Presto, Stan, Quickflix: You need to come clean on your numbers before it’s too late

Nic-Christensen-234x151-234x151Video streaming has dominated headlines this year but Mumbrella’s Nic Christensen argues the numbers being touted by the SVOD players and TV Networks are at best confusing and at worst close to misleading.

It’s an old cliche that there are three types of lies: lies, damned lies and statistics.

For the modern media world, I’d like to suggest we tweak that, just a little, and make it: lies, damn lies and video streaming numbers.

The most recent stock market reporting season illustrated this well, showing that when it comes to the streaming video on demand (SVOD) space, many key players are presenting the market – be it investors, media buyers or just the wider market – with some highly questionable numbers.

Before I get into the lack of detail in subscriber numbers being reported let me take a step back.

It’s only three months since the many of main players in the SVOD space spoke publicly on the one stage at Mumbrella 360 about how they were doing.

Looking back two things stand out: one is how quickly the market in this space is evolving (vale Ezyflix and, most likely, Quickflix) and two is the fact that almost all the players use wildly different metrics for measuring their subscriber base/audience.


You can watch the full session above (or fast forward to 3.00-7.00 minutes) where they each separately attempt to answer a straight forward question of how they each are doing.

To briefly summarise what was said:

  • Stan’s Mike Sneesby references the term “gross signups” noting the Fairfax/Nine venture is well on their way to 300,000 (a metric claim they have now say they’ve hit)
  • Quickflix’s Stephen Langsford claimed they have 140,000 “total customers”, while acknowledging that a “handful” of them are transactional electronic sell-through (EST) users, i.e. renting/buying individual titles.
  • Presto’s Shaun James also uses the opaque terms of “gross signups” but refused to disclose how many it has had (a important point in relation to Foxtel that I’ll come back to).
  • FetchTV’s Scott Lorson says they have 250,000 “paying subscribers” and then notes that only 140,000 of their customers have access to Netflix within their platform (a major driver of their growth).
  • Network Ten’s digital boss Rebekah Horne claims a unique audience of one million. This number is a Nielsen number and I should note the audio/video on demand (AVOD) market, typically referred to as catch-up TV, is different to SVOD so this metric is established and generally accepted as legitimate. 

Why the differences and what impact are the different metrics having on the market? 

Simply put the growth and sudden size of the subscription video on demand market has surprised many in the Australian market.

It was only April when Nine sales boss Peter Wiltshire suggested SVOD would only ever be a “niggle” on his TV Network. But with the likes of ISP iiNet reporting that a quarter of their traffic is coming from Netflix alone and estimates of the number of Australians with access to US giant Netflix ranging anywhere from 1.6m to 2.2m, many are starting to reassess the major consumer shift that has occurred.

Now some argue that most of the SVOD services don’t have advertising, so having precise numbers on their subscriber bases and audiences doesn’t really matter. But I’d argue ad-funded models for these services are inevitable, so unless they work to get credibility now they are going to struggle later.

So let’s look at a breakdown of some of the numbers being touted by the various players.


I’ll start with troubled streaming player Quickflix. It last week suspended ASX trading on its stock (with a market cap of just $2.2m) as it looks to stem major losses and find a way out of the $5m it owes the movies studios.

I’d argue it’s Quickflix that set the standard in opaque numbers.

Screen Shot 2015-09-05 at 1.29.23 pm

Source: Quickflix 2014 annual report

In the last ten years Quickflix grew to be one of the biggest players in the postal DVD rental market, before it then had to evolve into a streaming player as the market fundamentally changed.

This transition and the costs attached to video streaming crippled it. While Quickflix might claim that it has almost 140,000 total customers (see graph) it’s worth breaking down this number.

The latest Quickflix market update for June 30 had them at 107,979 paying customers (well below the 140,000 Langsford touts in the 360 session). However, even this number does not really breakdown what it represents.


Source: Quickflix quarterly update

From 108,000 you need to subtract Quickflix’s still profitable DVD on demand business, its still sizeable New Zealand customer base and finally it’s EST and TV on demand (TVOD) transactional business, where people are just renting or buying a movie or TV show.

And yes, that’s right anyone who buys even just one show (i.e. Game of Thrones) on April 1 is still being counted three months later, a factor that might help explain Quickflix’s high 11 per cent monthly churn.

Now Quickflix notes that 75 per cent of its customers have access to streaming, but I’d be willing to bet that not all of them use it. When all is said and done, the real business streaming subscriber base might be as low as just 50-60,000 streaming subscribers. Quickflix declined a request for a breakdown of these figures but said a figure of 60,000 underestimated its paying streaming subscribers.

As I’ve noted before Quickflix has burnt somewhere in the order of $30m to $60m in investor money in the last few years and it’s arguable that clearer breakdowns of the business and its various DVD and streaming customers bases might have helped a few investors see the end of the road a lot sooner.

Stan Stan

The Fairfax Media and Nine Entertainment joint venture has drawn many headlines since its launch on Australia Day this year. 

