What Netflix’s arrival downunder could mean for Aussie TV

MarshaWith Netflix tipped to launch in Australia in 2014, Professor David Marshall from Deakin University looks at what this might mean for the Australian TV market and consumers. 

Australians rejoice: Netflix is rethinking its avoidance of Australia, according to media reports, and could launch here as soon as next year.

Initially concerned about poor internet infrastructure, Netflix could be considering delivering content outside its traditional offerings – including through internet-connected gaming consoles and set-top boxes.

Entering the Australian market – alongside France and Germany – would cap off a good year for Netflix, which has seen its shares rise 260% since the start of the year. Netflix now has more than 40 million subscribers, and has more US subscribers than popular cable channel HBO. But is Netflix the next bubble stock, or is there a good reason for this optimism?

Stock market investing is driven by feeding frenzies. They appear to have some rationality around them, but like some television programs and web sites they are sticky and delicious kinds of candy.

Here are the facts that propel this giddiness:

At the end of the millennium Netflix provided a new model for getting rental DVDs in the US: consumers booked them online and, like Amazon and books and other products back then, they were delivered to their door within 24 hours.

This model expanded rapidly when Netflix rolled out a monthly subscription system for more unlimited rentals rather than a single fee per DVD. This blend provided something of a cable/pay television feel to the subscription, giving subscribers a greater sense of control in their viewing choices.

The business model reached its zenith in about 2003 when Netflix began online streaming of its catalogue of hundred of thousands of movies and television programs. It kept its DVD rental and delivery system in place but gradually built online streaming to represent by far the largest base of its subscribers.

Recent counts put online subscribers at about 30 million in the US and another almost ten million internationally, with DVD subscribers at about seven million.

2003 and beyond

On its own, this backstory is interesting; but what makes it sweeter is that Netflix continues to successfully migrate to new intersections in the relationship between entertainment and online culture.

It has managed the limitations that streaming movies online might have. Instead of placing limits on numbers of hours of screening, Netflix moved to a model of unlimited screenings per subscription which once again made the subscriber feel they had unfettered access to an enormous video library and archive.

Its growth interestingly intersected well with the expansion of broadband and DSL access in its home country so that the bandwidth necessary for screening was never significantly challenged in the market.

Netflix has worked very hard at connecting to devices associated with televisions that would allow online streaming to be easy for a family, and permit movies to be seen on the biggest screen in the house: via Wii, Playstation, and Xbox, Netflix migrated to be as close to the set as the DVD player had formerly come.

And there are reports the company is in talks with US cable providers to get its streaming app on their set-top boxes, a major coup. It’s already signed similar deals in the UK and Sweden.

Netflix represents a model of delivery that has at last challenged the illegal downloading of movies with its superior quality and reliability. It’s also a model of distribution and exhibition that major content providers – that is, movie and television production houses – are open to supporting.

More recently, Netflix has been commissioning new and original content. Netflix is the first quality media content generating platform to challenge old media structures. The key word here is quality – it is a challenge to companies such as HBO which has been the most successful model of linking filmic quality with television for redistribution and exhibition, building original content into the mix.

Netflix’s House of Cards, Arrested Development, and the latest Orange is the New Black have been released in 2013, and have seen a large influx of subscribers crossing over to its stable.

What makes this achievement all the more remarkable is that it has done this without any access to cable television subscribers who are linked to packages of programming across many cable channels over many years.

Netflix has said that no more than 10% of its spending on content will be channelled back into original productions, which is much less than the 40% ratio for HBO.

But the production of original content could expand dramatically as Netflix begins expanding internationally with forays into Brazil, the Netherlands, Scandinavia, and Latin America.


Netflix Q3 2013 Earnings Interview

Netflix has also tapped, more successfully than anyone else, into the new way of watching “series” television: people enjoy watching several episodes of a series they love in quick succession, which before Netflix could only be done easily with the ownership of a DVD.

The entire season of House of Cards was made available for viewing on the first day. This style of viewing is not only very “sticky” and delicious for the viewer, it is perhaps even more attractive in its guarantee of structure and support for the production companies making a series. This is a monumental shift.

Netflix has managed to move to the right intersection at the right time in this hybrid world of entertainment and online culture. It is about to become a much bigger player as it continues to expand overseas, acquiring intellectual property territory by territory, and building subscribers.

This is a very sweet corporate candy that is providing potentially a further expansion now into Australian territory which may help Australians understand how sweet it can be for both the pleasure of investment – and use.

David Marshall is professor and personal chair in new media, communication and cultural studies at Deakin University

This article was originally published at The Conversation.
Read the original article.

Comments


  1. Hugo
    26 Nov 13
    9:29 am

  2. This is one of those “I can’t believe it hasn’t already happened”. The demand is such that plenty of Aussies are already doing the whole fake U.S. IP thing. For a company like Netflix, Australia is a truckload full of money just sitting there on the side of the road. It’s a wonder no-one picked it up before now.

  3. Ex-ex
    26 Nov 13
    10:15 am

  4. As if millions of program directors suddenly cried out in terror and were suddenly silenced.

    RIP Commercial TV.

