Iflix Gets $90 Million to Battle Netflix in Emerging Markets

(Bloomberg) -- Iflix, a video-streaming service with customers mostly in Southeast Asia, raised $90 million in a round led by telecommunications giants Liberty Global Plc and Kuwait-based Zain to take on Netflix Inc. and Naspers Ltd. in Africa and the Middle East.

The investment will also fund expansions throughout Asia, the company said in an emailed statement Tuesday.

Iflix offers customers in nine countries a mix of Hollywood fare like the film “Iron Man” and TV series “Homeland” along with local programming for a monthly subscription fee. The company has signed up more than five million customers -- more than analysts estimate Netflix, the world's largest paid video service, has in Southeast Asia.

The streaming provider is looking to capitalize on its early success in the region by spreading to emerging markets elsewhere, starting with the Middle East and Africa. It has also formed a joint venture in the Middle East and North Africa with Mobile Telecommunication Co., known as Zain, which has 47 million customers in eight countries.

“It was always meant to be a Southeast Asian business, but it grew so fast,” Patrick Grove, Iflix cofounder and chairman, said in an interview. Grove started the company with fellow entrepreneur Mark Britt, the company's chief executive officer, with support from Hollywood's Creative Artists Agency and private equity firm TPG Growth.

Read how YouTube is luring viewers away from cable TV here.

Iflix has succeeded, Grove said, by positioning itself as cheap alternative to piracy, which is rampant in poorer countries where most people don't pay for cable. Though the membership fee varies by country, it costs about as much as a pirated DVD typically does in those markets. In Malaysia, Iflix runs about $1.80 a month for an annual subscription. Netflix's service starts at about $8 a month in many markets.

“We're like McDonald's and they are like a Michelin two-star restaurant,” Grove said. “We both sell food, but we're not competitors.”

The partnership with Zain mirrors how Iflix has grown in Southeast Asia. The company has relied on telecommunications providers to sell Iflix on top of their phone packages. That way, Iflix doesn't have to spend much money recruiting customers, and mobile providers can use Iflix to keep customers from defecting to rival carriers.

Competition in emerging markets is ratcheting up. Amazon.com Inc. extended its video service to the rest of the world late last year, while Netflix added a feature so people living in countries with inconsistent broadband internet can download shows to watch later. Within Southeast Asia, Sony Corp., Warner Bros. and Singapore Telecommunications Ltd. also operate a rival service called Hooq.

Previous Iflix investors Sky Plc, Catcha Group and Evolution Media Capital, a fund backed by CAA and TPG Growth, also participated in the funding round. Sky invested $45 million in Iflix last year.

To contact the reporter on this story: Lucas Shaw in Los Angeles at lshaw31@bloomberg.net.

To contact the editors responsible for this story: Crayton Harrison at tharrison5@bloomberg.net, Dave McCombs, Lena Lee