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Netflixification and the Australian VOD Rush

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Compared to the openness of Scandinavia, Australia has been left relatively far behind when it comes to the VOD market. In this third blog post exploring VOD around the world, I look at the reasons behind this delayed development and how the arrival of Netflix has lead to a sudden VOD-rush, as local companies seek to establish their own subscription service.

Australia’s pay TV industry is dominated by Foxtel, the country’s main service provider. Costly high speed broadband and expensive TV subscriptions have made it expensive to access foreign content. ABC reports that Australian’s pay on average 300%-400% more than their US and UK counterparts, who access the same content via Netflix.

Unsurprisingly, the region has relatively high levels of piracy. Nearly 1 in 3 Australian VOD viewers reporting that they use an illegal service. Affordable access to the latest content from abroad is often given as a key reason for illegal viewing.

As well as using illegal streaming sites, evidence suggests Australians are also accessing content through a VPN. By March 2014, Netflix already had 27% of the subscription or rental VOD market in Australia, a full year before it was officially launched.

When Netflix confirmed reports that it planned to launch in Australia in March this year, it posed a legitimate challenge to Foxtel’s dominance.

Percentage of Australian VOD viewers aware of and using VOD services

Source: Screen Australia & Nielsen, 2014

While awareness of SVOD sites in Australia was generally on a par with catch-up and ad-funded sites, uptake had been limited, with only HBO’s (later Nine’s) Quickflix (which began life as a DVD mailout service), Foxtel’s Play and Go platforms (part of the TV package) and Foxtel and Seven West Media’s SVOD movie service, Presto, available.

Since the start of the year, three more SVOD players have launched in Australia. Presto followed up on its initial movie-only offering with TV series subscription in January 2015, which was followed by the launch of Nine Entertainment and Fairfax Media’s Stan a week later. Netflix launched on 24th March 2015.

Presto Home

Presto, offering the best in 'binge-worthy' content. Source: Presto

Questions have since been raised over whether having four SVOD services is sustainable in Australia, with pundits highlighting the importance of establishing a point of difference in order to survive.

Judging by the initial pricing and design of some of these sites, that advice seems to be falling on deaf ears, with services following many of the design tropes set out by Netflix.

Stan UI

Stan's UI. Look familiar? Source: Tech Crunch

In order to stand out from the pack competing SVOD services will need to apply their knowledge of the local market to create products which resonate with Australian users.

For Australians, the ability to binge-watch a variety of content has been cited as key reasons for SVOD subscription. Given that caps on bandwidth imposed by Internet service providers mean that customers could be charged extra for watching a large amount of content, deals for unmetered downloads will also be key to SVOD service success.

Currently, Netflix and Presto seem to be winning this battle. Presto has immunity to metered downloads by parent Foxtel and Telstra, Australia’s largest telecom. Netflix meanwhile has done deals with iiNet and Optus.

Watching on the main living room TV will be a key driver towards VOD platforms. While laptop and PC may dominate, with 67% of VOD viewers choosing to watch this way, nearly a third of Australian homes having a connected TV and around half of VOD viewers watch on TV-connected devices.

Stan can be watched on the TV screen through both Chromecast and Airplay.

Presto’s TV support is limited to Chromecast. However, it has recently done a deal with Quickflix, which will see it become a distributor of the Foxtel service. This suggests that Presto is seeking to take advantage of Quickflix’ comprehensive device compatibility.

Netflix, meanwhile, is blazing ahead, with availability on Samsung, LG, Sony, Panasonic, Philips and HiSense Smart TVs, as well as set top box provider FetchTV in addition to its existing Chromecast, Airplay and cross-game console compatibility.

The subscription VOD market in Australia remains in a state of flux as the main players continue to do content and distribution deals and tweak the quality of their services behind the scenes in an attempt to differentiate themselves from the competition.

However, as the dust settles, it appears that it is Netflix which has emerged as the dominant VOD service in Australia, according to reportedly leaked figures from Experian Hitwise published in The Australian. Its established brand, strong library of content and comprehensive device compatibility have set it apart from the local players. So far, it seems, Netflix, is winning the battle to be the Netflix of Australia.

'Netflix leaves online rivals in its wake'

'Netflix leaves rivals in its wake.' Source: Experien Hitwise via The Australian

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