SYDNEY: Netflix’s stunning growth in Australia has been underlined by an analyst’s report that predicts that within three years, more homes will have a subscription video-on-demand (SVOD) service than currently take Foxtel.
The survey, commissioned by Citi Research’s media analyst Justin Diddams and seen by Fairfax Media, estimates that Netflix – which only launched here in March – already has 1.6 million active users, with 900,000 of those paying a subscription fee (the first month is free).
If Citi’s research is accurate, it would mark one of the fastest take-ups of a new consumer technology in Australian history.
Netflix – whose television and movie library users can access online for between $9 to $15 a month, compared with $25 for a basic Foxtel package – does not provide user numbers for Australia.
The explosive adoption of the platform, whose original shows include Orange is the New Black and Kevin Spacey’s House of Cards, has been helped by strong brand awareness which Citi’s research claims is already as high as that of two-decades’ old cable and satellite monopoly Foxtel.
The broker forecasts that by 2018, there will be 3 million households using video-on-demand streaming services. It estimates Foxtel has 2.7 million subscribers (the actual number will be confirmed at News Corp’s full-year results later this month) and will reach 35 per cent penetration of Australian households by 2018.
But Mr Diddams predicts that it is the free-to-air television networks, rather than Foxtel, which have the most to fear from the online movie and TV revolution.
“Don’t forget that 70 per cent of households pay nothing for video content in Australia, so there’s a lot of pent-up demand for content,” he told Fairfax Media.
“It doesn’t mean the death of Foxtel but it means an explosion in content consumption in Australia in the 70 per cent of households that don’t pay anything today.”
In his note, Mr Diddams writes: “For free-to-air broadcasters, increasing penetration of SVOD could place further downward pressure on audiences but this doesn’t mean [free-to-air television] is dying, but likely to limit earnings growth as focus on differentiated content is needed.”
Second placed in the video-on-demand race is Stan, owned by Nine Entertainment and Fairfax Media, the publisher of The Australian Financial Review and Business Day. Citi estimates that Stan has 332,000 sign-ups and 153,000 paying customers.
“We’ve seen early success for Stan, driven by its aggressive branding campaign, yet the fragility of “trial” subscribers represents a risk to securing “paying” customers over medium term,” writes the broker.
Foxtel’s own video-on-demand effort Presto, which it owns with Kerry Stokes’s Seven West Media, has just 193,000 sign-ups and 80,000 paying customers, estimates Citi. Foxtel is owned by News Corp and Telstra.
Foxtel is awaiting approval from the competition regulator for its proposal to take a 15 per cent stake in third-placed commercial television broadcaster Ten Network Holdings, which has an option to buy 10 per cent of Presto.
Citi estimates Foxtel’s fast-growing, cheaper rival Fetch TV has 280,000 active customers.
