With the Australian Federal Government blocking of pirated websites passing through the Senate in a radical anti-piracy move toward internet censorship, it looks like Aussies are one step closer to choosing between three leading movie and television giants in the market – Foxtel, Quickflix and the new Netflix ANZ (for those who weren’t proxying on Netflix US before).
For those that havn’t been following the life of Kim Schmitz better known as @KimDotcom who ran open source hosting platform MegaUpload alongside other existing platforms such as Putlocker.is, Megashare.sc and WatchSeries.to, free-to-stream platforms have capitalised on demand of new media for years at increasing costs to legitimate video-on-demand and pay-per-view providers.
On the legal front, the industry continues to face issues with intellectual property, piracy and security as a result of the consumption of audio-visual media and content.
However, whilst production intermediaries are investing heavily into new media avenues to produce, distribute and market, little attention has been given to governance and industry policy, which has left both intellectual property and production profits vulnerable.
Clickbait advertising and affiliate marketing have become one of the many commercial interests for the digitisation of film and video content both within legal bounds and above the law.
The recent case of the pirating of the Dallas Buyers Club by millions of viewers and the uproar following Voltage Pictures’ decision to take action either financially or via other means of recourse such as the shutting down pirater’s Internet connection by ISPs is just one of the many ways individual downloaders could be liable for breaches of copyright law.
Yet given the short time since the introduction of the law relating to Internet movie and video distribution, there is minimal case law precedent to set the stage for action to be taken when streaming media and distribution that violates copyright falls under the radar.
Production studios are savvy on the legal front giving larger Telcos such as Telstra and Optus a miss and targeting cases with ISPs such as iiNet where studios stand a better chance for recourse.
The challenge for the movie and video industry has always been for Federal and industry policies to reflect the changing market as anti-piracy concerns by studios are on the rise.
Now, it appears the Australian government have closed the loopholes in the anti-piracy arena and users will soon have to make a choice between the main pay-on-demand players.
Aussie stakes: What this means for media stocks
Recent changes to the anti-piracy arena means media stocks in the online video market should be anticipating a sky high, but who to bank on exactly?
If you’re still struggling to decide which company to spend your money and low alpha waves on, a quick look at where our video-on-demand and pay-per-view providers are in the Australian market will tell you what the existing cost-benefits are for investor sentiment.
Quickflix has historically benefited from being an early adopter of low-cost streaming being first to market to Australia and New Zealand.
They do a fair few things well:
– Customisable Service: Offering a streaming subscription for TV and movies from $9.99 per month and sell-through delivery content of rental DVDs from $12.99 per month, the main bonus here is customisable service despite fewer products – stream from a fair range of what you want with no added costs.
– Fast delivery: Users get the benefit of fast DVD delivery directly to customers and increased speed of updates for streaming services. With a local office distributed and based in North Sydney, they are very fast on delivery and offer paid for return mail packages for DVDs. You can take out 4 DVDs at a time on the $19.99 streaming and bundling option.
– Great customer service: The benefits of fewer products allow Quickflix to focus on operational management such as responding to customers and this had paid off through a strong reputation of great service.
Foxtel, on the other hand, benefits as the dominant full service premium provider for video and channel subscriptions.
– High Definition Exclusivity: With various entertainment packages starting from $25 per month for movies, drama, sports, platinum channels, pay-per-view movies, you also get an exclusive offer as Foxtel is the only service provider that offers channels through high definition direct broadcast satellite. If you’re looking for high-def exclusivity, users are yet to find a better option.
– Mixed Bundling With Internet and Home Phone: Triple play broadband bundles offering Internet, cable television and home phone packages starting from $90 per month, means they are still taking a piece of the revenue pie from a more stable telecommunications market.
– Diversity of Channels: With over 200 total channels (including standard definition channels, some high definition versions, and audio and interactive channels), Foxtel owns and operates 26 channels and have carriage agreements with strong trading networks and partnerships.
– Diversity of products:
Recording on the T-box: Tier one channels are through a hybrid fibrecoaxial cable network and Telstra’s T-Box digital recorder enable subscribers to gain access to 30 Foxtel Channels.
Good at mobile delivery: Tier two users can watch through a long-term contracted satellite platform provided by Optus and a Microsoft-Foxtel deal that targets users of the Xbox 360 made available through a number of Virgin Australia aircraft, mobile devices and tablets such as iPads and iPhones via Foxtel Go.
Marginally ‘cheaper’ options: Tier three users can access limited versions of services via broadband through Foxtel Play and Foxtel Go.
Price Wars: Two’s a party, Three’s a crowd
Yet with more competition, pressures from low-cost streaming providers on the Australian market remain high, despite retaining high levels of customer acquisition.
Even Foxtel who benefited strongly from its takeover of AUSTAR in 2012, which allowed it to gain a monopoly in direct broadcast satellite television, is now in between maturity and decline faced with intense rivalry with substitutes.
