up its sleeve to accomplish it.

Data analytics is a key revenue driver and a huge catalyst for e-commerce

What online entertainment streaming offers is access to a data goldmine that can be monetised in a variety of ways.

Being able to log what users watch as well as recording their broader social media and browsing activity, allows advertisers to design targeted, customer-specific ads that tend to generate more commercial value than standard advertising which is all about aggregate viewer numbers.

And that is exactly what TV2U’s technology can provide its customers.

Standard advertising only goes as far as placing ads for shaving utensils in the middle of sports programmes with the intention of targeting men – for example. Or perfume ads in the middle of romantic comedies, targeting women.

That’s a pretty simplistic way of doing things, and most people tend to nip off for a cup of tea while the adverts come on anyway.

Speaking of which; the next time a flurry of ads comes on in the middle of a movie you’re watching, keep an ear out for the supercharged volume level...

...that’s the sound of desperate advertisers utilising every trick in the book to keep your attention.

It’s pretty annoying, but it’s one of the only remaining tricks they have left.

Traditional advertising is losing traction with its audience...

so it’s about time advertisers got back into the fold

So TV2U has embraced the online content surge, applied cutting-edge data analytics to its users and generated ads that people actually want to see?

Well, yes, it has developed a platform to do just that.

TV2U wants to take the inefficient status-quo and inject a bucket load of dynamism into proceedings.

As an example, TV2U’s platform would allow a broadcaster to stream content to viewers and be able to create detailed activity profiles across viewing habits, browsing activity, online shopping choices and even search terms they entered on their phone or laptop.

Think the ‘Internet of Things’ but in an online entertainment niche.

In a nutshell, TV2U’s platform is a full spectrum content streaming and data analytics tool that can take online entertainment to the next level – for both consumers (more content available on more devices) and broadcasters (improved commerciality and better analytics).

Where operators like Netflix fall short is not overlaying data analytics onto its viewers, and not being able to go international due to licensing issues.

Netflix has struggled to break into China – the biggest growth market in the world – because Chinese authorities want excessive controls on content and its distribution.

TV2U is not hindered by national legislature and therefore, going ahead into China with a view of capturing a significant chunk of China’s online sprawl would not be an issue.

Singing for karaoke

The karaoke market, particularly in Asia-Pacific, is a key media opportunity for TV2U.

According to TV2U’s estimates, karaoke as a type of content offers the lowest capex and highest margin combination compared to all other types of content.

TV2U plans to generate early revenues from karaoke, with other content soon to follow once the platform is fully built.

However, it is early days for TV2U in terms of generating revenues, and there is no guarantee of success – this is an early stage tech company and a speculative stock. It’s always good to seek professional advice before investing, and be sure to consider your own personal circumstances.

TV2U is embarking on a strategic rollout targeting a number of key regions within the next 12 months offering a range of packages from a 1-hour pass to a yearly subscription fee to an addressable market of hundreds of thousands...

To put it in perspective, China-based online karaoke company Changba has 140 million registered users, 40 million of which are active monthly and 6 million daily.

Those are the sorts of numbers budding tech companies are looking for – millions of users, active on a daily basis.

Even if TV2U manages to siphon off just a sliver of the millions of karaoke buffs in Asia, it could generate substantial cash flow for this micro capped stock.

Internet connectivity is knocking down borders and opening e-commerce opportunities that are truly gargantuan

In Western countries, karaoke is seen as a silly pastime only worthy of occasional participation.

In Asia however, it’s a completely different story with karaoke seen as a very popular pastime, to be enjoyed by all age groups. It’s a cultural gap and there’s no reason why an ASX-listed company can’t fill it.

This fundamental difference means karaoke companies tend to make cash in Asia, but struggle in places like the US, Australia and Europe.

TV2U wants to be able to offer users what they want and where they want it, which means offering a top-notch karaoke service to Asian consumers, Hollywood movies and games for Western consumers and if that wasn’t all, there are also plans to offer Asian TV channels/content to Asian consumers based outside of their country of origin.

If we take China and India – two of the most populous and fastest growing nations in emerging markets – the combined addressable market for TV2U reaches into billions of people.

Hundreds of millions of people in these two countries are getting richer and moving into the middle-class which means more spend on electronic devices and online content.

Typical scene showing karaoke taking centre stage in living rooms across Asia

If TV2U can establish a presence in Asia first and foremost, it will have a large (and growing) market within which to prosper.

