Everyone agrees that a service which gives Australians the ability to pay a low fixed monthly fee to watch a huge range of TV shows and movies would be popular. Many people appear to believe an Australian version of Netflix would solve that problem. However, the brutal reality right now is that we’re never going to get the features or range or price most people want, we’re going to do nothing but complain about the options we already can get, and the companies providing those services are going to struggle to gain traction or turn a profit. Here’s why.
Picture: Gareth Cattermole/Getty Images
This problem became very evident in the discussions following our posting yesterday of an infographic from CHOICE comparing the options available to Australians for streaming media services. Here it is again, examining three choices: Netflix in the US, Quickflix in Australia, and Foxtel in Australia:
As we noted yesterday, the first problem with this chart is that it really doesn’t compare like with like. $7.99 from Netflix gets you nothing but streaming shows; $14.99 from Quickflix also gets you streaming and a DVD postage deal; and $72 from Foxtel includes a stack of live sporting broadcasts and a lot of channels. We know that sport tends to be the main driver for pay TV takeup, which makes the comparison even more dubious. We’re not disputing that many people would prefer to pay less for a streaming-only option from Quickflix, but that doesn’t justify comparing entirely separate products and pretending the more limited one is better value.
The second evident source of bias in this chart is that it lists nothing but US shows. It really shouldn’t be surprising that a US-based service has better access to American programming than Australian businesses, and it ignores the reality that Australian content remains the most popular choice on Australian TV. (As it happens, the range of streaming Australian content on Quickflix is also pretty poor, and a lack of local content is likely to be an issue if Netflix itself ever launches in Australia, a point we’ll return to.)
The third problem is that two of the shows which are included (House Of Cards and the fourth series of Arrested Development) were Netflix exclusives, developed by the channel itself. Had CHOICE focused on content from HBO, it might well have found the reverse result: Quickflix has an exclusive deal for HBO programming, while Netflix doesn’t. (The CEO of Quickflix has just returned from overseas having apparently signed up more programming deals; we’ll be interested to see what emerges there).
Finally, it seems worth pointing out that while Quickflix is the most visible Netflix-like service in Australia, it isn’t the only one dabbling in the general area. You can also choose Fetch TV, offered by a range of ISPs, the Foxtel Xbox service, and the BBC iPlayer iOS apps. (By the same token, Netflix isn’t the only game in town for US subscribers; Amazon’s offering is arguably the most visible.)
Having said all this, the biggest criticism of streaming services tends to be that they simply don’t have enough shows. If you can’t find the programming you want on a given service, you’re going to complain. Guess what? You’ll be complaining for all eternity.
No legal service — not Netflix, not Quickflix, not a local version of Hulu, not any future version we haven’t seen yet — is going to have everything. No-one is going to want to pay to license all that content, or have the energy to line up all those separate deals. Choices will be made, and some of us will end up seeing that gap — whether it’s Doctor Who or Offspring — as an excuse to stick with downloading without paying, or using a VPN to access a service from a different region.
What It Costs To Make TV
The main reason for this problem, as we’ve pointed out on Lifehacker on multiple occasions, is that movies and television remain a regionalised business. Producers typically license work to a specific country or region, and part of the reason they can demand reasonable fees for those rights is the promise that a competitor in the same region won’t get hold of the same content.
If someone can watch a show as part of a $7.99 bundle, the odds of a TV broadcaster paying large sums for the same content after that point are reduced very much, often to the point of zero. This may seem irrational behaviour given how easily we can all pirate and share the same content anyway, but the fact that there’s an easy illegal workaround doesn’t automatically create a viable business model. If the networks don’t want to pay to make the show, right now the show almost certainly won’t get made, and that won’t change in the foreseeable future.
Making television and movies is extremely expensive. Producing an hour of Australian drama costs around $550,000 (and that average figure is lowered through the inclusion of soaps such as Home & Away and Neighbours). It’s hard to see how that would be remotely viable if the key source of revenue was fees from a Netflix-style service.
Right now, Netflix has roughly 30 million US subscribers — let’s call it 10 per cent of the US population. If we assumed a similar proportion of Australians (which is way above Quickflix’s current subscriber base of around 113,000 paying customers), there would be 2.3 million subscribers. If we imagined each one paid $8 a month (the Netflix figure and the one CHOICE seems to be suggesting as reasonable), that would give Quickflix a total income of $220 million.
Sounds like a lot, doesn’t it? But if that was dedicated to production, it would still only cover 440 hours of television. The average Australian watches almost three times as much TV as that in the course of the year (according to the Australian Multi-Screen Report). And of course the vast majority of that income can’t go towards producing new content: licensing existing content and operational costs have to be covered. In reality, you’d be lucky to score a tenth of that money.
In the absence of a service that’s truly globe-straddling, no-one can afford to abandon the old model. But the old model is shedding viewers, who want more choice and don’t expect to pay much (if anything) for the privilege.
Even if there is a service that is truly globe-straddling — say Netflix launches around the world and secures global licensing deals — it’s hard to imagine it funding Australian content the way it has funded US content such as House Of Cards. Your big issue might be the inability to watch Arrested Development, but far more Aussies are likely to want to watch Packed To The Rafters. Don’t expect Netflix to be funding a future revival of that show — and we haven’t even thought about sport in this argument.
There’s no obvious solution to any of this, and there’s no denying that consumers want convenience, whether by legal or illegal means. But arguing about it in a “I should be able to watch absolutely anything I want and pay $10 a month” is just blindly ignorant of the realities of production economics.