In the same week that population scientists were abuzz at marking the recent birth of the 25 millionth Australian, the technology world was hit with its own indicator of dramatic change as Roy Morgan reported that Netflix has grown nearly 30 percent in the last year, to the point where it now claims some 9.8 million users in Australia alone.
Given that the streaming-video service only officially launched in Australia just over three years ago – and shortly afterwards began actively redirecting Australian users to its local site rather than allowing them to sneak into its US service – those numbers have made Netflix a runaway success here.
Foxtel, by contrast, plateaued long ago with an installed base of around 2 million households that, according to the Roy Morgan figures, represents 5.44 million individual users.
Viewership has long been measured in terms of households reached, but the rise of direct-streaming alternatives has shifted attention to the number of individual viewers, many of whom watch streaming services from their personal smartphones and tablet computers.
The success of Netflix shook the market to its core, Cox Media principal Peter Cox told Information Age – adding that while Roy Morgan figures are often “rubbery”, the underlying message in the figures was correct.
“When Netflix was starting, Foxtel was totally unprepared for that despite having been warned by myself and others for years that his was coming,” he said.
“The Netflix launch was done with no staff, no employees, and no advertising – but word of mouth had been so strong coming from overseas, and there was so much pent-up demand, that we saw probably the most extraordinary new product introduction we’ve ever seen in Australia.”
“I’ve never seen anything happen like that before.”
Can Foxtel stay relevant?
Australia’s increasingly crowded video-on-demand field includes Stan (2.02m users, up 39.2 percent), YouTube Premium (1.01m, up 38.5 percent), and Fetch (710,000, up 40.5 percent).
Even newcomer Amazon Prime Video has been surging, with 273,000 subscribers – up 87.7 percent since last year, mostly since the service’s official Australian launch this June.
The combined weight of those services has repainted a market that was long dominated by Foxtel, which Roy Morgan says saw subscriber numbers drop 2.7 percent year-on-year as the company’s built-in base was nibbled away by competitors.
Foxtel has long relied on sports programming to cater to its built-in audience of football, cricket and other sporting fans – and recently took a $1.2 billion flutter on a broadcast-rights partnership with Seven Network that, recent reports suggested, would segue into the launch of a 4K-resolution live streaming cricket service.
A Foxtel spokesperson had no comment when approached by Information Age to confirm the impending 4K launch, but a high-profile event this week is likely to shed more light on the veracity of the report and the nature of the broadcaster’s plans to claw back market share on the back of its cricket splurge.
Cox, who has previously called Foxtel’s cricket investment “desperate”, doubts that 4K will be the thing to win subscribers to a service that has struggled to offer a compelling alternative to market leaders Netflix and Stan, and last year shuttered its loss-making Presto service to relaunch its streaming offer as Foxtel Now.
4K is not enough…
The reports about 4K streaming cricket also suggested that Foxtel Now would be shuttered or morphed into yet another Foxtel streaming service.
Yet not even 4K – which Netflix has pioneered in Australia through an expanding roster of original 4K-resolution series and movies – will be enough to save Foxtel, Cox says.
“There will be a limited number of people who take up 4K and presumably they will like it,” he explained. “There will always be a market for early adopters – but I don’t think 4K is going to set off a revolution.
“Most people aren’t perturbed about watching videos on their phones; with streaming services, I think the fact that different members of the household can be watching content on their individual devices is far more important than 4K.”
If the 4K cricket rumour does prove to be true – and, one way or another, Foxtel and its rivals will need to embrace 4K – quadrupling the number of pixels on the screen isn’t going to be enough on its own to convince viewers to pay every month.
…but could content be the thing instead?
Netflix already has a long history of using a different approach – content – to keep viewers coming back.
The company has relied on the breadth of its roster of original shows – 700 and counting, with spend of $US8 billion ($A10.9b) this year alone – to fend off calls for greater investment in Australian content, in line with historical requirements placed on free-to-air broadcasters.
Industry group Screen Producers Australia, for one, is currently running a campaign called Make It Australian that is pushing for local-content requirements on streaming services – which could be one byproduct of the government’s high-profile inquiry into digital-platform dominance (submissions here).
Netflix would do well to consider pre-empting any changes by investing locally, Cox said: “They want to tread carefully, and therefore buying Australian content would seem like a good short-term investment for the longer term.”
The government’s new media reviews will consider the issue and extending the requirement to Netflix could throw a bone to Foxtel and its well-established local production networks.
Yet Foxtel isn’t the only potential winner: Nine Entertainment-Fairfax Media owned Stan hopes to benefit from the mooted merger of the two companies, creating another highly concentrated source of media rights and a stronger streaming proposition for Nine and its subsidiary holdings.
That’s the theory, at least; in reality, Cox says, “I don’t think the synergy arguments work, and have seen no evidence to support them over the years. I don’t think [a merger] is going to change the dynamic at all.”