Australian media companies on notice: Here comes Netflix

<I>Marvel's Daredevil</I> is one Netflix-exclusive on the way to Australia.

The imminent arrival of Netflix in Australia could give heart palpitations to the Australian media companies, according to an Australian analyst.

Netflix today announced it would bring its video streaming service to Australia and New Zealand in March next year.

“Right now people are in a cold sweat across Australian media,” IBRS analyst Guy Cranswick told Computerworld Australia.

Netflix said it will provide HD and 4K video to Internet-connected users in the A/NZ market.

A big question is what content Netflix can bring to the market and how it will stack up to what it offers in the US. For much of its third-party content, Netflix may need content agreements specific to this market; just because it’s available in the US does not mean it’s available here. This could put the company in a position of competing with itself.

Many Australians are already using the US version of Netflix, circumventing the service’s geo-blocking by use of a VPN. Already, Netflix is the second most popular paid-content media company in Australia, representing 27 per cent of the subscription rental media service market in Australia, according to the August 2014 issue of Choice magazine.

“In the short term, Netflix will likely draw many Australians into trialing the service; however without a strong content line up it might have trouble with churn,” said Telsyte analyst Foad Fadaghi.

“Even the biggest players such as Foxtel experience churn despite locking up much of the premium sports and entertainment content.

"It is also feasible that consumers will have multiple subscriptions to a number of service providers, if the content environment remains fragmented.”

Current Australian subscribers to the US service are likely to keep their VPNs since it’s good for other online activities, said Cranswick. While there may be some transfer to Netflix Australia, price and content could convince existing customers to stick with the US version, he said.

However, Fadaghi noted that content rights owner are likely to put pressure on Netflix to limits sales of the US service to Australian credit card holders.

In the announcement today, Netflix listed a variety of original content that will be available in Australia:

At launch, the premium and unique Netflix offering will include such original series as Marco Polo, BoJack Horseman and, among many kids titles, DreamWorks Animation’s All Hail King Julien.

Netflix, available on hundreds of Internet-connected devices, will also be home to the critically acclaimed documentaries Virunga and Mission Blue, and stand-up comedy specials Uganda Be Kidding Me, Live, from Chelsea Handler and Jim Jefferies’s BARE, among many others. The Netflix ANZ selection will expand in 2015 to include highly anticipated original series family thriller Bloodline starring Ben Mendelsohn, Kyle Chandler, Sissy Spacek, Linda Cardellini and Sam Shepard; the gripping Super Hero tale Marvel’s Daredevil featuring Charlie Cox, Rosario Dawson, Deborah Ann Woll, Elden Henson and Vincent D’Onofrio; Sense8, a new globe-spanning thriller series from the creators of The Matrix trilogy and Babylon 5, and, from the creator of Friends, Grace and Frankie with Lily Tomlin and Jane Fonda.

In addition, when Netflix recently bought the streaming rights to Gotham, the deal included the Australian streaming rights.

On a 15 October financial results call for Q3 2014, Netflix chief content officer, Ted Sarandos talked about the company’s approach to buying global content rights.

“We've hit a financial tipping point where we can move forward on buying up more territories than we're currently operating in, versus playing catch up, which we had been doing, licensing the territory or creating an original series and then several years later, having to go back and either renegotiate for that series or not have it, like we don't have House of Cards in some of our current expansion territories,” he said, according to a transcript.

Netflix said its service will work on a variety of smart TVs, tablets, smartphones, computers, game consoles and set-top boxes.

“Additional details on pricing, programming and supported devices will be available at a later date,” a statement from the company said.

Foxtel, Quickflix and free-to-air networks have been preparing for the arrival of Netflix.

Foxtel introduced and slashed the price of stand-alone subscription-video service, Presto. That service and Quickflix’s streaming-only service each now cost $9.99 a month. In the US, a streaming-only Netflix subscription costs US$7.99 a month.

Meanwhile, Nine and Fairfax Media have committed $50 million each to a joint venture called StreamCo that plans to launch a service called “Stan” in the 2015 financial year.

On 31 October, Quickflix reported a 23 per cent increase in its streaming-only subscriber base from the previous quarter. However, overall customer numbers declined by 3.8 per cent to 130,565 in the quarter.

“What might be more interesting than the actual launch and uptake of Netflix, will be the ‘Netflix’ effect on the incumbent players, including those that are making forays into the OTT video market,” said Fadaghi.

“It will be interesting to see if the availability of 4K content on Netflix will spur others like Foxtel to bring UHD content into Australia. This could drive the uptake of 4K TV sets and also be net positive for NBN Co and its resellers.”

Adam Bender covers telco and enterprise tech issues for Computerworld and is the author of dystopian sci-fi novels We, The Watched and Divided We Fall. Follow him on Twitter: @WatchAdam

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