Backed by a $100m investment by its two parent companies (it has never been clear how much of this is contra advertising versus cold hard cash) the SVOD player, led by Mike Sneesby, has recently been getting headlines about how it has “acquired 350,000 subscribers since February” or “has confirmed it has more than 300,000 paid subscribers”.

Screen Shot 2015-09-05 at 2.11.54 pm

Source: Nine investor presentation

Although you can be forgiven for misreading it that way it’s important to note that it’s not actually what Stan has been saying.

In truth what it has told the market is that has achieved 350,000 gross subscribers since its launch – now to be clears that’s that anyone who ever gave them a credit card in the last six months. The important point here is that it’s not all paying subscribers who have remained with the service.

Stan itself claims a 70 per cent conversion rate (a best case scenario, as many in the SVOD space note there is often a big drop off when the trial ends and consumers see the first charge on their credit card) which means from the outset the 350,000 gross subscribers is actually closer 250,000, but that doesn’t then factor in all the 3/6/12 months bundled free Stan trials being offered by the likes of the SMH/Age, Vodafone and Telstra.

Stan Vodafone

Stan insists these bundles have wholesale revenues behind them, but when you are talking about low margin $10 a month subscriptions you have to wonder how profitable they are.

As for how Stan gets to 800,000 people using the service, this is also an interesting number.

The company says it is an “extrapolation” of household profiles on Stan which is combined with streaming data but its also broadly what you get when you multiply the the 2.5 people the Bureau of Statistics estimate live in each Australian household.

Either way it’s arguably an even more meaningless metric than the 350,000 gross signups, given that many of them will not have stayed with the service, nor will Stan have individual profiles of each of the 800,000 users it is claiming.

A Citi report last month put the number of paying subscribers at 153,000 which broadly fits given Stan has recently said it is more than half way to a stated goal of 300,000-400,000 active subscribers (active subscribers presumably means both paying and trial) by the end of 2015.

Stan, like Quickflix, also declined to give a breakdown but you can be sure of the 350,000 gross subscribers being touted they will break down into three categories: paying customers; current trialling customers; those who trialled/paid for the service and then cancelled. But my guess is the real number of paying subscribers is going to be closer to 130,000-150,000.

The scary thing, in light of these numbers, is assessing Stan’s long term viability. A Credit Suisse report in April estimated the company could be worth $312m, but the Citi report projects the company is set to lose just under $200m over the next four years, on an EBITDA basis.

Stan boss Sneesby argued that Citi’s estimates on earnings were conservative but even assuming the SVOD service gets 250,000 paying subscribers this year it is difficult to see how it will turn a profit in the next five years.

David-GyngellNine CEO David Gyngell himself appeared unsure whether Stan could make money in the short to medium term, but last month noted it is strategically important.

“We don’t see Stan being the saviour of this company long term, we see it as an adjunct to content acquisition and original content deals,” he said.

For parent companies Fairfax and Nine there is a valuable data play implicit within Stan, and it is certainly useful for publications like The Age and Sydney Morning Herald to be able to bundle the SVOD service within it’s subscription proposition.

However, they must also be looking at that medium to long term plan and wondering whether Stan will get the terminal velocity to become sustainable before they pump further tens of millions of dollars into the venture.


prestoAs Mumbrella revealed last month there are also some serious question marks remaining over the growth in subscribers for pay-TV operator Foxtel, which is touting a surge in subscribers from 2.667m a year ago to 2.847m as of June 30 this year.

That 8.5 per cent year-on-year surge is significant. It comes after Foxtel cut the entry price of its pay-TV service to $25 and launched a massive marketing blitz to drive new subscribers, but it also included everyone who signed up to Foxtel/Seven/Ten owned Presto.

Foxtel growthEven within this there are number of key questions like are a number of Foxtel users are being given free Presto subscription/access are they being double counted?

Now Foxtel insist they aren’t included but concedes that one thing they are doing is removing those very same Presto users from the churn rate. Something they also didn’t declare upfront in the profit results.

Foxtel was keen to trumpet the falling 10.9 per cent churn rate, but hasn’t been as keen to explain but why it’s ok for Presto figures to be in the overall numbers but not in the churn rate.

The logical answer can only be it would hike the churn rate dramatically.

And that’s important, particularly at a time when Presto is also aggressively pushing 3/6/12 month free trials around things like Father’s Day and other promotions.

Frankly, if there is one set of numbers that should annoy the market it is this Presto one because it does matter.

foxtellogo-234x108You can be sure that sales house MCN is already touting these gross numbers widely and just last week The Australian’s Darren Davidson was waxing lyrically about how Foxtel had broken its August sales record.

That’s great but at least flag to the market that some of those sales are the low margin $15 SVOD subscriptions, where the monthly profit margin is somewhere between 10 and 50 cents, and not the high margin Foxtel cable/satellite subscriptions where users often pay $100 plus per month and profit is around $35 a month, on the back of a triple play of home phone/broadband/pay-TV.

