Market Insight

Netflix jostles with local players in the crowded Australian VoD space

March 04, 2015

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Netflix has announced that its service will launch in Australia and New Zealand on 24 March 2015. Consumers can look forward to original content, local as well as foreign series and films available on smart TVs, set-top boxes, games consoles, tablets and smartphones.

This marks Netflix’s debut in the Asia Pacific region. Its ambitious global expansion plans look to exploit 200 new markets by 2016 and Japan and China are the Asian markets it will march into next.  

Our analysis

Netflix in Australia has been put in the spotlight due to the much heated market climate. Besides existing players such as Quickflix and Ezyflix, two local video on demand (VoD) services, Presto TV and Stan, launched in the first three months of 2015. Both new VoD services are backed by players in the traditional TV space, Stan by Nine Network/Fairfax and Presto by Seven West Media and pay TV leader Foxtel. 

Netflix’s pricing in the US is comparable with Presto and Stan’s, within the range of A$9-10. Presto Movies and Presto TV are priced at A$9.99 a month whilst Presto Entertainment (TV and Movies bundle) is available for A$14.99 a month. Netflix has yet to reveal its pricing strategy in Australia.

Pricing is important, but it is content offering which catches consumers’ interest. With its well-established reputation for original programming, Netflix should definitely distinguish itself by beefing up its offering in this area. Importantly, some of the premium programming such as Netflix’s own House of Cards and HBO’s Game of Thrones will be missing, having already been sold to Presto. What's more, Presto and Stan have the advantage of support by FTA metro TV and the pick of back-catalogue TV content. Netflix will bring to market a number of popular titles, which it has rights to, but it will still lag in local content, being entirely new to the market. IHS sees no delay in Netflix partnering local producers to bring more locally-produced content to viewers.

Netflix is armed with a proven marketing strategy to compete with the two local entrants. Prior to Asia, it has launched in Europe by collaborating with local internet and IPTV service providers. It tied up with Deutsche Telekom in Germany and Bouygues Telecom in France. Similarly in Australia, it is teaming up with local pay TV OTT service Fetch TV. Launched in July 2010, Fetch TV is 75% owned by Malaysia’s Astro Overseas Ltd. Fetch TV sells its service via its ISP partners Optus, iiNet and M2, all major ISP players in Australia. Fetch TV’s 170,000 subscribers will be able to watch Netflix’s content simply by integrating the app. In view of its late entry and fierce competition by Presto and Stan, teaming up with Fetch TV will bring Netflix closer to potential subscribers.

Australia provides a good opportunity for Netflix, boasting 5.8m broadband households. Improvements in infrastructure will also facilitate further growth, particularly the ongoing rollout of the National Broadband Network (NBN). With over 57 million members and its service in more than 50 countries, Netflix will likely be a major player in the Australian SVoD market. Success will hinge on how it promotes and programmes its service locally and on its ability to drive subscription take-up via its local Internet and IPTV service providers. 

In the APAC region, expansion in Japan and China will be an entirely different matter, with strong differences in the market environment. Japanese consumer spending on physical video software is still going strong, and alternative forms of physical rental continue to expand in the same way that those in the West did earlier. The rise of rental kiosks and the increasing popularity of online rent-by-mail operator Rakuten already provide consumers with convenient and cost effective services for their entertainment needs. Netflix will also face strong competition from existing digital video platforms such as those from Amazon, Google and Hulu Japan. Netflix will also compete against mobile phone carriers including KDDI, NTT Docomo and the deep-pocketed incumbent telco Softbank which already operate streaming services in Japan. While US series are popular in China, foreign media contents are strictly controlled by the media watchdog.


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