‘Not great but not a train wreck’: Free-TV could lose 10% of viewing time to streaming by 2018
New research has claimed Australia’s major TV networks will lose around 10 per cent of consumer viewing time in the next three years to streaming services, with Netflix projected to have 2.5m local users by 2018.
The new study by Citi Research projects the US streaming giant already has some 1.6m active users in Australia – including 910,000 paying subscribers, with 25 per cent of those using virtual private networks (VPNs) to access the US version of the video streaming site.
The study appears to confirm other market research which shows that despite only launching in Australia in March Netflix has a five times the numbers of users as its nearest rival Stan, which has 332,000 users and Presto on 193,000.
It also projects local streaming service Stan, joint owned by Nine Entertainment Co and Fairfax Media, will lose $200m in the next four years.
Justin Diddams, equity analyst for media & telecoms at Citi estimates local subscription video on demand (SVOD) penetration will get to 35 per cent of households by 2018, equating to an average one hour per day per person or 10 per cent of free-to-air viewing time, described as “not great but not a train wreck” in the report.
“Across 2015 we have seen FTA TV audiences decline in absolute terms by 0.9 per cent year-on-year, yet the TV advertising market was flat (reporting 0.2 per cent growth in six months to June 2015), implying both a larger impact on FTA viewing relative to the penetration of SVOD but also that advertisers are still investing dollars in TV despite the audience declines.”
TV sales bosses have previously sought to play down the impact of the growth of SVOD with Nine’s Peter Wiltshire describing it as a “niggle” back in April.
Citi Research analyses the financial situation for Nine and Fairfax Media joint venture Stan and projects that the company is set to lose just under $200m over the next four years, on an EBITDA basis.
The report also looks at consumer sentiment and finds that among 1,000 people surveyed by Citi 14 per cent are likely to subscribe to Netflix, more than Stan (5 percent), Presto (3 per cent) and Foxtel (4 per cent) combined.
Mike Sneesby told Mumbrella this afternoon: “From a market perspective, on who is first, second and third, I think the Citi report is on the mark. But in terms of the consumer sentiment measured he is wildly off the mark in terms of what our data is showing and I think that is due to the sample numbers.
“Citi’s view (on profitability) is more conservative than ours”, he said referring to Citi projections on Stan’s profitability.
Despite the report’s financial projections the investment bank does however commend Stan subscriber growth on the back of the $100m contra advertising by parent companies Fairfax and Nine.
“With its access to contra advertising from its JV partners it’s made an impressive start in the battle for subscribers, gaining an estimated 300k sign ups in 2015, that said, the conversion of those customers into recurring ‘paying’ subscribers could prove challenging based on the research data,” the report finds.
“The key question for Stan is how much long is management willing to continue investing free cash flow into this business to achieve break even, whilst the competition is supported by two well-funded parent companies (Netflix and Foxtel). We note Stan has been funded with $100m ($50m from each partner), with contra advertising included in the deal, which implies the business has another two (maybe three) years to prove it’s on track to profitability.”
Citi’s report also appears to confirm that consumers are taking up multiple services but that Stan and Presto customers are more likely to then take up Netflix than the reverse.
Only 11 per cent of those Netflix subscribers had other services but well over half of Stan and Presto subscribers reported that they also used Netflix, although it should be noted that the sample sizes for the market overlap research was relatively small.
The report also looks at subscriber numbers for both the SVOD services and also pay-TV players Foxtel (2.72m), Telstra T-Box (458,000) and rival OTT/IPTV service Fetch TV (286,000).
By 2018 Citi Research projects that Foxtel will have 3.5m paying customers, Fetch TV 1m, while among the SVOD services Netflix is tipped to have 2.5m users, Stan will be at 750,000 and Presto at around 250,000-300,000.
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More like 30%, it will start going exponential.
Only old people (35+) watch TV, in three years thats more likely to be 40+.
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Anyone who thinks that uptake like what’s been put forward above will result in only 10% FTA viewing time reduction is dreaming.
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Agree with unlikely. It’s going to be a faster slide, driven by demographics plus the increased take-up of new technology. I would have thought it will hit cinema in the guts too.
That reminds me: how are newspapers still around?
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All this new research is doing is confirming the accuracy of Roy Morgan Research’s subscribing Netflix households and ‘user’ numbers that were released in July.
https://mumbrella.com.au/netflix-now-watched-by-1-42m-australians-across-559000-households-claims-roy-morgan-305713
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The big problem that no one in the advertising industry wants to talk about is the fact less and less people are prepared to sit through ad breaks.
First of all there are so many distractions like twitter, Facebook etc while they are on, then there’s ways to zap through them, and of course streaming is conditioning people to enjoys shows without interruptions.
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Latest Netflix numbers out from Roy Morgan Research today.
Netflix has hit 8% of Australian homes reaching 1.89 million people 14+ in July, the latest monthly data from Roy Morgan Research shows. Over 1 in 3 households now have some form of pay or subscription TV, up almost 30% since the start of 2015.
http://www.roymorgan.com/findi.....1508102349
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Please let me know where I can put some money down on this figure being 20%+
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The TV networks are pulling their own wool over their own eyes. The FTA networks continue to drive viewers away by saturation advertising in anything that looks like a ratings hit, but in doing so they further denigrate their own product. The 2nd tier channels are full of rubbish and they get lazy doing dual screening of the same content. Even Netflix which puts on old good stuff, and B grade programming but the consumer would rather watch that than suffer a barrage of mind numbing advertising.
The future of advertising is all about relevancy and there is nothing relevant about FTA TV at the moment, Ive converted 3 people to Netflix and Presto – how about you?
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The dominance of Netflix is not really that surprising, besides the superior content, Netflix is the name most associated with a streaming service, most people can recall the name Netflix and associate it with a streaming service, whereas many have never even heard of Stan or Presto, their marketing is just not getting the same reach. I just read a Harvey Norman catalogue and the TVs are all advertised as “Netflix Capable” one even has a “Netflix button on remote”. Not a mention of Stan or Presto in the entire catalogue.
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Where’s the bookie? I’m in at 50%+
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So people over 35 are old now? Wow are you like 5? While you’re at it, maybe learn to spell your own pseudo name. Us “old people” have heard all this before. The poor old television has survived technological advances and competition from cinema, beta, VHS, DVD, Blu-Ray, subscription, streaming. The majority of Australia watches TV and is happy doing so.
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Yeah-nah, it won’t be 10%.
Clip this and file . Come back in 2 years.
10%. Dream on.
Don’t know what the number will be, but it know for sure they are going to look back and weep, wishing it was just a mere10.
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People over 35 aren’t physically ‘old’ but they tend to be on the outside of the ‘digital generation’ Majority of people under 35 have grown up in vastly different times than those before them, are very clued in with new technology and their preferred media consumption is digital streaming or downloads.
FTA is driving people away with far too many self promotional ads and the same garbage reality tv formats over and over again. The only thing keeping FTA relevant at the moment is our poor quality internet infrastructure and super expensive ISPs.
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