A bloody battle worthy of a Hollywood blockbuster has come to Australia.
THE PITCH The video on demand (VOD) market has ramped up in Australia over the past few months, with the arrival of international streaming superstar Netflix spurring a revamp of recently launched subscription based VOD services from the major local media players – Stan (Foxtel), Presto (Fairfax) and Bigpond Movies (Telstra) – as well as incumbents and new entrants at the smaller end of town iFlix, ezyFlix, Quickflix, and FetchTV (backed by iiNet who is also offering Netflix on the FetchTV service and download quota free).
Not to mention the existing heavyweights Apple (iTunes/AppleTV), Google (Play), Amazon (Instant Video) as well as a range of services from studios or gaming consoles (e.g. movie streaming propositions on XBox and PlayStation).
However, the local market has been ticking along in a bit of a vacuum for the past few years.
Foxtel had been happy to push its ‘ Foxtel Go’ proposition (an extension of their existing PayTV service across mobile devices), Stan and Presto have basically competed amongst themselves while they try and develop a decent customer value proposition, and the free to air ‘catch up TV’ services like iView and SBS On Demand have used streaming to extend the life of their respective programming, and provide monetisation opportunities (for SBS at least through pre-roll video advertising).
Netflix’s arrival on the scene has kicked things into a different gear.
HANG ON, WHAT’S CONTENT STREAMING?
It’s simply another way to consume video content (in this case entertainment); instead of going to the movies, whacking in a DVD to binge watch your favourite TV series, watching Foxtel (cable) or free to air TV (assuming people still do that!), you can watch content online either through a web browser or an application that runs on your device of choice (think ABC’s iView, SBS On Demand, TenPlay playing on your iPad or through your Smart TV).
Sometimes these are free services like ABC iView, others you pay for a device (e.g. Apple TV) that turns your TV into a online movie store (using iTunes) and you just pay for what you watch, and still others like Stan, Netflix and Presto are called subscription video on demand (SVOD) services and you pay a monthly fee (at the moment these SVOD service range from around $8.99 – $11.99).
The bottom line is that it gives viewers total control over what, when and how they watch movies and TV. And – like when Apple scared the pants off and basically broke the music industry pricing and distribution model with the iPod and $1.99 individual track downloads (and at the same time saving it from total destruction due to music piracy from peer to peer file sharing sites like Napster) – all this disruption has many of the the traditional content owners (think film studios) and media owners running scared (think network TV, Foxtel).
As Kevin Spacey – star and producer of Netflix’s wildly successful original program House of Cards – said in a recent speech:
The audience wants the control. They want the freedom. Through this new form of distribution…we have learned the lesson that the music industry didn’t learn: Give people what they want, when they want it, in the form they want it in, at a reasonable price, and they’ll more likely pay for it rather than steal it.
Now, let’s introduce the key players in this distribution drama.
We saw from an earlier post on the MPK732 blog by Shaun Beirne and Ashlee Yang that the traditional movie distribution model has evolved (using The Walt Disney Company as an example) to provide channels for studios to have direct engagement with consumers through online retailing of their products, cable TV networks and through the DVD market, and that studios (some more succesfully than others) have vertically integrated their channels for some formats (e.g. cable TV channels). In addition to that, things have also become exponentially more complex as content aggregators arrived, licensing and bundling up packages of online studio content and giving access to consumers through iOS/Android applications, web browsers, connected TVs, gaming consoles and other platforms for a monthly subscription fee.
This has made the world of online content distribution a very complicated place, with no clear winners and plenty of change to come. Just looking at the distribution landscape as it stands today shows the level of complexity that these companies are dealing with.
SO, WHO WINS? AND HOW?
Well, I suppose it depends on who you think has the power.
Is it the platform owners – Samsung, LG, Sony Bravia, XBox, PlayStation and other conected device manufacturers – who decide which apps they will host on their platforms? I doubt it – unless they vertically integrate to get closer to the consumer it’s likely that they will stay in the ‘hardware’ space when it comes to consuming entertainment content online.
Or maybe the channels: online video or retail heavyweights like YouTube and Amazon? Perhaps, but they’ll need to seriously start producing quality content themselves not just serving it up or licensing it.
Apple. Well, they don’t currently offer a subscription VOD service, and they also haven’t ventured into content production either. Plus, they have Netflix and other services available on the Apple TV main (and you can download apps from Quickflix, Presto, Stan and Foxtel through the App Store), so they’re already getting a cut of the SVOD market through whatever revenue share deals they’ve done. See how it starts to get complicated…
Is it the Aussie media companies and telcos who have brought out their own subscription VOD services with thousands of hours of content? Why, when Stan has more content than Netflix (for now – see below) is it that they are getting passed over by customers? Could it be that it’s about quality, not quantity, and those with the original content or the deep pockets or global presence to fund global content licensing deals are in the driver’s seat?
Or will it be Netflix, with a strategy of creating exclusive original programming and serving it up to customers all at once to drive binge watching, combined with closing out the distribution windows for other platforms to give themselves a competitive advantage and a unique hook to promote their streaming service? After getting Australian audiences hooked on House of Cards Season 1 and 2 through Apple and Foxtel over the past couple of years, Netflix launched their service in Australia with House of Cards Season 3 as their headline title.
And in a move worthy of Kevin Spacey’s villainous president-elect Frank Underwood, you can only watch it on Netflix.
WHO DO YOU THINK WILL COME OUT ON TOP?
In case you hadn’t guessed, I’m backing Netflix. And Kevin Spacey.
Ulin, J 2014, The Business of Media Distribution: Monetizing Film, TV and Video Content in an Online World, 2nd edn, Focal Press, London, UK.