Netflix takes lead in race for subscriptions - 7th April 2015

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Almost one in five Australians ­either intends to subscribe to Netflix or is already using it, giving it a major head start in the battle for the subscription video-on-demand market in Australia, new research shows.

The research, commissioned by Authentic Entertainment which provides syndicated music services and operates the Vevo online music video platform, suggests there is a sizeable market for paid over-the-top video services in Australia. And that they are likely to gain traction fairly quickly.

“Over-the-top represents the new world of viewing,” Authentic head of research Beth van Koesveld said.

“You can pick your time: TV and video fit around life. The brands that are defining (the landscape) are completely different than five years ago.”

Two in three (65 per cent) Australians watch short clips, catch-up TV services or long-form video online, and 14 per cent of those had subscribed to the US version of Netflix by the end of last year, with 9 per cent signing up to local service Quickflix.

An additional 14 per cent intended to sign up to the Australian version of Netflix, which launched last month, while 18 per cent was thinking about using Quickflix, according to a study of the over-the-top video market, or video delivered online rather than via broadcast, cable or satellite.

OTT penetration levels are likely to grow by 30 per cent from 65 per cent of the total population to 85 per cent within two years, according to Authentic marketing and strategy director Jonathan Hopkins. That’s before smart TVs are connected to the internet in big numbers; while about 29 per cent of Australians own a smart TV, very few have connected them to the internet. “It is the next frontier,” Mr Hopkins said.

Video viewing has moved increasingly to mobile devices, and it is now consumed in every room in the house, as well as in snackable serves while on the go.

Among OTT video consumers Netflix had the highest brand awareness at 58 per cent, followed by Quickflix (54 per cent) and Fetch TV (52 per cent).

Since the research was conducted in December last year, new local streaming video-on-demand services including Fairfax and Nine’s joint venture Stan, and Foxtel and Seven’s JV Presto have also launched. At the time they did not rank highly for intent to purchase, revealing the scale of the marketing job ahead of them. “The challenge they face is how hard is it to get Stan on the big screen,” Ms van Koesveld said. “It’s not necessarily clear to consumers.”

She said while sport, news and big-event viewing would remain on broadcast TV, the move to an on-demand mindset “spells ­trouble for the traditional (broadcasters)”.

More than eight in ten (86 per cent) of 16 to 24 year-olds watch video online and at 30.3 hours a fortnight, it dwarfs their television viewing of 21.5 hours over the same period.

“For younger demographics free-to-air networks don’t have the same kudos as they do for the people that were brought up on them,” Ms van Koesveld said.

One 17-year-old girl interviewed for the study, which included in-home ethnographic interviews and an online survey of more than 1700 people, had several VPNs to view international OTT video services, watched broadcast TV only on a time-shifted basis and preferred British shows to Australian product.

“Why do they call it catch-up TV?” she said of the free-to-airs’ own video-on-demand services. “I haven’t missed anything.”

While penetration levels are heavily age-dependent, even among those aged 55 and older, one in two - 54 per cent - watch video online.

Just under half (48 per cent) of respondents admitted to watching pirated content — a figure Authentic believes is likely to be understated. Half of those cited cost as a factor, but being able to watch high-quality video was more important than not having to pay.

While most subscription video-on-demand services are ad-free, Authentic believes they also present an opportunity for advertisers, with one in two people preferring to watch ads rather than pay for SVOD. “It probably means a new focus for advertisers,” Ms van Koesveld said. “Consumers seek out premium content,” she said. “Advertisers should too.” (The Australian)