Netflix hype won't destroy local TV

Netflix's is finally here and despite questions about the content and the cost of its local offering, its presence just might boost the Australian streaming sector.

After what seems like years of media speculation, US streaming giant Netflix has finally announced it will launch in Australia in March 2015.

It’s not an entirely unexpected move. The news was foreshadowed by reports of the company courting ad agencies and content companies in preparation for a launch down under.

The announcement is likely to trigger a wave of speculation about the future of the streaming sector in Australia. Most questions will likely revolve around which companies will be put under pressure by the launch, namely Foxtel and local streaming veteran Quickflix and Nine and Fairfax’s new joint venture Stan.

But before we widen our gaze to the rest of the sector, it’s worth noting that there are a number of questions that remain unanswered in Netflix’s launch announcement, which could have the potential to threaten the local appeal of the service.

We still don’t know how much Netflix will cost in Australia

Netflix said that this information will be released at a later date. Netflix’s prices vary across different regions, though they typically fall within a range equivalent to $US6 - $US7. The price will also likely include the $1 price rise Netflix introduced across its service earlier this year.

Consumers would hope that Netflix would keep this rule with its Australian pricing. In doing so it would undercut its nearest rivals Quickflix and Foxtel’s Presto service, both of which offer video-on-demand services at $9.99 a month. However, there has been talk suggesting that Netflix could raise its prices above the $10 per month threshold.

Craig White, the head of Australian video-on-demand service EzyFlix, argues the service could easily justify a price above that of Presto and Quickflix, due to the hype it has generated and the marketing blitz it will unleash prior to launch.

A higher entry cost may help Netflix pay for the additional cost of licensing its third party content for an Australian audience. This brings us to our second point.

We don’t know what content will feature on an Australian version of the service

We know that all of Netflix’s own popular series, including House of Cards and Orange is the New Black, will be available. The question really revolves around what additional third-party content Netflix will air in Australia.

Netflix’s appeal comes from its vast library of content. Its buffet-style business model is only as effective as the amount of content on offer. But in order to do this legally, it needs to pay the content creators a region-based licensing fee.

This is why the service will be launched both in Australia and New Zealand -- in the content world, we are packaged into the same region. Given our small population, it will be interesting to see how much money the company will pour into stocking its library with third-party material for Australian audiences.

This could mean that while hit shows such as Sons of Anarchy and Dexter are available on the US service, they may not feature in the Australian version of the service. But even with half the amount of content (roughly 20,000 movies), EzyFlix’s White believes that it will still draw an audience in Australia.

Content discrepancies might impact Netflix's local subscription figures in the long term. This is the case in Canada, where a reported one in three Netflix viewers use a VPN or similar proxy service to subscribe to the US version of Netflix despite the streaming service’s launch in Canada in 2010.

That said, this is exciting news for the Australian streaming sector. Quickflix chief executive Stephen Langsford said Netflix’s arrival will “grow the pie” in the streaming sector, rather than steal away his customers from his service.

Once launched, Netflix’s marketing blitz and innate hype could kickstart a larger shift towards streaming in Australia -- one that both Langsford and White hope could encourage the most technology-adverse Australians opt to stream their favourite TV shows and movies rather than watch them on the commercial networks. 

This is an expanded version of article that originally posted on The Ticker.