By Foxtel’s own counting they have 180,000 new subscribers. The pay-TV provider maintains that Presto represents only a small percentage of that growth, but they are now refusing to disclose what percentage at a time when Citi estimates they have at least 80,000 paying subscribers.

That Citi number is one that stands at almost half the Foxtel growth figure and raises questions about the success of the marketing push and price drop strategy.


Given the way Foxtel and its CEO Richard Freudenstein slipped the Presto numbers into the last round of reporting it is arguably now in their interest to clarify the precise number of Presto users, lest the market and advertisers on its pay-TV service begin to believe they are hiding poor growth results.

Screen Shot 2015-09-05 at 5.15.41 pmFetchTV and Netflix 

Comparatively, FetchTV has been the most upfront with its numbers. The IPTV service which is trying – with the backing of Optus, Dodo and up until two weeks ago iiNet – to challenge Foxtel in the IPTV/pay-TV space on the back of its Netflix partnership, says it is up to 275,000 paying subscribers.

Paying subscribers is a better metric than the other players are touting, but it’s worth noting that a lot of people don’t specifically sign up for FetchTV. Typically it’s part of a hero bundle being offered by the telcos as part of their triple play – home phone/broadband/IPTV.

On stage at Mumbrella360 Fetch’s Lorson noted due to technology only 140,000 of their customers have access to Netflix within their platform, which suggests that much of their recent growth (back in November they had 150,000) has come in recent months from being sold by the telcos around the Netflix proposition.

It will also be interesting to see what impact founding partner iiNet decision to cease sales of the product will have on the service’s growth. Lorson maintains most of their growth comes from Optus and other resellers.

Meanwhile, global online streaming giant Netflix is the godfather of secrecy in this space. Indeed with the risk of a ‘Netflix tax’ on its local earnings plus just the general risk of letting its local competitors know how well it is doing the US giant is unlikely to ever provide a local breakdown of its numbers, especially with no boots on the ground in Australia.

Netflix key franchise House of Cards

Key Netflix franchise House of Cards

Given the size of Netflix’s global play – with shows like House of Cards costing $4m a episode – it will probably never have to unless it eventually decides to incorporate advertising into the platform.

That said we do have signs of just how big the Netflix juggernaut is here locally. In May, The Australian published Hitwise data showing Netflix dominated the AVOD and SVOD markets from day one with 475,000 site visits.

Mumbrella understands that this trend has not only continued but accelerated, with agency sources telling me Netflix is now achieving over a share of 55 per cent share of video site visits up against not just Presto, Stan and Quickflix but all of the AVOD players ABC iview, Plus7, 9Jumpin, TenPlay and SBS OnDemand.

It’s time to agree on the metrics for SVOD 

Among the free-to-air TV networks there is general agreement on how to measure the video streaming space: its unique audience, as assessed by Nielsen.

Catch-up-TV-468x278Although to be fair, Yahoo7 was trying to claim in July that it was still the market leader by touting the highest video streams, after it lost for three consecutive months to rival 9Jumpin.

But I’d argued that in the same way unique audience is the measured in AVOD its equivalent – paid subscribers – is important in SVOD.

The Mumbrella360 streaming panel was quite resolute that advertising was not in their business plan, but I’m willing to call out the lie there.

While it may not be part of their immediate business plans, and as PwC’s Megan Brownlow noted last year, at some point the sheer weight of money being offered by advertisers will be too great.

At this point, having accurate numbers on SVOD subscriber bases will be crucial, both to advertisers and also in terms of the wider data play.

SVOD offers a level of targeted ad delivery that is unrivalled in traditional television and also there is a lucrative side business in the data play, particularly for businesses, like Fairfax and Nine’s digital division Mi9, in capitalising on potential synergies.

But for that to work we need both unanimity about the metric, across the subscription streaming space. We also need just a basic level transparency.

So here’s my plea:

Quickflix, as a market we all agree that your “total customers” aren’t a really relevant or useful metric, particularly if it includes DVD rentals, customers based in New Zealand or someone who just buys a one off movie. So if you do come out of the trading halt, then can you cut it out?

Stan, no one cares about the total number of people who have ever given you their credit card. It’s not a useful measure and the market is very keen to understand if your model is viable in the long term, so please stop touting “gross subscribers”.

And finally Foxtel, if you want to bucket your entire premium high value pay-TV subscriber base with a low margin SVOD service and not tell people which is which, well then I guess there’s nothing to stop you. But be careful that media buyers and advertisers don’t start taking Citi’s 193,000 total estimated Presto subscribers (both paying and trialling) as gospel and use it to start arguing for a rate reduction in their pay-TV spend.

The video streaming players need to be open and transparent with the market about three things:

  • how many people are paying for your service?
  • how many people are trialling your service?
  • what’s your level of churn (i.e. how long are you holding on to customers for)?

Anything else is just marketing spin.

Nic Christensen is the deputy editor of Mumbrella.

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