A TALE OF TWO SERVICES
There are currently two main types of streaming services available in Australia – ad supported free streaming services and paid streaming services. There is hot debate in the industry about the ability for the Australian population to sustain the number of players in the market and who will end up taking the lead. This is our take on the market place and an attempt to read the crystal ball of the future.

We’ve included a table at the end outlining the main features of each service as a summary and a quick reference guide. But first, let’s discuss the viability of paid streaming services in Australia.

PAID STREAMING SERVICES
In Australia, there are now numerous streaming services on the market, including Stan, Presto, Foxtel Play, Fetch TV, Quickflix, Google ChromeCast, Apple TV/iTunes, and soon Netflix will enter the market. However, the Australian marketplace won’t be able to sustain so many competing services as with so many other products and services, one or two competitors eventually take a dominant share as we’ve seen in the Apple – Google mobile OS wars.

There are a few barriers to the proliferation and sustained success of so many paid streaming services in Australia compared to other markets, namely the U.S.

First, Australia has a much smaller population. The available cash to sustain multiple subscription services in the market place is considerably smaller. Stan has a considerable stockpile of cash – $100M in fact – to wage the war for subscribers. However, the challenge will be signing up and retaining enough subscribers to maintain the content. For this reason alone, you could expect that only one or two players will have enough income from subscriptions to sustain a decent library of content to win over, and keep, subscribers. Only about a quarter of online Australians use an official streaming service to watch TV and not all of them will convert to a paid subscription. With its global footprint, Netflix would seem most likely to sustain in the long run.

Second, Australia has good free TV options. Ok, some might counter this argument. (Ahem, Brits. I get it, the BBC is amazing.) And ‘good’ might be gushing… we can even go with ‘OK’. However, in the end, FTA stations haven’t done too bad in picking up broadcasting rights for some of the most popular shows from overseas, some that are even on subscription / cable television in the U.S., and offering that for free in Australia. The UK has higher subscription levels due to the English Premiere League being on Sky. But, legal restrictions through the anti-sport syphoning rules prevent that from happening here (until the law changes). And for most Australians this is good enough. If you’re getting things for free, why pay for them?

Which brings us to barrier three: Australians are masters at illegal downloading. It’s no secret “fast track” isn’t fast enough for many Australians. And we have a global reputation for piracy. There is an estimated 200,000 Australians who are using a VPN to access Netflix’s U.S. service. That’s more users than who subscribe to Quickflix service! And as we know, Australia was the country with the most illegal downloads globally of Breaking Bad. To quote Jeff Goldblum, life will find a way. In this regard, I think even Netflix could struggle.

So, let’s make some predictions based on the user experience test we’ve run at PHD.

Stan
Stan has been taking some big bets with exclusive content deals, but their app and service aren’t getting the greatest reviews. Stan doesn’t have any personalised recommendation engine built in. They dump all the content in, highlighting a few shows or at most, what’s the most popular across the network.
Prediction: Likely will survive due to exclusive content deals and good pricing in the market.

Presto
Like Stan, Presto doesn’t have any personalised recommendation engine built in. Presto’s execution of show highlights was more robust than Stan, but still didn’t take it as far as data powerhouse Netflix, recommending shows based on what you have liked, watched and what ‘others similar to you’ have liked. That’s the power of Netflix. With personalisation and social recommendation being ever more required by people, it’s a big feather in Netflix’s hat.
Prediction: Will end up with very low subscriptions and eventually shut down.

Quickflix
There have been comments that the quickest way for Netflix to enter the market would be to buy Quickflix and their 130,000-ish current subscribers. Maybe. However, I think there are enough Aussies hungry for Netflix that their name wouldn’t require the buyout. If they aren’t purchased by Netflix, then they’ll lose out based on their service. You subscribe to the service at the same price as the others, but you don’t get “all-you-can-eat” at that price. For newer, ‘premium’ titles, you have to buy the movie in order to view as we found out while testing the availability of the recent movie Fury across services. In addition, the user experience on Quickflix mobile app to watch Fury required me to first receive an email with a link, to then go onto my computer and complete the purchase before I could watch the movie on my iPad. What a poor user experience! What happened to in-app purchases?!
Prediction: Quickflix will be one of the first to close up shop.

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Quickflix’s email to prompt purchase

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Quickflix’s online authorisation for purchase on COMPUTER

Foxtel Play
Foxtel Play is just like subscribing to Foxtel, and is as dear on your wallet, only you don’t need a box. Foxtel Play is the streaming service that allows you to access Foxtel without an iQ box over IP. You can use both your Foxtel and Foxtel Play accounts to log into the Foxtel Go app for mobile access to Foxtel. But, be warned it doesn’t give you access to everything from your Foxtel Play (or Foxtel proper) subscription as content is limited from the app.
Prediction: Will live on, but won’t be competing against the likes of Stan, Presto, Netflix as it’s a straight Foxtel clone and will compete for Foxtel subscribers.

Fetch TV
Fetch TV isn’t competitive in pricing. In fact, it’s pricing is all over the place based on who you buy it from.
Prediction: Won’t be able to sustain in the long term due to confusing pricing structures and better service options available elsewhere.

Netflix
Netflix reportedly already has over 200,000 subscribers in Australia, so technically they are already bigger than Quickflix. With their content set to be slightly different for the AU version, we don’t see these folks voluntarily switching over if they already have access to the US version. That said, over time, as Netflix gains the rights back to their original content for Australia, they could sign up a lot more Aussies to their AU offering. Although looking at a traffic report from Hitwise, below, they definitely have had more interest than competitors in the last year.
Prediction: Might have a rough start, but they will dominate in the long run.

graph

Google ChromeCast & AppleTV
Google ChromeCast and Apple TV / iTunes are paid streaming services, but they aren’t the all-you-can-eat platform that’s been exploding as of late.
They are very competitive in content, but individual pricing makes them slightly different to the other players.
Prediction: Both of these services won’t be going away any time soon – they are massive global players and could be the future of content consumption with an un-bundled, on-demand service.

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Google Play Movies on computer

So, who will be the winners? We think Stan and Netflix are the front runners in the race for paid streaming services in Australia, but we’ll see what the market picks.

table 13