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Intelligence Briefs

How many streaming services can Australians afford?

Industry Contributor

Stephen Fisher, General Manager
Hatched Media

4 November 2019 5min read

A report in The Guardian from the London Film Festival last week picked up on a press conference where Martin Scorsese was forced to defend his decision to bankroll his new film, The Irishman, through a deal with Netflix.  Despite a legendary cast – including Robert De Nero, Al Pacino and Joe Pesci - the film struggled to find funding from traditional backers. It will now be released in cinemas on 1 November and then will be available to stream on Netflix from 27 November 27.   Separately, in its April-June quarterly update Netflix announced it was experiencing “headwinds”, revealing that it had lost US streaming customers for the first time in eight years and missed targets for new subscribers overseas.  Although that trend was reversed in the subsequent quarter (the three months to 30 September where the business added 6.8m subscribers) these two seemingly disparate pieces of news are closely related and speak volumes about how we continue to adapt our consumption of TV and movie content.   

 

Key points: 

  • Netflix’s backing of The Irishman has enabled a distribution deal which reduces the standard 90-day theatrical release window, with several US and UK cinema chains likely to boycott screening the film.  The movie is estimated to have cost $200m
  • Scorsese commented: “There’s no doubt that seeing a film with an audience [in a cinema] is really important. There is a problem though: we have to make the film… having the backing of a company that says that you will have no interference, you can make the picture as you want – the trade-off being: it streams, with theatrical distribution prior to that. I figure, that’s a chance we take.”
  • Netflix has more than 158 million paid subscribers globally (11.5m of whom are in Australia – Roy Morgan)
  • Both Disney+ and AppleTV+ launch in Australia in November

My Takeout

The case of The Irishman is a microcosm of a broader conundrum, with the content industry once again finding itself at a crossroads.  The model of studio/distributor/exhibitor is collapsing, replaced by single platforms.

That Screen Australia box office estimates point to another bumper year for film, at the same time as a movie with near perfect DNA struggled to find resources, tells that there are contradictory forces at play within the content universe.  It’s odds on that pressure will crack something, somewhere, at some point.

With the imminent launch of Disney+ and AppleTV+ the production and distribution landscape is about to go through another period of radical upheaval.   

By year end, in addition to Disney and Apple, we will have access to Netflix, Stan, Foxtel Now, Kayo, hayU, YouTube Premium, Google Play and Amazon Prime, plus content specific options including NBA Pass and Optus Sport, as well as the free to air on demand services.  With Foxtel due to launch Project Ares in 2020, focused on drama and entertainment and dubbed “Kayo’s sister”, content access for Australian households continues to expand at a rapid rate.    

Adding to the complexity is that VPN usage in Australia is low compared to global benchmarks (vpnMentor.com research states that 13 per cent of Australians use a VPN, of which 4 per cent do so to access entertainment content) meaning the number of people accessing overseas streaming content is limited, and therefore the impact of this increase in options on current consumption likely to be sizeable.

There are some big ramifications that come with this expansion. Box office is a massive revenue stream for studios, but where is the point at which Disney deems theatrical release surplus to requirements and pushes all new release content through Disney+ either as a subscription incentive or under pay-per-view terms?  The Irishman / Netflix agreement, with its reduced theatrical release window, signals this shift is already underway.

Perhaps a more tangible and fundamental question is, can Australian households actually afford to pay for all these services? 

Streaming at this point has been positioned as the best of all worlds - anything and everything you want, when you want it, on your own terms, in your own time. But the impact that this fragmentation will have on customer wallets hasn’t really been explored.  We’ve already seen Foxtel change its model, and with prices ranging from about $6 to $25 each per month, most SVOD services are positioned to be well within the comfort zone of middle Australia.  Deloitte’s Media Consumer Survey 2019 identified that half of respondents with SVOD services said they needed more than one to access the video content they wanted, and on average subscribed to 1.5 services.   How many services are people going to be prepared or able to pay for is the more pointed question. Especially in economically stagnant times.

Deadline reported in August that interest in Disney+ was outpacing Disney’s own predictions, specifically noting that 43 per cent of people surveyed said they planned to sign up to the service.  That same research also reported that 57 per cent of those who would sign up also planned on cancelling a current subscription service, with an existing cable/pay TV service the most likely candidate.

That’s not good news for incumbent services.  Foxtel perhaps has an advantage in its aggregation approach and the genius of bringing Netflix onto its platform, but that model is also ripe for the picking from telco’s, ISPs and big tech.

What is certain is that Australia is entering the next phase of household content consumption, one that will tempt viewers with more choice and more ways to spend their hard earned dollars.
Let’s go. What do you think?

Industry Contributor

Stephen Fisher, General Manager
Hatched Media

Stephen has over 20 years experience in media agencies and has worked with clients in the UK, European, Asian and Australian markets across a diverse range of categories. Stephen joined the Melbourne based independent agency, Hatched in 2017.
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