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08 December 2014
8 December 2014: Netflix is coming to Australia in 2015. Media Partners Asia explores some of the things the U.S. giant will find when it arrives, including 200K VPN users and strong local playersAustralia's internet-based video-on-demand (VOD) sector – both advertising (AVOD) and subscription (SVOD) funded – is one of the strongest in Asia Pacific, generating total revenue of US$230 million at end-2014, according to Media Partners Asia's (MPA) latest analysis. While most of this is generated from online video advertising (US$200 million in 2014), the over-the-top (OTT) delivered SVOD market is expected to generate strong growth in the future, from a low base.MPA forecasts Australia's SVOD market will grow from US$31 million in 2014 to top US$160 million by 2020, powered by the entry of Netflix in March 2015, competing with local incumbents such as Foxtel, Quickflix and Stan, a Nine-Fairfax joint venture. Meanwhile, online video advertising is expected to cross the US$1-billion mark during the same period (CAGR of 32%).Key market drivers include high broadband penetration and the growing availability of VOD, MPA says.Fixed broadband network household penetration was 69% at end 2014, although MPA highlights low download speeds relative to North Asia and Singapore. There are also significant data caps and telcos often throttle speeds to limit peak levels of video consumption. Both these issues could prove to be near-term barriers to Netflix adoption, says MPA executive director, Vivek Couto.High-speed internet growth is expected with the rollout of a fibre-based national broadband network (NBN). The critical catalyst for NBN growth is a deal with telecoms giant Telstra, anchored to an US$11-billion package that involves the Federal government. The deal has been delayed to 2015. Wireless broadband continues to gain traction, reaching 46% penetration (11 million su...
8 December 2014: Netflix is coming to Australia in 2015. Media Partners Asia explores some of the things the U.S. giant will find when it arrives, including 200K VPN users and strong local playersAustralia's internet-based video-on-demand (VOD) sector – both advertising (AVOD) and subscription (SVOD) funded – is one of the strongest in Asia Pacific, generating total revenue of US$230 million at end-2014, according to Media Partners Asia's (MPA) latest analysis. While most of this is generated from online video advertising (US$200 million in 2014), the over-the-top (OTT) delivered SVOD market is expected to generate strong growth in the future, from a low base.MPA forecasts Australia's SVOD market will grow from US$31 million in 2014 to top US$160 million by 2020, powered by the entry of Netflix in March 2015, competing with local incumbents such as Foxtel, Quickflix and Stan, a Nine-Fairfax joint venture. Meanwhile, online video advertising is expected to cross the US$1-billion mark during the same period (CAGR of 32%).Key market drivers include high broadband penetration and the growing availability of VOD, MPA says.Fixed broadband network household penetration was 69% at end 2014, although MPA highlights low download speeds relative to North Asia and Singapore. There are also significant data caps and telcos often throttle speeds to limit peak levels of video consumption. Both these issues could prove to be near-term barriers to Netflix adoption, says MPA executive director, Vivek Couto.High-speed internet growth is expected with the rollout of a fibre-based national broadband network (NBN). The critical catalyst for NBN growth is a deal with telecoms giant Telstra, anchored to an US$11-billion package that involves the Federal government. The deal has been delayed to 2015. Wireless broadband continues to gain traction, reaching 46% penetration (11 million subs) in 2014. 4G deployments are growing with three of the largest telcos – Telstra, Optus and Vodafone – garnering a combined nine million 4G subscribers in the first half of 2014. With nearly 50% of all online video consumption derived from mobile devices, Australia's strong wireless broadband networks will be a key piece of the success story for online video platforms, MPA says.MPA also points out that VOD services are widely available in Australia, including SVOD services from market leader Quickflix, whose shareholders include Nine Entertainment; Presto, a SVOD service offered by Foxtel; and Stan, an A$100-million joint venture between Nine Entertainment and Fairfax.Netflix is launching SVOD-based OTT services in Australia and New Zealand. The service will be available on smart TV sets, tablets, mobile, computers and internet-capable game consoles and set-top-boxes. Netflix already unofficially exists in Australia with 200,000 customers accessing the service using virtual private networks (VPNs) or changing DNS (Domain Name System) settings.Netflix, at the outset, may face challenges as it looks to convert its VPN base to legal SVOD. The U.S. offering will have a wider breadth of Hollywood content, although the Australia launch slate includes original series such as Marco Polo, BoJack Horseman and kids titles such as DreamWorks Animation's All Hail Ling Julien.The Stan service, meanwhile, is investing A$50 million-A$65 million to reach breakeven, targeted over three to four years. The company's target market is 1.4 million households, which should grow to 2.5 million by 2019. Management expects to price its SVOD offering at the low end (A$9-A$10 a month), in line with Netflix. Stan content is likely to be largely anchored to non-exclusive back catalogue programming, with some premium exclusive original content. Other key free TV networks (Seven and Ten) are also looking to enter the SVOD market. There is speculation Seven may partner with pay TV operator Foxtel while various bidders, including Foxtel, are lining up to acquire Ten.MPA analysis suggests a total of 276,000 SVOD subscribers in Australia at end 2014, including those accessing Netflix, with revenues of US$31 million. By 2020, this is expected to grow to 1.44 million paying SVOD subscribers with subscription revenue topping US$160 million. Content costs are expected to scale up to almost US$50 million a year by 2016 and grow to US$78 million by 2020.AVOD services available in Australia include those from the three commercial terrestrial free-to-air broadcasters – Nine, Seven and Ten, which are advertising funded. The three have increased levels of content available via catch-up services and also revamped their websites, improving digital apps and players. However, not all content aired on the free-TV channels has been cleared for digital and catch-up rights, especially for library titles.The online video ad sector currently accounts for 4% of the total online advertising pie, generating revenues of US$200 million in 2014. Three global majors – Google (via YouTube), Yahoo and Facebook – account for an estimated 50% share of online video advertising. The sector experienced 45%-50% growth in both 2013 and 2014. According to media buyers, growth is starting to taper off but advertiser demand for premium, brand-safe long form content remains strong. Such content is currently unavailable via either YouTube or Facebook and should help free-to-air broadcasters to capitalise on their AVOD platforms.Piracy is one of the issues that could negatively impact the market, along with the propensity and willingness to pay. Australia's pay-TV subs growth has long been stagnant, reaching just 30% penetration of TV households at end 2013. High ARPUs (A$95 a month for Foxtel) and anti siphoning have been key barriers to growth. Emerging SVOD services, priced at A$8-10 per month, could find traction as consumers look for more affordable ways to access content. The first steps in this direction were made as recently as the second half of 2014, when Foxtel halved prices for both its linear pay-TV services, and for SVOD service, Presto. Subscriber demand has already picked up and MPA projects pay-TV penetration will grow to 40%-plus by 2020. Monthly pay-TV ARPU is likely to decline to A$80 a month or lower over the next few years.ContentAsia Issue 6, 2014