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What is the state of the online video streaming market in Australia? Will there ever be a single platform or a Hulu-style service available? Nic Christensen finds out.
Will Australia ever get its own version of Hulu? The question of a single platform for IPTV has long been a discussion point for Australian television, but it appears the answer increasingly is no.
In Australia IPTV, or internet protocol television, is on an upward trajectory. Public broadcasters like the ABC and SBS now receive millions of visits each month on their catch up TV platforms while commercial networks struggle to fill advertiser demand for premium pre-roll advertising.
SBS CEO Michael Ebeid says: “Clearly there is a massive appetite for it, particularly for our sort of content which is quite niche. People want to be able to watch what suits them at a time that suits them. We’ve had a 40 per cent increase in over the top or online viewing over the last year.”
“We are now doing around four million video views a month on our platform. The demand is there and people are going to engage with it a lot more. While 95 per cent of viewing is still linear, the growth is enormous.”
The competition in Australia is set to grow with online streaming company Quickflix hoping to capitalise on the opportunity ahead of the arrival of Hoyts, Telstra and Optus who are all eyeing the market in eager anticipation.
But Channel Ten’s new chief digital officer Rebekah Horne says the economics of IPTV in Australia are tricky. “Australia is constrained by a few things: content, cost of acquisition, internet costs and also the reality of the market dynamics,” says Horne. “It can be a very difficult business to make work from a profitability point of view.”
Horne, the former boss of MySpace Australia, says that while we are a few years behind the US and UK there are some interesting trends in Australian usage. “It is not just younger people. You can see in the numbers that it can be anyone up to 50,” says Horne.
“As an industry it is really about more than a demographic.” Despite Ten being in the ratings doldrums, the network has been doing well in terms of online audience – proportionally better than its commercial rivals. “We actually have reasonable numbers on catch up,” says Horne. “It can be up to 20 to 25 per cent of overall broadcast viewing and our video viewing has certainly grown year on year.”
Ten is not alone in seeing a significant boost in audience thanks to online viewing. SBS says it grew its television audience last year for the drama Hunted, which featured Australian actress Melissa George, by posting the entire series for free on its online platform SBS OnDemand and on iTunes after the first episode.
“It really drove up average viewing for that drama,” says Ebeid. “I know it’s counter intuitive but word got out there and more people wanted to watch it.”
“When we did the analysis on the series we found that 20 per cent of the viewing was on the OnDemand platform, even though overall viewership was also up 19 per cent.” SBS is now planning on repeating the practice with a number of new TV shows when SBS2 relaunches at the start of April.
“We are relaunching SBS2 to target what we are calling cheekily the ‘thinking 20s and 30s’,” Ebeid says. “They know how to get this content whether legally or illegally and are not happy to wait for networks to schedule it months after its first broadcast.”
Chairman of DVD rental and online streaming company Quickflix Stephen Langsford says he is not surprised by the growing demand for online streaming. “(In Australia) we are very early in the cycle,” says Langford. “In the US everyone talks streaming and 20 to 30 per cent of all internet traffic is on account of Netflix.”
Quickflix launched its online streaming service in 2011 but ran into trouble late last year with the departure of a number of senior staff and cashflow problems which forced the company to raise capital.
Quickflix believes the trouble came about because they were simply too quick to act and enter the market.
“History is strewn with players who have gone too early and have been too ahead of the market,” says Langsford. “But we made the decision to make a substantial investment and there’s no question in our minds in the Aussie context we have a very good broadband infrastructure that supports streaming now. We’ve got no doubt over the course of the next 12 to 18 months there’s going to be a sharp increase in consumer awareness around IPTV and the Quickflix proposition,” he says.
In the wake of the company’s December capital raising, Langsford says it now has the money to capitalise on the expected growth of IPTV. But the company’s critics remain sceptical about whether it has a sufficient library of content to build a profitable business and ward off looming competitors.
Industry insiders predict that by the end of 2013, Hoyts, Bigpond and Optus will all have made moves to enter the space which could squeeze the beleaguered Quickflix out of the market. The key to making a real go of the opportunity is licensing agreements for content. In early 2012 American cable network HBO invested $10m in Quickflix in a deal that had fans of the high quality series produced by the network excited but the deal only covered content Australians had long been able to view on DVD. Forget seeing the latest series of Game of Thrones on Quickflix any time soon.
The lingering question remains whether the free-to-air networks would be willing to band together to create a single online streaming service.
Dan Barrett, editor of TV commentary website Televised Revolution, says: “It would be a miracle if we could ever get the stations to work together.”
Chairman of free-to-air television industry group Freeview Kim Dalton says while he favours a single platform or a gateway for IPTV content in Australia he understands the reluctance of many commercial networks to the long-mooted idea.
“In the long run we need to have an aggregated platform where consumers have easy access to content to navigate their way through,” says Dalton. “But the reality is that the TV networks are running businesses and those businesses revolve around monetising and selling content. Unless you’ve got a model you can monetise that with, the networks shouldn’t be expected to just turn around and make their content available willy-nilly.”
SBS’s Michael Ebeid says that while those with a weaker IPTV offering such as Channel Nine or even Ten might have a lot to gain from one platform, the odds of it happening are increasingly unlikely.
“When you look at Hulu it has tried for at least the last four years to come into the Australian market, but it hasn’t succeeded,” says Ebeid.
“Hulu has definitely been to Australia and been talking to all the TV executives but it hasn’t got anywhere here because our market is very different to the US.”
In 2010, there were reports Hulu had signed a joint venture deal with Nine. There were also suggestions a deal to bring the networks together on a single platform was close. One anecdote suggests the firing of then Ten CEO Grant Blackley was what derailed the process.
Freeview told Encore it is exploring a number of options for an IPTV service in Australia and while talks are ongoing, no successful model has emerged.
Last year the UK version of Freeview successfully launched catch-up service YouView.
SBS’s CEO says the lack of a single platform is not an obstacle for growth. “I’m not sure a common platform is needed to grow this sector. Audiences are finding it and they are engaging with us in a much deeper way.”
So will Australia get a Hulu or YouView? “I think the boat has sailed on that one,” says Ebeid.
This story first appeared in the weekly edition of Encore available for iPad and Android tablets. Visit encore.com.au for a preview of the app or click below to download.
