Netflix is coming - but will it be worth watching?

Exclusive content deals and direct-to-market strategies threaten to fragment Australia's fledgling online video market.

Amid all the glitz and glamour of Samsung's recent Galaxy S4 and Smart TV launches lay a tantalising glimpse of Australia's online video future -- but unfortunately it's not all happy viewing. Turf wars and backroom content deals could stifle Australia's fledgling streaming video ecosystem even before the 800 pound gorilla Netflix officially sets foot on our shores.

For many people the US-based Netflix is considered the holy grail of online video streaming. Australian viewers are turned away by geo-blocking restrictions, but they're child's play to bypass. Netflix has even eased its restrictions on Australian credit cards, giving the distinct impression that it's happy to take our money and look the other way.

Netflix has embarked on an aggressive international expansion campaign over the last few years, although it still hasn't officially made it to Australia. That day isn't too far away, says Evan Manolis -- Samsung Australia's head of content for Smart TV/AV.

"US online video giant Netflix will come to Australia, I'd say give it two years. That means Australia's players have two years to get their strategy in order," Manolis says.

"Right now I'd say Australia lags around four years behind the US in terms of online video services. Of course Australia is not four years behind in demand for these services, just four years behind in supplying them." 

More competition in the online video space sounds like good news for Australian viewers but unfortunately exclusive content has become a key weapon in the tech wars, with Manolis overseeing a range of Samsung deals. In Australia the Quickflix subscription video app for Android is only available for Samsung's flagship Android devices. Meanwhile the new Foxtel Go Android app is also a Samsung exclusive until November, allowing Foxtel subscribers to stream live channels, watch Catch Up TV and schedule recordings on Foxtel's iQ2 Personal Video Recorder. The ability to subscribe to Foxtel IPTV packages is also exclusive to Samsung's televisions and Blu-ray players, although it is available via set-top boxes such as Telstra's T-Box and Microsoft's Xbox 360 games console.

What's perhaps more intriguing is Samsung's deal with the Seven Network's Plus7 Catch Up TV service. Plus7 offers a growing range of content via its website, but most of the decent shows are missing if you try to watch Plus7 on the PlayStation 3 or an internet-enabled TV or Blu-ray player. Samsung has struck a deal to bring most of this missing content exclusively to Samsung's Plus7 Smart TV app for Android devices and home entertainment gear. While US distribution deals will still block a handful of programs such as Revenge, Samsung's Manolis estimates owners of Samsung gear will have access to 85 percent of the programs available via the Plus7 website -- including the likes of Home & Away, Packed to the Rafters and My Kitchen Rules. You'll miss out on all this extra content if you're watching on a non-Samsung television or Blu-ray player, even if it has access to Plus7.

You might not care for Home & Away, and who can blame you, but Samsung's deal is part of a disturbing trend to lock away content and roll back the gains made by Australian viewers over the last few years. Australian fans of fantasy blockbuster Game of Thrones were pleased to learn that this season will be fast-tracked on Quickflix as well as iTunes, but it's a short-lived victory. As of next year, Foxtel's new deal with HBO will block Quickflix and iTunes from offering new episodes of Game of Thrones in Australia until Foxtel has finished screening the entire series locally. Foxtel is also snapping up a range of UK content for its new BBC premium channel, which will see some shows disappear from Australia's free-to-air channels and their Catch Up TV services.

Don't count on Netflix charging in as your white knight to save you from these content wars. Once Netflix does make it to Australia it will be certainly be hamstrung by local content deals. It's not going to offer new episodes of TV shows before they screen on Australian television, or perhaps even offer them at all if they're locked away on Foxtel.

Australians would be far better off sneaking into the US Netflix service than paying for a watered-down Australian service designed to respect the growing number of exclusive content deals. But even Netflix in the US isn't the service it once was. Sony Pictures recently resigned its deal with US cable channel Starz, keeping Sony movies off Netflix for another five years. This week Netflix lost another 2000 movies as Warner Bros, MGM and Universal content was cut when a content deal with Epix expired. There's also talk of Netflix ending its deal with Viacom.

Meanwhile Warner Bros has launched its own Warner Archive Instant subscription service for $9.99 per month -- more than a Netflix subscription. It's hard to see why anyone would pay Warner Bros $10 every month to watch the handful of 1950s reruns such as The Adventures of Superman and 77 Sunset Strip. It looks destined to fail, just as if Warner Bros had opened its own video store around the corner from your local Video Ezy and expected you to go to go there just to hire B-grade horror movies from the 1950s.

Even if Warner Archive Instant turns out to be an epic fail, the damage has already been done. The dream of paying one simple monthly subscription fee to meet all your online viewing needs was tantalisingly close but is now crumbling to dust. The big winners will be Pay TV providers and piracy, depending on where viewers draw their moral line in the sand.

The content industry is in the middle of a major power struggle. All service providers are obsessed with "owning" the customer and content providers are trying to prevent any one partner becoming too powerful and establishing itself as the sole gateway into our lounge rooms. It's actually new-world players such as Apple and Quickflix which have the best chance off pulling this off, but the internet offers every player the opportunity to cut them out of the picture and establish itself as a direct factory outlet. 

An old-world giant like Warner Bros is deluded if it thinks people are going to pay more for a Warner Archive Instant subscription than they pay for a Netflix subscription. In the process it's going to destroy the goodwill Netflix and other such services have built up with online viewers, luring them away from BitTorrent. No-one household is going to happily hand over $10 per month to every movie house rather than a single $10 per month to Netflix. If anything they'll put the money towards Foxtel or simply a higher monthly download limit so they can simply steal everything they want to watch. The industry will cry foul as people turn back to piracy, oblivious to the fact that it drove away paying customers.

Netflix might be coming to Australia, but if every content provider insists on locking away its movies and TV shows then there might not be much left worth watching by the time Netflix gets here.