GST no bother for Netflix
The goods and services tax to be imposed on Netflix will not slow its rapid growth given its market leadership, wealth of original content and unmetered deals with telcos.
That’s the view of media analysts and executives canvassed by IF. By some estimates, the streaming service may have close to 500,000 subscribers already, outpacing rivals Stan, Presto Movies, Presto TV and Quickflix.
Netflix executives would have factored the likely imposition of the GST into their business plan for Australia and it may be that the company “eats” the 10% tax, rather than passing it on to subscribers. The measure won't come into effect until July 1 2017.
“GST levels the playing field at the margins but I don’t think it will have a big impact on Netflix,” Credit Suisse analyst Fraser McLeish tells IF.
McLeish is bullish about the SVOD sector’s prospects, predicting 1.5 million subscribers by the end of the year. He expects Netflix to rank as the market leader with 40% (which would mean 600,000 subs, probably an under-estimate), followed by Stan with 33% (500,000) and the Presto services at 27% (400,000).
Netflix, which launched on March 24, has told ISPs that consumer demand has exceeded its forecasts.
While much is made in the media over its monthly fee of $8.99 being a dollar cheaper than Stan and either of the Presto services, that’s for just one feed per household. It’s believed the vast majority of Netflix subscribers take the two-stream high-definition plan for $11.99.
A Netflix spokesman said, “Netflix has been and will be compliant with all applicable laws and regulations, and we pay taxes as required under local and national law.”
McLeish doubts the streaming platforms will take many viewers from the free-to-air broadcasters but believes there may be an impact on DVD rentals. He also thinks some Foxtel subscribers may opt to drop the movies and drama packs in favour of one or more of the SVOD services.
The government will introduce legislation imposing GST on digital products including streamed content and e-books today. Treasurer Joe Hockey said the measure would raise $350 million in the next four years
Hockey said: "It is plainly unfair that a supplier of digital products into Australia is not charging the GST whilst someone locally has to charge the GST.
"When the GST legislation was originally drafted, it did not anticipate the massive growth in the supply of digital goods like movie downloads, games and e-books from overseas."
Foxtel welcomed the government's move. Spokesman Bruce Meagher said: “The introduction of this legislation will not only help to maintain consistency across the competitive landscape, but it will also ensure that Australia gets its due taxes from the companies that choose to do business here, which benefits all Australians.”