Reed Hastings the CEO of Netflix is set to launch the Companies new Australian service later this month.
Hastings who missed the recent CES Show in Las Vegas after breaking a leg in a skiing accident is set to meet with launch partners, he will also announce several exclusive programs that will only be available via the $10 a month Netflix service being launched in Australia.
Hastings is confident the company’s deep pockets will offset any home advantage that local competitors have in both buying and producing hit shows.
Netflix’s two biggest Australian competitors, the Foxtel-Seven West Media vehicle Presto and the joint Nine Entertainment Co-Fairfax Media joint venture Stan, say their local experience and relationships set them apart in buying and making content for the Australian market.
In an exclusive interview, Netflix CEO Reed Hastings told Fairfax Media, he disagreed, saying bluntly: “It’s just money. If you pay the most money, you win the show.”
Netflix announced on March 3 it had snatched back House of Cards from Foxtel, with all three seasons exclusively available on Netflix when it launches on March 24.
Netflix plans to spend more than $US3 billion ($3.9 billion) globally on content in 2015.
A new report by analyst firm IHS claims that the launch of Netflix will not pose a threat to Foxtel, Quickflix or Nine Entertainment’s Stan however the new service will be a challenge for Apple’s iTunes and JB Hi-Fi when it launches in Australia this month.
The research reveals that while Netflix would cause some damage to players in Australia’s home entertainment market, most of it would be limited to sales of individual movie and TV show downloads, rather than to rival all-you-can-eat subscription streaming services.
The findings were based on changes to consumer home entertainment spending patterns in Western Europe as Netflix launched across the region between 2012 and 2014.
Based on their analysis of Netflix’s arrival in markets like the UK the Research Company claimed “The effect of a Netflix launch does not have an overly negative impact on existing SVoD (streaming video on-demand) services, as revenues on rival services continue to increase. ?
In Australia Foxtel mainstream subscriptions are falling however the overall subscription numbers are being bolstered by low cost Telstra T Box/Foxtel subscriptions.
The research also predicted that sales of Blu-ray and DVD discs, which are already under pressure from online piracy and structural changes to the entertainment industry, would escape serious impact.
Free-to-air broadcasters are also set to face a minimum hit however IHS does claim that Netflix could take a small bite out of average daily TV viewing times.
The study was commissioned by the industry lobby group representing the $1 billion Australian film and TV home entertainment industry, The Australian Home Entertainment Distributors Association (AHEDA). It echoes comments made by chief executive of The Australian Subscription Television and Radio Association Andrew Maiden last week, when he said the SVOD market in Australia would be dwarfed in size by the existing TV industry.
AHEDA chief executive officer Simon Bush said that the results were surprising, particularly for disc sales.
“It’s unclear how the market is going to shake out this year but the research suggests that streaming is not going to dramatically impact physical DVD sales,” Mr Bush said.
The Financial Review said Australia’s internet infrastructure has slowly reached a standard capable of carrying over-the-top on-demand and streaming video services. That has lowered barriers that protect Australia’s incumbent cable TV operator Foxtel from competitors and led to the rapid proliferation of alternatives.
Foad Fadaghi managing director of digital consumer specialist firm Telsyte agreed that Netflix Australia might not necessarily pose a major threat to local streaming providers.
“Our research has shown that consumers are quite likely to have multiple SVoD subscriptions. They will have them for different content types depending on the content rights’ structures that are in place,” Mr Fadaghi said.
In other words, consumers were likely to cherry-pick services to tailor content to their tastes.
Mr Bush said streaming services had adopted a strategy of buying exclusive rights for popular TV and movie content to attract subscribers rather than trying to be a one-stop shop for viewers.
For instance, Stan has exclusive rights to Better Call Saul a spin-off from the highly successful series Breaking Bad, while Foxtel has secured exclusive rights to Game of Thrones for its Presto streaming service. More recently in the US, Netflix has started sidestepping the likes of HBO and AMC and invested directly in its own TV series, including Orange is the New Black and House of Cards.