Emerging substitutes such as streaming on demand and sell-through-delivery rental DVD providers such as Quickflix, Fetch TV, Hoyts video-on-demand kiosks and new market entry by Ezyflix have seen to Foxtel losing subscribers to competitors with 10% of customer’s stated to be cancelling or downgrading subscriptions.
Quickflix are also faced with a hyper-competitive market. Especially with the maturity of DVD rentals, it was a testy decision for Stephen Langsford to not drop DVDs as a product.
Pay-per-view content has also been marginalised by demand for low-cost (or no cost) streaming where an overcrowded market has seen to the same product being ably produced at lower costs via fully net-based distribution.
To add fuel to the fire, industry leaders prepared and reacted severely to American streaming company Netflix entering the Australian market this year through a loss-leader.
The result? A number of recent changes to marketing strategies across the board, have seen to prices dropping in an overcrowded market.
Presto: Foxtel’s low cost alternative devouring Quickflix
This is a classic case of benefits to us at significant revenue costs to Aussie-grown providers.
Quickflix is predominantly more disadvantaged by increased competition being lesser known compared to Netflix and Foxtel.
The companies’ aggressive low cost pricing is a result of drastic changes since the companies’ inception in 2003.
When there was little competition, Quickflix could make do with higher prices. But prices lowered on individual products to reflect marginal cost as more competition grew in recent years. Rates dropped from a preliminary $14.99 a month to $9.99 for its streaming service and DVD rental subscription dropped from $14.99 per month to $12.99 per month.
From 2013, Quickflix also began to segment its market by price points offering mixed bundling options from $19.99 per month for a combination of DVD rental and streaming services to promote cross-sell opportunities.
Whilst prices adjusted to reflect the companies new segmentation based on three tiers or service, the change to marginal-cost pricing in 2013 was also a severe reaction to the price war against more established rival Foxtel.
Changes occurred after Foxtel’s line extension to introduce low cost subsidiary streaming service Presto and in anticipation of Netflix entering the market.
According to Foxtel CEO Richard Freudenstein at the ASTRA conference late last year, the strategy with Presto is to create a range of different products at different price ranges to target a wider audience.
The introduction of low cost subsidiary Presto in 2013, which now costs $9.99 per month limited to movies in standard definition quality or a package deal for streaming TV and movies at $14.99 per month, allowed the company to target a price segment that it previously could not reach that had lost Foxtel 50 per cent of market share to Quickflix and other streaming providers.
Foxtel also changed its service to offer multiple tiers by genre and lowered prices on bundles. In 2014, bundling costs for television packages dropped dependent on whether customers are seeking an entertainment, movies, drama, sports, platinum or combination pack.
This recognised that competitors such as Netflix and Quickflix offered highly customisable options through streaming services and aimed to address severe differences in price. E.g. Foxtel Play now offers smaller packages at cheaper prices.
Foxtel: Where’s my upgrade?
Yet a huge blunder for which they have grown a reputation is their lack of loyalty incentives for old customers. Word of mouth feedback from loyal customers of 15 years are still having to put up with an ancient model of the T-box which cuts out of connection during vital moments of the footy.
Is it really necessary to threaten to leave the provider before getting an upgrade?
Foxtel has traditionally been targeting a limited number of hardcore television and movie goers with the sports packages doing exceptionally well yet this lack of retention incentive for users doesn’t live up to its name as a premium service and sets the stage for bad rep for the new Presto service.
Quickflix: the oldest start-up in the market
Quickflix has actually been around since 2003 but whether less tech-savvy users have heard of the streaming company is another story – the company well deserves its name as the ‘oldest start-up in the market’.
Though Quickflix extended its product range to key new entertainment devices including the Sony Playstation 4, Microsoft Xbox One game consoles and Google Chromecast media streaming device to exploit new profit channels through mobile platforms, this is far from enough to remain afloat in the long term with Netflix in the market.
Especially in a market where differentiations between products are minimal, the company has and continue to be noticably under-marketed and on struggle street for investor sentiment.
Quickflix, especially, has a record of being slow to stimulate growth for the brand instead of the product.
In much need of brand growth and a need to raise investor sentiment, this year they also invested relatively substantial marketing expenditure in their budget to shift from its prior focus on tangible product growth to improve brand awareness.
With a 90 per cent increase in marketing expenditure over the last financial year, Quickflix only recently changed its MarComms strategy to adopt acquisition through its buyout of Telstra’s Big Pond Movie rental service Little Stars and its existing user base.
The current promotional strategy is largely focused on word of mouth, free-to-use social media channels, event affiliation and partnership marketing. However, event affiliation with the Sydney Film Festival, Melbourne International Film Festival and collateral communications through the Quickflix blog is needless to say still elementary in raising brand awareness.
Plagued by lower shares and ample room for new growth, Quickflix requires strong investment to stay afloat in the longer term.
Yet with a 6 per cent decrease in gross revenue, Quickflix’s revenue model is still displaying characteristics of a ‘start up’ introductory stage well deserving of its name if marketing channels don’t step up to bypass a long overdue promotional strategy to piggyback off its (no longer) exclusive delivery of chart-topper Game of Thrones.
