SINGAPORE (Reuters) - Who would want to watch a South Korean soap that was a flop back home?
Lots of people, it turns out - something that Singapore-based startup Viki feels vindicates its business model: an ad-supported streaming TV and movie site where unpaid fans add the foreign subtitles.
"We call it content arbitrage," said Razmig Hovaghimian, Viki CEO and co-founder. "Ninety percent of content is trapped within borders. We're taking things that aren't travelling and making them go places."
The service plays on a number of trends both in Asia and worldwide: a passion for watching video over the Internet; a growing interest in content from other countries; and the emergence of more sophisticated software to spread the burden of laborious tasks like subtitling.
Viki provides a platform that pulls together two traditional strangers: broadcasters and other video producers who license out content to territories where there are no existing rights with local broadcasters, and volunteer "fansubbers" who translate and write subtitles in any language they want.
Viki then inserts ads and provides the streaming service, and shares the ad revenue with the broadcasters.
Take, for example, that Korean flop, "Playful Kiss". Ratings sank below 5 percent when it was aired during primetime in Korea in 2010, says Hovaghimian, when a top drama might capture up to 30 percent of viewers. But on Viki it topped the site's charts for several months and was translated into 56 languages.
The company behind the show made "hundreds of thousands of dollars" in ad revenue and was able to secure rebroadcast deals with 10 countries it would otherwise never have reached, Hovaghimian said. The broadcaster wasn't eating into existing audiences, it was finding value in new ones. "We're increasing the size of the pie for you, we're not cannibalizing," he says.
Originally dreamed up by two Korean students in the United States who wanted to share their country's videos with non-Korean speakers back in 2007, Viki now has 12 million users each month watching 12,800 hours of content subtitled into up to 150 languages.
MOVING INTO MUSIC
It's not that fan-generated subtitling, or fansubbing, is new. It's just that it has largely been clunky and, most importantly, usually illegal. Viki's challenge was not only to provide the platform to make it easier, but to persuade broadcasters and others that fansubbing their content was a great way to make extra money.
"Getting good content owners to agree to this was such a pain," says Hovaghimian, who previously worked at U.S. TV network NBC. "It took two years to convince NBC - and I was from NBC - that it was OK to do fansubs."
In this they have been largely successful.
Two of its key strategic investors have been BBC Worldwide, the commercial arm of Britain's BBC, and SK Planet, a subsidiary of South Korea's SK Telecom, meaning that users are able to watch John Cleese's Fawlty Towers or a Korean movie. Other investors include Greylock Partners, Andreessen Horowitz, Charles River Ventures and Neoteny Labs, from whom Viki has raised $20 million.
And on Thursday, Viki announced that it was moving beyond TV and movies by signing deals with several music labels and agencies, including Warner Music Group, to subtitle and stream thousands of music videos on its service in the U.S., Canada, Europe and parts of Asia.
Stephen Bryan, Executive Vice President, Digital Strategy and Business Development at Warner, said in an email interview the appeal was being able to reach audiences that previously wouldn't have understood the meaning of songs.
"Lyrics are obviously a key part of how many artists communicate," he said. "Through the translations on Viki, a star that already has a global following will be able to forge a deeper connection with audiences that don't speak his or her language."
Winning one of the big global labels represents something of a coup for Viki. Rivals Sony and Universal teamed up with Abu Dhabi Media in 2009 to launch VEVO, which last month launched in Australia, its fourth country. EMI also licenses its content to VEVO, while Warner partnered with MTV Networks.
It's also a boost to revenue. Though Hovaghimian won't discuss numbers, he said music could "double revenue because it can scale ... Every month there's going to be fresh new content."
Viki's challenge remains to translate the idealistic vision of two Korean students into something that retains the passion of its followers but also scales up into a business that matches its investors' and owners' ambitions.
Indeed, there are signs of growing pains. Contributors - those who help manage the content's translation - complain about problems with the platform and slow response to requests for support. But, for now, they say it's not about sharing proceeds.
"We don't mind the money issue," said 24-year old French contributor Celine Choquet, who has been using Viki since 2009. "It's just that, if they are making money off of our submissions, we expect to have a good product and good customer service."
(Additional reporting by Eveline Danubrata; Editing by Daniel Magnowski)