Digital video streaming is on the rise in Australia and changing the way we consume our entertainment, writes Paul Budde.
LARGE SCALE VIDEO streaming arrived rather late in Australia. But when Netflix finally made its entry in Australia – five years after its launch in North America – it had very easy pickings Down Under.
By that time, the country had been suffering for over two decades from a de facto Foxtel pay-TV monopoly, with prices as much as four times as high for similar services elsewhere in the world. Despite Foxtel forecasts that by the year 2000 it would reach 75% market penetration, over all those years they never reached much more than a 25%–30% penetration.
This had all to do with affordability — customers were simply not prepared to pay anything more than what they could afford and what they saw as fair. A side effect of this situation was that pay-TV piracy in Australia was rife.
Then, in 2015, Netflix arrived with a subscription rate of under $10 a month and, as they say, the rest is history. Now, four years later, the service has some 12 million users. A clear indication that when the price is right, Australians will flock en masse to such services.
We currently have a similar situation in Australia regarding the NBN. The company is complaining that people don’t want the higher speed services, however, as soon as the price is right, we will also see people rapidly moving to higher-speed services.
Back to the streaming video-on-demand services (SVOD). The success of Netflix also finally saw the Australian broadcasters, as well as Foxtel, waking up. Channel Nine (initially with Fairfax Media, who they gobbled up in the process) launched Stan and now have close to 3 million subscribers. Channel 10 has its 10 All Access service. After various trials and errors, Foxtel has its Foxtel Now and Kayo services which account for another 2 million users.
Apart from these two subscription-based services, all broadcasters also offer free catch-up services. Optus and Telstra also offer streaming sports services. Furthermore, there is still the original Foxtel pay-TV service and the Fetch service, which is used by Optus, TPG and others.
However, it looks like the real battle will be between the international operators. Apart from Netflix, Amazon Prime, YouTube Premium, Hayu (NBC Universal) and Disney+ have entered the market and after a few false starts, Apple TV is set to arrive here later this year.
To further highlight the Australian appetite for these services, in all there are around 15 million users, indicating that many people have multiple subscriptions. Looking at overseas markets, it looks like few people take up more than three services. If this growth pattern continues then there is plenty of room for the total number of subscriptions to double over the next five years. It clearly shows that there is great interest in these new streaming services. Interestingly, however, most of the commercial SVOD operators still will have to make a profit. Depending on how the market develops, this will result if mergers and acquisitions occur in the not-too-distant future.
As a result of all these SVOD activities, the broadcasting market has now changed beyond recognition. Soon, if it has not already happened, most viewing will be done on-demand with a rapid decrease in traditional TV viewing time.
With international companies now dominating the new broadcasting environment in Australia, the focus will now shift to “original” content. Who will be able to provide the most attractive content? This is going to be the next differentiator for the competing companies. With the arrival of companies such as Disney, Netflix will have a tough time ahead. While they are rapidly producing new content, will it be enough and will it be the quality that allows them to compete with Disney?
Then there is also the question of local content. These international companies have little interest to produce local content for all the 100-plus local markets they operate in around the world. While it was good to hear that Netflix will start producing more local content, it will be interesting to see if we can maintain a reasonable level of local content without specific quota regulations. (It needs to be noted that last year Netflix produced less local content than the year before, so the future remains unclear.)
For the time being, however, it is great to see that competition is driving better prices for consumers, innovations and hopefully a better market for Australian content. Who knows what else will be developed around SVOD? There will be bundling with other services and other content such as music, games and podcasts. Better search facilities and more personalised services, as well as specialisation (categories such as children and sport), are also being introduced. This will also work in with services such as Amazon Alexa and Google Home. Bundling within pay-TV packages is another activity that is pursued.
It is clear that the fat and lazy days for the broadcasters and companies such as Foxtel are well and truly over and that in order for them to survive, they will have to pull up their socks and stay relevant in this rapidly-changing market. The signs have been on the wall for a long time but now the new environment has well and truly arrived and all bets are off as to who the winners and the losers will be.
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