Netflix dominating the billboards and home screens
Whereas Fetch TV and Netflix run a series of aggressive advertising campaigns via television, display and radio advertising for its services, both Foxtel and Quickflix have focused its MarComms strategy through low cost operations whilst Netflix have spent up big as a penetration strategy.
Earlier this year Foxtel shifted its advertising and promotions to Youtube through ads such as Foxtel’s showcase channel featuring popular on demand content, (again) featuring HBO’s Game of Thrones.
More recently, however, advertising expenditure for Foxtel’s premium service has become a non-priority as the company shifted its interest onto promotions for the new Presto with ads during free-to-air channels to focus on new customer acquisition.
Despite the shift to lower cost operations, Foxtel is strong on social media and is still anticipated to give Netflix a run for its money. With over 850,000 fans on Facebook, and 100,000 followers on Twitter, the fight to dominate social channels also includes a Foxtel Help account with a team dedicated to answering customer queries.
Yet will shaving budgets off marketing expenditure through lower cost operations be enough to compete with literally busloads of Netflix display ads on the road and high volume free-to-air ads?
Foxtel, Netflix or Quickflix: Who’s still ahead of the game?
Boston Consulting Groups growth-share matrix still holds true to show us who is ahead of the game.
Foxtel traditionally known as a ‘cash cow’ is characterised by lower growth and high shares, which represents the most opportunities for maintaining market share which they have optimally pushed forward through pioneering products such as Presto.
Whereas, Quickflix as a ‘problem child’ has lower shares in a high growth market which requires the firm to seek out higher levels of cash investments to survive. Most detrimentally, ineffective MarComms support which is slow to move away from an end-user focus (e.g. word of mouth communications and partnership agreements with petrol stations) has seen to Quickflix being inferior in opening up opportunities for investors.
Netflix, as a new contender and with strong backing in the US and globally being a (rising) ‘star’ with products that have high market share in a fast growing, developing market (and without the Quickflix setback of having to cater for DVD rentals which is largely a mature product) poses as a serious threat to both Quickflix and Foxtel.
With the price war hitting a floor, it’s really a MarComms game
Prices are capped out: With Foxtel still taking a stronghold in the market, as the price war continues between a high number of competitors where product differentiation is minimal, the strategic challenge for Foxtel remains in distinguishing a quality of service that will lead customers to choose to pay a starting price point of $25 per month or switch to Quickflix which allows users to customise streaming starting from only $9.99 per month and Netflix starting at only $8.99 per month.
Though Presto, now comprehensively targets a segment of low cost time constrained users who do not watch enough television to warrant paying premium prices where a brand extension is optimal for long-term profits, can Foxtel step up their game to deliver a quality of service that brings exceptional utility to evade new competition anticipated to continue damaging market share?
Lack of retention strategies: Though both Quickflix and Foxtel lack retention strategies, this is more detrimental for Foxtel’s low growth premium service than for Quickflix’s high growth potential. Foxtel has overall compensated for the e-business model loophole with its new product Presto eating into Quickflix’s low cost market share (you would hope the new service offers better retention incentive).
The result? Quickflix to stream Presto content? Quickflix and Foxtel have gotten in bed together against Netflix and we may soon see Quickflix distributing Presto content to cut costs under the new deal. Dropping licensing of non-premium, general content is a smart budget cut for Quickflix who saw to a $8.6 million half year loss year ending December 2014, but Quickflix still has the added disadvantage of being without a sound MarComms strategy to build its brand to attract investors to stay afloat in the longer term.
For end users, are cuts to content to compensate for lack of investor sentiment a risky move for existing users?
Netflix ANZ, where’s the latest season? Netflix who have set the price floor as a loss leader but fundamentally lack responsiveness on social media to angry reviews, is it too early to say this is a sign for poor responsiveness to user feedback for Netflix ANZ?
Though, I must say there appears to be little fault in their promotional strategies which have made a huge penetration presence in Australia, they still have some core user demands to meet. Reviews on the NetflixUS Facebook page have tonnes of poor reviews with users who are not happy about limited options, delays in distribution of content and site functionalities.
Can we also predict prices won’t stay down as the Netflix tax will eventually have a flow on effect to end-users?
It’s a tough call.
Clearly, Aussie providers of streaming and pay-on-demand will need to change the pace of MarComms with a noticeable focus on retention to take the lead on the game since any marketing (still) piggybacking off the popularity of HBO’s Game of Thrones is temporarily on a standstill as Aussies lean in to the end of winter and The MarComms Killing Season begins.
There’s always VPN
If you still can’t decide who to use then there’s always VPN, but price wise it works out to be about the same value for money to signing up with a streaming service and you’ll be supporting much needed creatives and IP.
For media stocks, my heart’s with Quickflix to stay afloat in the longer term, but my moneys still on Netflix to come ahead with up-to-date content.