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.


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.”