Sunfly deal opens the door to Eastern prosperity for TV2U

In order to get in amongst the sing-along-loving Asian karaoke market, TV2U has partnered with Europe’s largest karaoke company, Sunfly , to launch a new joint venture KARAOKE 2U targeting Asia with its app SUNFLY 2U.

One of TV2U’s major differentiators against its competition in both the OTT entertainment and karaoke markets, is its diverse range of content.

Rather than just focusing on western and Hollywood generated songs and movies, TV2U targets content that is created in emerging markets.

To begin with, TV2U will launch in Thailand first before spreading to other Asian markets and into Latin America with already to go localised content.

Sunfly already has commercial rights to more than 14,000 songs and TV2U’s finished product offered to customers will contain both western and local artists with the catalogue growing over time.

TV2U’s subsidiary TARA TV, has added over 13,000 tracks and 1,500 full motion karaoke videos into the mix as part of the Sunfly deal.

TV2U will embed the karaoke songs and accompanying videos into its ‘jukebox’ offering, to be customarily plugged directly into its over-the-top VOD service.

As we mentioned earlier, TV2U is embarking on a strategic rollout targeting an addressable market in the hundreds of thousands within the first 12 months of its Karaoke service.

But what could be the real money spinner is the associated advertising and marketing features IVAN brings to the table.

IVAN the Terraformer

TV2 owns pioneering technology dubbed IVAN (Intelligent Video Accessible Network), which streams digital video over open internet networks. This is what’s known in the industry as an over the top (OTT) solution.

An OTT service is anything a consumer receives over the internet that is not directly provided by their Internet Service Provider (ISP).

Popular websites like YouTube, Netflix, Apple TV and Skype all utilise OTT services to bring content to their consumers.

TV2U’s approach is agnostic to the network and can work over fixed internet connections, Wi-Fi as well as slower 3G/4G mobile connections.

IVAN also allows TV2U to introduce a crowd-sourced content channel similar to YouTube and even synergise with the online world of betting, which could see a whole new paradigm of commercial opportunity for TV2U – especially in Asia where online and ‘in-play’ betting is rather popular.

TV2U’s success is largely dependent on its ability to monetise its TV platform

Given that TV2U can build up a detailed understanding of its users (user location, their likes and dislikes, type of device etc.), TV2U can then dynamically display adverts injected into live content almost instantly.

This advanced form of targeted advertising is far more effective than standard ads because every single viewer can potentially receive a different ad, depending on their social media activity, browsing history and previous spending preferences.

Detailed analytics data can then provide valuable inputs to recommendation engines and to provide additional data to advertising selection servers for personalised advertising.

The integration of the analytic platform as a standard component of the IVAN platform is a pivotal differentiating factor for TV2U.

Having completed its A$4M capital raising just days ago, TV2U is ready to rock’n’roll

With its capital raising done and dusted, TV2U listed on the ASX today.

The first port of call will be Thailand where its service will launch first, but over time there is a much larger Asian market TV2U just can’t wait to get its teeth stuck into.

TV and video revenues are forecast to more than double from around $4BN today to over $10BN by 2020. Most of that growth will come from advertising and subscription revenue...

...which fits well with TV2U’s plan to get subscriptions moving and advertising cash rolling in courtesy of IVAN.

There is no guarantee this tech roll out will be successful though, so caution should be applied here if looking at investing. This is a small, speculative tech stock.

TV2U’s technology allows the company to monetise online video content from the entire value chain – installation, delivery, subscription, maintenance, advertising, and content.

Ultimately, TV2U enables its clients to push up their revenues through detailed analytics and push advertising that commands premium advertising fees. At the same time, its strong encryption protocols and piracy controls attracts content providers that don’t want to fall prey to piracy.

TV2U enables the monetisation of video, audio, gaming and music content via the internet to their users, over any network, to any device.

Of the 180+ streaming platforms operating in the market today, TV2U has developed one of the most advanced platforms available, empowered by proprietary technology by the name of IVAN.

The technology superiority allows TV2U to incur perpetual, recurring revenue and offers something to advertisers that other solutions do not. This is likely to assist TV2U in establishing long-standing deals with advertisers that provide lucrative revenue streams.

If you’re looking to plug into the online revolution and take advantage of the never-ending sprawl of online content, it’s all about bringing the TV to you.