Who’s afraid of the big bad Netflix?

The arrival of the US entertainment juggernaut Netflix on Australian shores may not be as imminent as imagined, and the likes of Quickflix and EzyFlix certainly aren't losing sleep over it.

Secure your profits and incentivise your subscribers, Netflix is coming... or so some would have you believe.

Once again, the talk in media circles has been dominated by the so-called ‘imminent’ arrival of the US entertainment juggernaut Netflix.

It’s assumed that this movie and TV streaming giant, which apparently accounts for up to 50 per cent of web traffic in the US, will swoop into Australia and scuttle our local broadcast media industry in one well-timed precision strike.

The company already has a captive market, given that Australians already abuse VPN and proxies to access the US version of the service. As we revealed earlier this year,  Australia ranks just behind Canada as second highest user of one Netflix-targeted VPN service.

All of this combines to form a riveting narrative - one which apparently spells doom for the sector. But there are a few key facts, lost in the Netflix hysteria, that ruin the story. The first of which is that Netflix has never mentioned - or even hinted at - any plans to move into Australia.

“We haven't announced any plans to enter the Australian market,” Netflix spokesman confirmed to Technology Spectator.

He added: “The Australian press seems to be speculating wildly and we have no idea why they are doing so, much less at this moment in time.”

However, it’s worth noting that another US tech giant, Amazon whistled a similar tune with the Australian media about its overseas expansion plans. But then, out of the blue, it opened a data centre in Sydney. And this year followed suit with more consumer-facing services.

Even if Netflix were to launch in Australia, it would at least give the industry some warning. As per its current strategy to explore and open markets in Europe and South America, the company recently launched in the Netherlands. It failed to specify an exact date, but it clearly indicated the move in a press release on its website last July.

And one of the reasons it launched in the Netherlands is because of its extensive broadband infrastructure. We may have to move a few rungs up Akamai’s ‘state of the internet’ report before we’re considered a viable market.

So, that’s that. But for argument’s sake, let’s pretend that Netflix is launching in Australia - and soon for that matter. Turns out, Australia’s local content players actually aren’t that scared of the big bad streaming giant.

Quickflix, a company that would serve as a direct competitor to Netflix's Australian operations, welcomes the challenge.

And in response to the purported fear the arrival of Netflix is inflicting on the local industry, Quickflix CEO Stephen Langford said that “somebody needs to breathe into a paperbag”.

“The early evidence [from the US] is that at the sort of price points that we play in, customers are taking more than one service,” he said.

If the Australian market pans out to be anything like the US, then the distribution of content rights will likely allow for multiple players in the same market. Albeit, less than the US given our market size.

Also, what many don’t realise is that an Australian Netflix would not be a like-for-like of its US counterpart.

When it comes to broadcasting rights, the studios charge companies like Netflix on a region-by-region basis. Judging by the amount we already pay for content in Australia, there’s likely a premium on the rights to broadcast in this part of the world. 

Netflix would need to look at whether our market size justifies the amount they would need to spend to import their full library to Australia.

On top of this, the group’s ace-in-the hole against this situation, its original shows (House Of Cards, Orange is the New Black etc.), are already airing on Foxtel and other local content services.

It’s for this reason that VPN-based access to the US version of Netflix is rife in Canada, despite the fact that the company has launched a Canadian-based service. The US counterpart simply offers more content at a lower price.

Another local content player, EzyFlix, is banking on this fact as its defence against a Netflix assault. Its founder, Craig White says that while Netflix will aim to offer an all-you-can-eat buffet of year-old movies or TV series, his service will focus providing new release content on demand across any device you choose.

Let's keep in mind that, EzyFlix is more like Apple TV than Netflix, in that you need to pay for each episode or movie rather than through a flat-out subscription fee.

Both QuickFlix's Langford and EzyFlix's White agree that Netflix will one day hit Australian shores. Perhaps this may happen once it’s done conquering Europe and South America. The exact same point was hinted at in a piece by David Marshall earlier this week.

One possibility that he flagged to Technology Spectator after penning that piece is that Netflix could ease its way into Australia through a partnership with our incumbent cable provider, Foxtel.

It wouldn’t be a new strategy for the company. In fact, Netflix signed up its third cable distribution partner in Europe earlier this month.

Could you imagine having to sign up to Foxtel (starting at $24.50 per month) just to gain access to a diminished library of Netflix content? It is a possibility, given Foxtel’s current reach and power across Australia.

Perhaps the key takeaway from all of this is that if Netflix is destined for Australia, it won’t be the white knight that we all hoping it would be.

If Canada is any example, it may just drive even more customers to the US version of the service and ultimately reinforce Australia’s inherent disadvantage in this emerging global content market.

InvestSMART FORUM: Come and meet the team

We're loading up the van and going on tour from April to June, with events on the NSW central & north coast, the QLD mid-north coast and in Perth, Adelaide, Melbourne, Sydney and Canberra. Come and meet the team and take home simple strategies that you can use to build an investment portfolio to weather any storm. Book your spot here.

Want access to our latest research and new buy ideas?

Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.

Sign up for free

Related Articles