The AFR today ran a feature regarding the Australian TV network executives seeking to squeeze out Netflix from the marketplace by securing content before Netflix can get access to it. Based on the quotes that run through the article, however, it appears that local network executives are still too focused on combating Netflix as a current day broadcaster and not as a pure digital consumption provider.
Netflix is not just movies. Netflix is not just TV. Netflix succeeds by fulfilling broad-ranging content casual consumption needs.
What is being missed in the efforts to combat Netflix is to actually combat their strengths – movies, TV, documentaries, stand-up comedy, and foreign language content. Netflix are not a mainstream broadcaster, but rather they provide enough content for niche interests to be sated.
There are a number of points throughout the article that are misguided and simply fail to reflect the reality of what Netflix represents. It makes for positive spin now, but just won’t hold up once the US streamer launches a local presence.
TV bosses figure they can squeeze Netflix before it launches in Australia by acquiring the “holdback” rights on first-run TV shows and feature films … The holdback window can be up to 18 months for SVOD operators such as Netflix.
Netflix operate as a casual consumption source. Fresh, first run content isn’t as significant an issue on a service like Netflix as it is on a broadcast service. Much of the viewership on Netflix comes from viewers discovering new content that doesn’t have much name recognition. The Netflix recommendation algorithms are a core component to the success of this discovery process. It pushes all the shows and movies a viewer may be interested in, prompting further exploration of content.
It’s this recommendation algorithm that is responsible for so many people sampling and enjoying low-profile shows like The Fall last year and (in recent weeks) Happy Valley. These are shows that would do limited audience numbers on FTA, but on Netflix they thrive. If these shows were up to 18 months old, that wouldn’t be an issue for Netflix as their consumers are casually discovering shows they may otherwise have limited familiarity with anyway.
Big marquee names are important to Netflix, which is why they’ve launched they commission their own original content (House of Cards, Orange Is The New Black, Bojack Horseman) and buy the rights to shows like The Blacklist and Gotham. But, in reality, Netflix only need a handful of these series to get people subscribing. Low-profile series and movies still drive much of the viewership on Netflix because the recommendations offer something tailored to watch when people just want something casual to enjoy.
“I’m not trying to undersell the task we have got in terms of raising Presto’s brand awareness but [Netflix] will be an inferior local service because of the rights that currently sit with Seven, Nine, Ten, ABC and Foxtel. They have looked at this market and seen that.”
-Shaun James, Presto
One of the biggest sources of competition to Netflix is actually SBS. It is the niche types of content that SBS have leveraged off to build their compelling SBS2 that actually echoes the sorts of series that does well on Netflix. Series like Mad Men, 30 Rock, Parks & Recreation, Brooklyn Nine Nine, Real Humans, The Bridge, Breaking Bad, Community, Black Mirror, Lip Service, and The Office all perform strongly on subscription services. They’re niche and are often buried on commercial broadcasters in late night time-slots.
Furthermore, documentaries are an often-overlooked area of Netflix’s success. Docos do huge business on Netflix because they can provide targeted content that appeals directly to their subscribers niche interests. They’re exactly the same type of feature documentaries that often appear buried on SBS and the ABC, but thrive on the streamer.
“You will never see an HBO program on Netflix in Australia”.
-Richard Freudenstein, Foxtel CEO
One will also never see an HBO program on Netflix in the US*. And they’re doing just fine. US TV is currently out-putting more premium drama and comedy than at any other point. Long gone are the days of The Sopranos being the premium show on TV. Foxtel can hold onto that HBO deal for as long as they want – it doesn’t mean Netflix don’t have other content providers to choose from.
“In reality, the latest episodes of the Australian and international programs that the majority of Australian viewers love will not be available on Netflix.”
-Angus Ross, Seven Chief Programming Director
Again, the latest episodes of programs that the majority of Americans/Canadians/Brits/French/Scandanavians/etc love aren’t on their respective local Netflix services either. But there is just enough of those shows and movies on there that are interesting enough to justify a $7.99-ish monthly cost. Netflix use a handful of marquee shows to drive subscriptions, then keep audiences watching through recommended casual viewing. Netflix is also not an end-all and be-all platform. Most consumers will likely subscribe to 3-4 services to get a substantial content offering in the years to come. Australian providers would be well-advised to find what works for Netflix and emulate a similar strategy rather than trying to hold onto content that works very well for broadcast audiences, but less so for those watching recommendations on demand. These are not the same shows.
“Underestimating what the studios will do to make money would be naïve. Netflix will have a lot of good product, as will Stream Co, as will Presto. There will be a lot of similar product and amongst it all everyone will have a few little golden nuggets that they own.”
-David Gyngell, Nine CEO
Don’t underestimate David Gyngell. He is spot-on and often is when discussing streaming video services. There will be similar content on many platforms. Not that much of it is genuinely exclusive. Furthermore, every platform will offer something that people want. This is why consumers will be looking for multiple service providers.
A marketplace that offers just Netflix and overseas providers will make for a poorer content consumption experience in Australia. The last thing any country needs is a large US content provider wielding complete control over the SVOD space. The global strength of Netflix also works as a plus, however, in that the company’s efforts to produce content in-house and signing deals for global distribution means we’ll see a reduction in wait times for content to be made available locally.
Netflix is going to be great for consumers. Their successful grey presence in Australia has spurred Australian content holders to get into the SVOD marketplace, which will provide an abundance of content for Australians to watch and enjoy legally. The growth of piracy in Australia can largely be attributed to the limited number of viewing options we’ve had until now. There will be room for more SVOD services than Presto. StreamCo has a great opportunity as long as they move early and launch with a compelling content strategy. Presto will do fine with their movie service once they start competing in the space and aren’t simply differentiating from the Foxtel service. And then there’s growth opportunities for other providers. To compete, however, it’s important to understand that Netflix is not a broadcast service and viewers do respond differently to content offerings.
To compete with Netflix is to understand it.
*The Larry Sanders Show being a strange aberration a number of years ago.