Netflix zaps free-to-air broadcasters

10 August, 2015 by Don Groves

The free-to-air broadcasters’ audiences collectively are down 9 per cent on last year and further erosion is inevitable with the rise of Netflix and other streaming services.

That’s according to Citi Research analyst Justin Diddams. “We see growing risk of shifting consumer viewing from FTA TV channels to SVOD platforms, as consumer seek out content, “ he writes in a briefing for clients entitled SVOD… Reality bites in 2015.

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Despite the drop in viewers, FTA advertising revenues for the first six months were up by 0.2 per cent. Diddams posits, “The key question is how much longer can FTA TV broadcasters sustain this level of CPM increases on advertising dollars, as real audiences continue to decline.”

He predicts SVOD penetration will hit 3 million by 2018, or 35% of households, which he thinks could lower FTA viewing by 10 per cent. “Not great but not a train wreck,” he says. ““For FTA broadcasters, increasing penetration of SVOD could place further downward pressure on audiences but this doesn’t mean FTA is dying, but likely to limit earnings growth as focus on differentiated content is needed

He estimates Netflix already has 1.6 million users- 900,000 paying customers and a further 700,000 who are still on free trials.

The Nine Entertainment/Fairfax Media joint venture Stan has 322,000 sign-ups and 153,000 paying customers, he believes.

Foxtel’s Presto Movies and Presto TV, co-owned by Foxtel and Seven West Media, have 193,000 and 80,000 respectively.

Diddams expects Foxtel, which has 2.7 million subscribers, will remain the dominant provider of premium sports and drama content, reaching 35 per cent penetration (up from 30 per cent currently) in 2018.

He predicts Stan will have 750,000 paying subs by 2018 but reckons the platform needs 1 million to break even, and he questions how long  the owners are prepared to keep investing free cash flow in the business.

A Citi survey found Foxtel households are the biggest consumers of streamed content, with Netflix, Stan and Presto over indexed across these households.

“We conclude that SVOD will grow the total market for 'paid for content' in Australia rather than cannibalise the existing premium payTV market. We view SVOD as complementary,” he says.

 

 

 

 

 

 

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