How Netflix Will Change The Australian Pay TV Market

We know Netflix is coming to Australia in less than a fortnight. Although reports suggest that around 340,000 Australians already access the service, the official launch will change Netflix from something used by those that understand what a VPN is and how to change their router settings to a general Australian phenomenon, available to anybody with access to a modern game console, a smart TV, a mobile device or a computer. Just how is this going to affect the Australian pay TV market?

Picture: Getty Images/Ari Perilstein

To answer this, we need to understand what Netflix is, and — importantly — what it isn't.

Netflix: Home Of The Classic TV Show Marathon

Netflix began life in the United States back in 1997. At this time, the idea of streaming large videos over the Internet was but a gleam in Al Gore's eye, so Netflix was actually born as a DVD subscription service. For a flat monthly fee, customers could rent DVDs for as long as they wanted, returning them when they were done with them so that they could rent some more. With this model, and given the timelines for DVD postage, Netflix grew quickly as a way for consumers to watch their favourite DVDs and TV shows. Rather than new releases, Netflix customers enjoyed the large back catalog of DVDs, watching what they wanted when they wanted via DVD.

In 2007, Netflix began to move away from its DVD rental service and towards a streaming service, but the basic approach remained the same. For a flat monthly fee, customers could access the entirety of the Netflix back catalogue, making it possible for customers to binge watch their favourite shows. Combined with their recommendation system that makes it easy for customers to find other shows they like, as well as apps available for a slew of different devices, this made Netflix a very popular service in the United States.

Customers were no longer tied to a broadcast schedule and could watch what they wanted, when they wanted to. At a cost of only $US8 a month, with no lock-in contract, it was possible to watch a gamut of different television shows and movies on a schedule that suited the consumer. Combined with services like Hulu and Amazon Prime offering first-run TV shows and new movies, this phenomenon gave rise to a new term, "cable cord cutter" describing those that had decided to abandon the cable television system (in many American cities, the major way to receive television content) for a combination of free-to-air television and a collection of streaming services available on their devices.

And this is in a complicated American market, where cable providers have a stranglehold over much of the premium television offerings, and where free-to-air television does not often the options that Australia does.

How On-Demand Television Will Change Australian TV

Over the last several years, the Australian free-to-air networks and Foxtel have all experimented with on demand offerings. Commercial networks offer services such as PLUS7, 9Jumpin and TENPlay, and the ABC and SBS offer ABC iView and SBS On Demand, but all of these services are promoted primarily as catch-up services — a way for viewers of the broadcast channel to catch up on shows that they've missed. Foxtel has taken the model a little further, with Foxtel Go and Foxtel Play offering a mobile streaming service for the existing channels, and Fox On Demand offering a video demand service from the Foxtel iQ Box. However, both these services have limitations, either only offering the existing channels, or requiring special hardware to operate.

Where Netflix has the advantage is that it was built from the ground up to be a streaming service. Subscribers to the Netflix service have access to every show that Netflix offers immediately and on demand, and can watch their choice of show at any time. Combined with the lack of lock-in contract and the availability of Netflix on many different devices — including both televisions and mobile devices — this makes Netflix a perfect choice for Australian consumers that aren't looking for access to the latest content, but instead are looking for a wide choice of shows that they'd like to watch. Netflix even play to this strength, releasing original series shows like House of Cards whilst noting that consumers may binge watch the whole season over a weekend.

In a market where mature free-to-air offerings give access to sport content and first-run Australian TV shows, and where commercial free-to-air catch-up services exist to give us access to the Australian shows that we miss, Netflix has the opportunity to quickly absorb the market of classic television binge watchers that traditionally belonged to the Pay TV providers, making it easy for them to watch the shows they love on a variety of different devices. Rival services Stan, Presto and Quickflix are all aiming for the same market, but don't have the Netflix advantage of maturity in the market and a slew of existing content deals and original content.

But what about sport? Well, while it's true that Netflix doesn't offer any sport, the reality is that the Foxtel sport service may still be outside the price range of many consumers, with the basic sport package on Foxtel costing $50 and requiring a 12 month contract. Consumers weighing the cost of a minimum $600 commitment against the al la carte $10 a month Netflix might simply decide that it's easier to stick with the sport on free-to-air television (despite the limitations) and spend their money on something else.

At the rumoured price of $10 a month, it's even possible that customers will try the Netflix service in addition to their Foxtel service and then find themselves turning into the Australian "cable cord cutters" and dumping their Foxtel service. If the estimated 340,000 Australian subscribers to the American service are anything to go by, this process has already started, and the launch of Netflix in Australia is only going to accelerate the trend. Come March 24, TV in Australia might be set to change dramatically.

Michael Cowling is Senior Lecturer & Discipline Leader, Mobile Computing & Applications at Central Queensland University.

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Comments

    Netflix even play to this strength, releasing original series shows like House of Cards whilst noting that consumers may costing $50 and requiring a 12 month contract.

    Sentence makes no sense and link is broken.

