Why Foxtel’s Presto is no threat to Netflix

On-demand streaming is changing the way Australians consume video, but Foxtel's Presto, with its limited range and higher price, poses little threat to market leader Netflix.

In March of 2013, 49,500 Australians entered the search term ‘Netflix’ into Google. Ten months later, in January of this year, that number had increased over 300 per cent to 165,000 people.

Original programming such as the Kevin Spacey-led House of Cards, season 4 of Arrested Development and cult hit Orange is the New Black have introduced Netflix to a new audience of Australians.

The search volume on Google shows that getting Netflix in Australia is moving from purely the domain of the technically-proficient to a much, much wider audience. The Netflix experience on Apple TV is wonderful, and simple to use.

The benefits are obvious. For $US7.99 a month, you get access to almost infinite programming options: movies, TV shows, documentaries and original programming. All are available on demand. For a little over $100 a year, you can pretty much watch whatever you want.

Actual quantified information around the number of Netflix-connected households in Australia is tough to get, but most experts put the figure between 100,000 and 200,000.

Last month Foxtel launched its own on-demand service, Presto. Presto is effectively a Netflix-light package -- movies only at this stage, no TV shows -- and is double the price of Netflix at $19.99 per month (first month is priced at $4.99).

Presto is also currently only available on mobile, tablet and PC. Should users want to get Presto content on the main screen -- their television -- they’ll need to be a little creative. Presto feels an awful lot like the old Bigpond Movies service from Telstra.

The main difference between Presto and Netflix is that Presto is 100 per cent legal in Australia while Netflix, technically, is not. Netflix users in Australia are gaming Netflix into thinking they are located within the US, a territory Netflix has the required content licensing permissions.

Is Presto competing with Netflix? I would argue it isn’t. If anything, Netflix is competing to an extent with Presto’s parent, Foxtel. Aside from live news and sport, Netflix has a large amount of the TV content that provides the bedrock for most of Foxtel’s channels, such as comedy series, drama, movies, documentaries and reality programming.

And will Presto put a stop to Australians taking up Netflix? Again, probably not. At least not until the two are comparable -- both in range and price. Regardless, it is too early to make a call on Presto as the brand has only just started establishing itself in Australia. Within a year we should have a good indication of whether it has struck a chord with users.

Personally, I love my Foxtel. IQ is a great product and for an AFL fan, the service offers an excellent product. However, these things come at a price -- for me in excess of $100 per month -- and I don’t have access to the movie package (which also includes Showcase and premium TV series such as House of Cards, Breaking Bad and Game of Thrones). Still, as long as Foxtel has all AFL games live on its platform I will be a subscriber.

I do not have Netflix, but I know at least five households that do. Of those five households, four also have Foxtel, with no plans of abandoning it.

While local estimates on Netflix usage are cloudy, Netflix itself would know exactly how many households are using the product in Australia.

The company has 45 million subscribers worldwide. Earlier in the year, it announced it that will be considering expansion in territories with large-scale internet consumption and broadband subscriber bases, such as France and Germany. Will Netflix eventually make its way to Australia? Absolutely. It’s a matter of when, not if.

The big question is what the rise of on-demand streaming means for the consumption of both pay and free-to-air television into the future. Presently it’s still a niche activity, with the overwhelming amount of video consumption is happening via broadcast channels. But this will change, and the younger generations will drive it.

A friend of mine told me a story about his four year old son wanting to watch Peppa Pig. My friend tuned his TV to ABC2 and checked the guide. He told his son he would have to wait until the afternoon to watch Peppa Pig. His son laughed at him and opened up the iPad and surfed to the ABC iView app. Within minutes he was watching back to back Peppa Pig episodes on the big screen, streaming on demand. For this four-year-old, the idea of waiting to watch his favourite show was completely alien.

It makes you wonder what TV will look like in 20 years and who will be the big winners, and big losers, of these changes in consumption.