Rakuten’s Video Service Wuaki Confirms UltraViolet And European Rollouts

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One year after launching video streaming services in the UK, Wuaki, the streaming video service owned by e-commerce giant Rakuten, has confirmed  to TechCrunch that it has picked up 250,000 users in the UK, as well as a couple of key moves to compete better against streaming services from Amazon, Netflix and local players. Wuaki is planning a wider European rollout, and it will start to offer UltraViolet films to its users to complement physical DVD sales.

“We will have thousands of titles combing local and hollywood and new releases,” CEO Jacinto Roca tells TechCrunch. “For us it’s really important to have group synergies. Raketen has e-commerce properties across Europe and we will be supporting UltraViolet so that we can promote physical disc distribution.” He says that those e-commerce operations already have “millions of customers with single ID and sign-in credentials.”

Wuaki, based in Barcelona and currently live in Spain and UK, will turn on services in France by mid-August, in Germany and Italy before the end of 2014, and a further six markets by the end of 2015, bringing the total to 11, Roca says.

Meanwhile, the UltraViolet service, similar to what Amazon also offers, will play into synergies with Rakuten’s wider e-commerce operation: people who purchase a streamed version of a film or TV show will get access to a physical copy, and those who buy physical DVDs will get access to the streamed versions via Wuaki. In France and other countries in Europe, the service will work in conjunction with Priceminister. In the UK, the physical distribution partner will be Play.com.

The moves come as Wuaki continues to expand the platforms where its service can be used, recently adding Chromecast and a Windows 8.1 app to existing availability on iOS, Android and several smart TV platforms.

No plans for now to expand Wuaki to the U.S. market, Roca says.

In its one year of life in the UK, Wuaki has so far picked up 250,000 users, Roca tells me. About 15% of them taking some form of paid service each month, either in the form of an a la carte purchase of a selected TV show or film, or via a monthly unlimited use subscription from a selected list of titles — options that the company crafted to help differentiate its offering from existing providers and to bring on later adopters who might be less keen on all-you-can eat offerings.

Of the numbers, Roca says, “We’re happy with results, because it’s a sign of how the market is giving us trust.”

Nevertheless, the numbers are a far cry from the millions of UK users who are subscribing to other OTT services from Amazon and Netflix, or those who opt for VOD services from pay TV providers like Sky, Virgin Media and BT.

Moving targets

As a later entrant into the video market in the UK and soon in other countries, Wuaki is taking an approach that goes against the grain of what competitors are doing — and, one might argue, against the grain of what economics seems to dictate.

In terms of the pricing, Wuaki does have a subscription offering called Wuaki Selection, which is priced at £5.99 per month. But it’s not these steady subscription packages that Wuaki encourages. As Roca describes it, it’s the pay-per-view, transactional model that Wuaki is pushing most aggressively and views as “our main focus.”

“There is very limited differentiation between streaming video providers that sell subscriptions because of content exclusivity,” he says.

In contrast, he explains that it’s “in Rakuten’s DNA as an e-commerce company to offer a transactional model. It feels better with our core business, especially since DVDs and other packaged media have been a big part of our business.”

Wuaki’s decision to offer UltraViolet films, meanwhile, comes at a time when the same of the game seems to be streaming, even if that doesn’t always work out with the most lucrative returns compared to physical DVD businesses.

Netflix, for example, noted in its last quarterly earnings that streaming services accounted for nearly $1 billion of its $1.2 billion in total revenues. However, it seems that streaming still costs Netflix a lot to offer: of the $204 million made from DVD rentals, the cost of revenues were just over half of that: $107 million, working out to $98 million contributing to profit. Streaming, despite bringing in nearly $1 billion of total revenues, for now cost a whole lot more produce, with the profit contribution working out to just $166 million.

“If you look at the wider market there is still a big appetitive for physical copies of products,” Roca says. “While we are going for digital we are not forgetting that.” Across the five markets where Wuaki will be active by the end of this year, the physical video market is estimated to be worth €10 billion, he says.

Another area where Wuaki is not following in the footsteps of its rivals is in the area of original content: so far there has been none on the platform, and the company has yet to announce anything in this area. That’s not to say that it won’t, though — last week Roca was in London specifically to meet content producers.

Viki, Kobo and other partners

On the wider opportunity of synergies between Wuaki and other Rakuten companies, Roca says that the opportunities are still being “actively evaluated so see what else we can do to differentiate our proposition.”

Among other properties, Rakuten also owns the Kobo e-reader business, and there is also messaging service Viber, which Rakuten acquired in February 2014 for $900 million.

Perhaps most synergistic of all, especially in light of international expansion, is Rakuten’s acquisition of Viki, the platform that brings together crowdsourced translations and subtitles that run alongside content from different online streaming networks. Viki was acquired last year for $200 million, and while it has rolled out in Rakuten’s home market of Japan, it has yet to be integrated into the company’s video holdings.

“In some of the Viki videos you are seeing some ads for Wuaki, and we are trying to evaluate the conversion,” Roca says. “We need to understand the crossover between the two.”

All the same, even if Rakuten wanted to bring the two services closer together there may be some challenges in doing that. There are already relationships in place between Viki and the likes of YouTube, Yahoo and Netflix, and there is the question of how crowdsourced subtitles would square with rights holders.

“Getting subtitling in our content from the community is not easy and will require stakeholder management,” Roca says. “Doing it hand in hand with hollywood is our preferred choice.” Having said that, he adds that the studios “love the idea of Viki.”

There will likely be other kinds of partnerships on the horizon, too — namely in the form of linking up Wuaki with local carriers to promote deals, along the lines of what Netflix currently offers with Vodafone in the UK, where Vodafone is offering customers six free months of Netflix when they take 4G subscriptions with the carrier.

“We are planning to do this too,” Roca says, “but we don’t have a partnership to announce now.” You could probably perform a process of elimination to figure out who a likely partner might be.