Can StreamCo turn the tide on Netflix?

With local players scrambling to counter the threat of subscription video king Netflix, what makes Nine Entertainment and Fairfax Media think StreamCo can find success?

Australia's internet video drought has well and truly broken and there's no shortage of ways to rent or buy movies and TV shows online. Even the fledgling all-you-can-eat subscription video market is taking shape, with Foxtel's Presto joining Quickflix this year as an Australian competitor to international giants such as Netflix, Hulu and Amazon Prime Instant Video.

Quickflix and Presto are certainly feeling the pressure from Netflix, even though it isn't officially available in Australia. Up to 200,000 Australians pay to sneak into the US Netflix service each month – more customers than Quickflix and Presto combined – and the streaming giant is rumoured to be opening its doors in Australia next year. Presto and Quickflix prices dropped recently, as Netflix prices rose, but the US service still has the advantage when it comes to its range of titles and picture quality on media players like Google's Chromecast.

New kid on the block

Into this fight walks StreamCo – Nine Entertainment's long-promised streaming video service which has finally found a partner in Fairfax Media and is set to launch next year. From a business perspective, it's a good match between two old world media players looking to stake a serious claim in the new world of online video. Between them they have the cash, content, bargaining power, marketing clout, advertising partnerships and customer base to quickly reach the critical mass of subscribers required to make a subscription video service work.

StreamCo could possibly send a competitor like Quickflix to the wall, but can it succeed against the might of Netflix?

If Netflix does come to Australia next year, it will never be able to replicate its full US service due to local rights agreements already in place. If a program is yet to screen on Australian television, or is locked away by the likes of Foxtel, then there's not much Netflix can do about it until the next round of rights negotiations. Australians already watching Netflix will figure this out pretty quickly and stick with the US service – although Netflix coming to Australia will make it easier for Australians to sneak into the US service, as getting Netflix to take your money is harder than beating geo-blocking.

As long as Australians can sneak into the US Netflix service then there will never be a level playing field, but this isn't the biggest threat to StreamCo's success. Nine and Fairfax aren't going to win back Australians who are already satisfied Netflix customers and there's little point in chasing them.

Instead StreamCo should focus its efforts on tapping the vast reserve of mainstream Australians who haven't yet embraced subscription video and would put sneaking into Netflix in the too hard basket. It should target the silent majority of people who still buy the newspaper and watch free-to-air television, rather than the digital hipsters who insist traditional media is dead and source all their content online. While Australians are spending less at the newspaper stand, free-to-air television ratings are holding steady for the time being.

The enemy within

The biggest threat to StreamCo is the all-too-common arrogance of incumbent media players when approaching new media. For StreamCo to succeed, Nine needs to move beyond the "too big to fail" mentality and treat its online customers with more respect than it does free-to-air television viewers. That could be an insurmountable cultural shift for a broadcaster which is fond of last-minute schedule changes, deliberately running shows late and cramming in an inordinate amount of advertising even if it means trimming the program and plastering promos over the top.

Nine's approach to broadcasting is to treat viewers with contempt and hope it doesn't drive too many people away – exactly the model which Netflix set out to smash. Fairfax Media has already experienced its Road to Damascus moment and been forced to accept that it's not too big to fail in the internet age. Nine Entertainment would do well to take this on board

The fact that so many Australians still suffer through watching live television might vindicate Nine's approach to broadcasting, but the writing is on the wall if the US market is anything to go by. Why should Australians hand over $10 per month to StreamCo when it launches next year, rather than handing over their money to Quickflix or an arm of Netflix? If StreamCo's answer is simply "because they love Channel Nine" then it's in trouble.

Give 'em what they want

So how can StreamCo stand out from the crowd? A smart move might be to follow the HuluPlus "freemium" model, giving away some content for free but opening up a vast back catalogue to subscribers. Nine and Fairfax can leverage the content already available via their free Catch Up TV services – recent programming and Australian content which you won't find on Quickflix or Netflix yet.

For example, season two of Arrow is currently screening on Nine and the last five episodes are available via its free Jump-In Catch Up service. StreamCo could offer those five episodes for free, with a subscription unlocking access to every episode of this season along with all of season one – all from the convenience of one streaming video service. Meanwhile Netflix only offers Arrow season 1, while Quickflix won't stream it to you at all but will send you the disc via snail mail.

Along with premium US content there is Nine's a wealth of Australian programming for StreamCo to tap into, from The Block and The Voice to House Husbands and McLeod's Daughters. Making StreamCo the first port of call for Catch Up content makes it much easier to convert viewers into subscribers.

Or throw it all away

That's the best case scenario for StreamCo. The worst case scenario is that StreamCo becomes a disappointing also-ran, dragged down by mediocre content, overly-intrusive advertising, disappointing picture quality, crippling digital rights management and a general disdain for the viewers. Broadcast television viewers might still put up with such treatment, but the revolution is coming and StreamCo doesn't want to be up against the wall when it arrives.

The ball is in StreamCo's court, but its first step must be to put aside the arrogance of an incumbent and concede that it's not too big to fail.