  5. Brent W
    26 Nov 13
    10:21 am

  6. Hugo – Undoubtedly, the Netflix service would be well received. However, with Netflix contributing to something like 30% of all the US’s bandwidth use between 9pm and 12pm with only 10% of the US as subscribers, our infrastructure needs to be more solid to support a similar demand. This is also with the continued rise of digital infrastructures replacing traditional ones. Xbox and Playstation have integrated the internet heavily into their systems – digital downloading, online games and the constant connection to social, and applications equates to a massive load of bandwidth.

    Also the introduction of 4K – it’s twice the size HD. That’s double the bandwidth.

    Can our infrastructure handle it?

  7. Bem
    26 Nov 13
    12:24 pm

  8. No doubt when they do come to Australia the pricing will be double what America pays and with half the content. The clever will still be getting a VPN and using the American Netflix.
    But what does this mean for Australian TV? Foxtel will finally be getting a run for their money, and no doubt there will be many who realise they don’t need it any more. The free to air networks will also no doubt see a drop in American shows.

  9. mainlander
    26 Nov 13
    1:00 pm

  10. Agree with Brent W.

    Have noticed already that after 5pm on a Friday Spotify goes from smooth playing to annoying buffering. And this is just audio.

  11. Hugo
    26 Nov 13
    1:30 pm

  12. I hope so Brent, I really do – but I agree our infrastructure is a worry going forward from here. If you’ll forgive me going slightly political – the national broadband network being done half-arsed is the biggest negative of the last federal election.

  13. Benross
    26 Nov 13
    2:56 pm

  14. Bring it on – the more legal ways to access great content the better

  15. Dave.
    26 Nov 13
    3:25 pm

  16. Anyone heard of Fetch TV? QuickFlix? Apple TV? T-Box? Samsung & LG Smart TVs?

    All these services offer movies and/or TV shows on demand (alongside optional subs packages).

    Have they taken off and shaken up the establishment?

    Will Netflix be any different?

  17. Gav
    26 Nov 13
    3:32 pm

  18. If they want to succeed, we’ll need the NBN.

    The entry of another competitor is just another reason that traditional media will continue their campaign *against* the NBN. Though it does look like Foxtel will be moving more and more into an on demand style service…

  19. CS
    26 Nov 13
    3:48 pm

  20. Can’t wait, bring it on. Good bye Foxtel.

  21. chris
    26 Nov 13
    4:10 pm

  22. it’s not like others aren’t already offering, or have tried to offer, similar offerings… BigPond, Quickflix, Apple etc etc. The challenge for these companies and Netflix is that Australians, at their core, are tightarses who would prefer to get something for free rather than pay for it. While they can still get it free via piracy, it’s a tough sell.

  23. Netflix Subscriber
    26 Nov 13
    7:27 pm

  24. Has anyone here actually WATCHED Netflix? Im one of the many Australians who have Netflix – it’s easy to set up if you do a bit if Googling.
    However I still watch 95% of my viewing on Foxtel. The only reason Netflix is $8 is because it’s full of crappy old movies and years-old TV shows. Yes they now have some good original shows – and t’s good every now and again for an obscure doco. But it is in no way a Foxtel competitor.

  25. John
    28 Nov 13
    3:30 pm

  26. The article is titled “What Netflix’s arrival downunder could mean for Aussie TV”

    Is does not really go into detail of what it COULD mean – it is mostly the history of Netflix that reads like a Wiki entry.

    If you are going to publish an opinion piece at least have an opinion.

  27. Add
    1 Dec 13
    11:08 am

  28. Murdoch doesn’t want NBN and made it so.Netflix will have to jump through hoops to offer a competitive price because Murdoch owns foxtel.you see where I’m going here?

  29. Simon
    1 Dec 13
    5:42 pm

  30. I have Netflix as well. I agree with Netflix subscriber – the content is a little old – interspersed with high quality stuff. But that was my problem with Foxtel – mainly crap with the occasional highlight. You only pay $8 for the Netflix service and I was paying $100 for the same on Foxtel.

  31. y0z2a
    2 Dec 13
    11:59 am

  32. If Netflix or any of the other online video providers came to AU, I might go out and buy a TV or projector. Until then, I am happy with YouTube, Catch Up TV on the laptop or phone.

    I am still amazed that I can’t subscribe to specific premium events or programs on Foxtel through live streams.

    If YouTube could sort out live streaming (it’s glitchy for me) then they too could be a contender, however they don’t have the content from the local networks, and we all know why that is.

    /y0z

  33. penny
    4 Dec 13
    1:46 pm

  34. Agree with Hugo and others that Australia is a sitting opportunity for Netflix, i can’t wait to get begone of Foxtel and its laughable “IQ” service. I think another problem Foxtel has is a low level of trust and loyalty to Foxtel among consumers (remember when ads came in?).

    To those who ask why will Netflix succeed in getting mass-market adoption where others haven’t (like Quickflix and T-box and Apple TV). The answer is that no-one is yet offering a content streaming service which is simple, can be delivered to any device, and has enough decent content to be worthwhile (this is why I am paying over-the-odds for Foxtel IQ – its easy [tho still not good enough in 2013]). Remember what smartphones were like before the iPhone, the techies said they were great but no-one else bought them.

    To those who question the quality of the content, it will get better…. Many disruptive innovations start off being pretty ordinary but get better as they make more money and can reinvest.

    Great points re infrastructure. Good thing we didn’t have the Coalition when Australia first build roads as they would have only gone to the street corner. But it is also possible there will be other technical innovations that help, like better compression technologies.