      Netflix even play to this strength, releasing original series shows like House of Cards whilst noting that consumers may (binge watch the whole season over a weekend). Link: http://www.wsj.com/articles/SB10001424052702303932504579254031017586624

      In a market where mature free-to-air offerings give access to sport content and first-run Australian TV shows, and where commercial free-to-air catch-up services exist to give us access to the Australian shows that we miss, Netflix has the opportunity to quickly absorb the market of classic television binge watchers that traditionally belonged to the Pay TV providers, making it easy for them to watch the shows they love on a variety of different devices. Rival services Stan, Presto and Quickflix are all aiming for the same market, but don't have the Netflix advantage of maturity in the market and a slew of existing content deals and original content

      But what about sport? Well, while it's true that Netflix does't offer any sport, the reality is that the Foxtel sport service may still be outside the price range of many consumers, with the basic sport package on Foxtel whilst noting that consumers may costing $50 and requiring a 12 month contract.

    Mistake in the markup
    Netflix even play to this strength, releasing original series shows like House of Cards whilst noting that consumers may binge watch the whole season over a weekend.
    In a market where mature free-to-air offerings give access to sport content and first-run Australian TV shows, and where commercial free-to-air catch-up services exist to give us access to the Australian shows that we miss, Netflix has the opportunity to quickly absorb the market of classic television binge watchers that traditionally belonged to the Pay TV providers, making it e...for them to watch the shows they love on a variety of different devices. Rival services Stan, Presto and Quickflix are all aiming for the same market, but don’t have the Netflix advantage of maturity in the market and a slew of existing content deals and original content. But what about sport? Well, while it’s true that Netflix doesn’t offer any sport, the reality is that the Foxtel sport service may still be outside the price range of many consumers, with the basic sport package on Foxtel costing $50 and requiring a 12 month contract

    Last edited 16/03/15 2:37 pm

    surely Netflix will be able to tell exactly how many Australians had a US account once 200,000 US customers magically start accessing it in aus. It'd be interesting to see the numbers from netflix on this come 24th of March.

      You're assuming that they don't already know, of course! A lot of people think that they are well aware we are using it but have so far been fairly ambivalent. Will be more interesting to see if that changes in a week or so.

    I'm a little surprised that 2 weeks out and we're still not really clear on what will be available for us Australians to screen.

    Anyone who still has not yet dumped Foxtel should do so. It's about cutting Murdoch out of the future of Australian media content delivery, we can't let him slide in under the door at the last minute and get away with it after failing to innovate and forcing people onto bundles all this time.

    I wonder how well it'll work considering how bad many of our ADSL connections are. I can barely play youtube videos I cant imagine Netflix working.

      This will be a really interesting point to investigate once it comes out. Users that have the American Netflix here in Oz seem to find that it works okay, but as I note in the article, those users are probably more likely to be geeks, so you could imagine they have a better connection speed. Will be interesting to see how the infrastructure holds up once we are talking the average jo-schmo instead on his ADSL1 connection miles away from the exchange. Should be an insightful test for the infrastructure.

        i have ordinary Internet (tpg) which constantly drops out, and unlike youtube & other VOD, Netflix is the most stable playback.
        Their buffer magic seems to work, and when my net drops out, Netflix can continue to play till I reset my modem.

      Netflix are pretty good at adjusting video quality on the fly. A few weeks ago I got to see how the US version went over a 1.5mb DSL line. Not mind-blowing quality but definitely watchable.

      They call it adaptive streaming. The video quality will adjust based on the traffic on your street's pipes. If all goes well you will never notice any drop in PQ.

      Last edited 16/03/15 5:28 pm

      i can have issues with youtube, and do, buffering like crazy
      my netflix going through hola (chrome extention) works perfectly though

    I believe that Netflix makes their entire catalog available to all the major Australian SPs and the customers just download a show locally. No major buffering issues crossing different oceans.

    I have a Kodi (formally XBMC) HTPC which currently meets all the household needs.
    Free-to-Air, Pandora, a variety of free streaming services via plug-ins, connected my NAS for local media playback)

    I am hoping to integrate Stan, Presto or Netflix into the HTPC. However after contacting Stan & Presto support there is currently no plans to support Kodi/XBMC. So unless I want to add more hardware & complexity to my setup I will have to go with Netflix. (My TV is a cheap 42" with no Smart technology)

    Having a Chromecast or Apple TV would not worry me, but there are other users in the house who are less tech savvy and like the fact that all our media needs are met by a single device on a single platform.

    On a different issue when looking at the services it is hard to do a comparison on content as most of the information is hidden from general view. In Stan's case when I asked about it supported provided the following.

    "...that at this point in time we don't have a specific content list available without signing up for Stan's free 30 day trial."

    Obvio that at this point in time we don't have a specific content list available without signing up for Stan's free 30 day trial.

    Any chance of Lifehacker doing an article to detail not just the tech differences but also the content differences?

    I'm just sick of waiting. There isn't even a Netflix app on Android.
    If it's not working on the 24th I will sign up with Stan and forget Netflix ever existed!

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