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.