Netflix causes angst in Oz

31 October, 2013 by Don Groves

The US streaming giant Netflix is believed to have many thousands of subscribers in Australia despite a geoblock which is supposed to prevent Australians from accessing the service.

That potential loss of revenue is galling for Foxtel, which is striving to lift its penetration above 30% of Australian households.

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Foxtel is launching its own Subscription Video-on-Demand service dubbed Presto in December, designed to appeal to movie lovers who are happy to pay $24.99 per month to access any title airing on Foxtel’s seven movie channels. The channels are Foxtel Movies Premiere, Foxtel Movies Comedy, Foxtel Movies Drama/ Romance, Foxtel Movies Thriller/ Crime, Foxtel Movies Action/ Adventure, Foxtel Movies Family and Foxtel Movies Masterpiece.

Netflix, which has more than 31 million subscribers in the US, charges $US7.99 a month for unlimited viewing of movies and TV episodes streamed over the Internet.

Last week Netflix chief content officer Ted Sarandos riled US cinema owners by accusing them of potentially killing the movie business by being inflexible with shrinking theatrical windows. “Why not premiere movies on Netflix the same day they’re opening in theatres?” he asked.

Some Australian pay-TV executives theorise that Netflix has between 100,000 and 150,000 subscribers who live in Australia and circumvent the geoblock by using a virtual private network (VPN), which can show a computer’s location is based in the US.

By this means Netflix has the potential to earn considerable revenues from Australia with zero costs for content / marketing/management. Numerous websites offer instructions on how to set up an account in Australia with streaming sites such as Netflix, Hulu and BBC iPlayer.

Those executives believe Netflix has chosen not to enter Australia thus far due to the relatively small size of this market plus the costs of acquiring rights for Australia and of maintaining an Australian operation.

“If they came to Australia they would struggle to replicate 50% of their US content suite, they would have enormous costs and would lose money for 3-5 years,” said one screen industry executive.

Foxtel is believed to have made representations to the US majors, and perhaps directly with Netflix, to try to deter Netflix from accepting Australian credit cards and thus limiting the number of local subscribers who can access the service.

A Foxtel spokesman told IF, “Netflix, like the US studios, has contractual arrangements in place which determine where its content can be screened. We expect Netflix to abide by those contractual arrangements in the territories where it has rights, just as we abide by our contractual arrangements.”

In response to questions posed by IF, Netflix said, “We don't comment on speculation. We also haven't announced any plans to enter Australia.”
 

 

 

 

 

 

 

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  • Zed

    I am one of those people who subscribes to a number of US streaming services – VUDU, HULU, NETFLIX, and US iTunes, including AUS iTunes and Spotify.

    In addition to the above, I also subscribe to FOXTEL at $120 per month. For this I get a ridiculous number of repeats, overpriced VOD, and little else.

    Like most Australian consumers I know I pay through the nose for most items – cars, content, bandwidth, etc.

    So to read that FOXTEL executives have made representations to the US majors to try to deter distributors accepting Australian credit cards and thus limiting the number of local subscribers who can access these services makes my blood boil.

    The reality is that FOXTEL is making these approaches to protect its monopoly and lift its penetration above 30 per cent of Australian households.

    Times are changing, the way we consume content has undergone massive change – maybe linear TV is less relevant and dying? Perhaps it’s time to view piracy as a competitor, and rather than content creators feeling threatened, embrace the marketplace and become competitive?

    While I don’t condone piracy, perhaps the reason Australia is recognised as among the world’s most notorious territory for piracy, and the distribution of illegal film and television content is because we have little variety for which we pay too much.

    M

  • consumer

    Hear, hear. Well said. Could not agree more.

  • David

    I really do hope Netflix and Hulu come to Australia, we’re so content starved and over priced with little competition, Americans are so lucky in this department.
    Geoblocks should be outlawed, consumers should be able to access and pay for content from the company of their choosing regardless of what country it resides in. I guarantee piracy would be eliminated almost over night if consumers had this freedom.

  • Jessica

    I totally agree with you. Being a student means that paying for FOXTEL’s over priced service is not an option. This leaves me and others no other choice but to look to other services such as Netflix.

  • Natalie

    Protectionism at it’s best. When cable came out in Australia, we were sold on it because there would be no ads … paying premium to choose not to have your programs interrupted by the most annoying (max sound) advertisements. Foxtel, I don’t subscribe to you anymore because the cable carriers said one thing to get us hooked then changed the rules to suit themselves – I prefer just to buy my dvd’s and go to the movies and watch free to air (for news etc). Foxtel also doesn’t allow much flexibility … I only like a couple of their channels … I don’t want sport … I don’t want to have to tape programs that I’m not home to watch – I just want to select a program that I like then select the episode I want to watch (advert free) … so until they (or someone else) comes up with this option, I don’t want to listen to their whining. We pay far more than any other country for entertainment – to stop piracy, they all need to lower their prices … after all, it’s digital and their overheads are less yet the price doesn’t reflect it. Quite frankly, three things need to change. Advertisers need to pay to have local ads made rather than replaying international versions to keep our commercial industry thriving. Cable needs to go and allow our Channels to thrive and produce/ fund great local shows like A Place To Call Home, Tomorrow When the War Began Red Dog, etc and keep our production industry thriving. Let the blockbusters come out at the cinema first and keep the movie going experience alive … most of the younger generation wouldn’t even have memories of going to a Drive In Movie … If this keeps going, their kids won’t even know what a cinema is.

  • Stacey

    As someone who has worked in both subscriber tv and in movie rental stores, I’m pretty sick of hearing people constantly complain about lack of content, the price of movies, and more people than I care to admit complain to me about having to pay for tv and movies at all. All you seem to hear lately is more, more, more and faster, faster, faster, yet when their needs are delivered they still aren’t satisfied. Nothing is ever enough and the sense of entitlement is absolutely infuriating. Why do you deserve something for nominal cost? Just because a country like the US offers these services doesn’t mean we are entitled to access or have it too. Whilst some of these services would be great to counteract the epidemic of piracy, they take time and money to develop. When will people remember that the money that pays for content goes to make more and high quality products. If crews don’t get paid. Who is going to make ur content?

  • Anthony

    Netflix has had several Australian trademarks registered with IP Australia-and own Netflix.com.au .

    Their latest shareholder letter indicates they will enter a new international market next year-mostly likely another European one.

    On the other hand, Hulu refuses to confirm any plans to expand beyond Japan-and they own several Australian trademarks just like Netflix.

  • Jessica

    Really Stacey? Do you know how much movie rental income actually gets back to the people who make the films? And do tell what it takes to implement an internet based business that already exists elsewhere.

  • Mark

    @Stacey. Methinks you must still be employed in the industry. The costs you speak of 1) Don’t exist under the internet delivery paradigm. Nothing extra needs to be provided to extend the service to Australia; and 2) The network costs for the initial set up of Foxtel in Australia were met by Telstra as part of the joint venture. I recall that Telstra had to pay Foxtel $400 for each connection. Sounds crazy but its true. Rupert wins again; 3) A large part of the Foxtel costs would have been the fixed assets like real estate. Fox Studios were once part of the Sydney Showgrounds. Murdoch was ceded these assets by a friendly State Government at little/no cost. They are now appreciating assets.

    Subscribers to the existing service providers have been gouged relentlessly since the service started. Its about time true competition was allowed.

  • Dez

    Stuff using Fuxtel. It is ridiculously priced for repeats, ads and mostly lame content.

    I use both Hulu and Netflix, via a DNS provider.

    I hope this is part of a big single finger salute to Fux and that withered old turd, Rupert Murdoch.