Trump has talked a big game on trade this year, slapping tariffs on the dragon that is China, prompting it to retaliate with fire. This trade war has escalated fast, with many Southeast Asian economies potentially getting burnt. However, a report by The Economist Intelligence Unit has found that two of the key battlegrounds for the trade war are technology and automobiles, with countries like Vietnam, Malaysia and Thailand seeing long-term benefits in these sectors. With that in mind, here are some interesting stories from the year:
THE AGE OF PRIVACY NIHILISM
Welcome to the age of privacy nihilism. Facebook’s Cambridge Analytica scandal rocked the world this year, raising questions about user privacy, the dissemination of fake news and social media’s capacity for influencing politics around the world. This led to the social media juggernaut experiencing the biggest wipeout in stock market history with shares plunging a whopping 19%, erasing about US$120 billion in market value.
However, for big tech companies like Facebook, the reality is that their value doesn’t lie in their stock prices – it lies in the user data of their consumers. With more and more Southeast Asians going online for the first time due to the rise of cheap phones and better accessibility, the war for personal data and privacy is just heating up, but so far we’re losing.
NETFLIX AND TOO MUCH CHILL
Early in the year, Netflix reached US$100 billion in value, joining a prestigious club of companies on the S&P 500 worth over 12 digits. However, from its latest earnings report, the internet entertainment company’s momentum seems to be waning as negative cash flow affects its long-term viability. It has also just announced its sixth debt raise of over US$1 billion in the past three and a half years, leaving the company with over US$10 billion in debt together with US$19 billion in streaming content obligations, for a total of nearly US$30 billion. With all eyes fixed on Netflix, will it reduce its prices, cut content spending, or rapidly grow its subscriber base?
I FLIX, YOU FLIX, WE ALL FLIX FOR IFLIX
Looking a little closer to home, SEA-based streaming service iflix has taken a different approach, launching an all-new ‘freemium’ model that allows users to sign up and access certain levels of content for free – iflix looks to be trying to buff up their user base as fast as they can via new segments of the lower-income market in SEA before other services do.
Iflix is also continuing its strategy of bundling its services with telco and internet providers, allowing them to hit new households as soon as they come ‘online’ for the first time. With a very healthy war chest, but facing stiff competition from the many, many new streaming services that have cropped up throughout the region, the SEA streamer can’t afford to iflix and chill if they want to stay alive.
WE ARE ON THE WAY
Tesla may be planning on sending people into space, but back on planet earth ride-hailing apps are the big buzz. Earlier in the year, Grab announced that it will be taking over Uber’s Southeast Asian operations, turning Grab into the overlord of the ride-hailing sector in this part of the world, but leaving users unhappy with the emergence of a ride-hailing monopoly. Both ride-hailing giants were then slapped by regulators in Singapore with a hefty fine of about US$4.6 million for Grab and US$4.8 million for Uber, due to their merger harming competition.
In round two of the fight for SEA’s 640 million population, enter Go-Jek. The Indonesian titan has just launched its first foreign operation in Vietnam and is set to penetrate Thailand, Philippines and Singapore soon. The region is under ride-hailing app crossfire as both juggernauts fight for a piece of the SEA pie – but we aren’t complaining as long as we get cheaper rides.
NO MUSIC, NO LIFE
The music streaming company became the eighth largest tech IPO after its first day in trading in April this year, leading to its interesting Q3 of 2018 – growing to 191 million monthly active users, 87 million of which are paying subscribers. However, with many SEA residents unable to afford premium content, they have resorted to pirating from the app or using other music streaming options. This led the music streaming giant to launch its Family and Student plans that allow for up to six users to use the service for as low as US$1 per person, causing a dip in average revenue per user.
Spotify also turned its first-ever profit, albeit a small increment from July from a one-off tax benefit from its investment in Tencent Music from China. It’s likely that Spotify will be back in the red next quarter due to its many royalty costs. However, despite the heavy costs and slower growth, it seems like the music streaming service will be back in black soon enough.