How video-streaming can save the TV stars
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How video-streaming can save the TV stars

If you're a young Australian in 2018 you're in the minority if you don't have a video subscription. They're known as the Netflix generation and it's not only the under-32s who are hooked. According to Deloitte, 43 per cent of Australian households use Netflix, Stan or a similar provider.

It was a different story in 2015 when Fairfax Media (owner of The Sydney Morning Herald and The Age) and Nine Entertainment launched their joint-venture Stan on Australia Day and Netflix launched two months later. Then only one in 10 households were paying for video streaming.

Video streaming has taken off in a big way in recent years.

Video streaming has taken off in a big way in recent years.

Today, Stan has more than 1.1 million subscribers and, while Netflix does not share its Australian numbers, technology analyst firm Telsyte estimates it's sitting at about 4 million.  Others subscribe to Google’s YouTube Premium, Amazon Prime Video and other smaller players, with smart TVs allowing streamed content to be watched on the big screen.

It's little surprise then that for every hour the average Australian spends online, 12 minutes is used to stream video, making it the most popular form of online entertainment, ahead of social media.

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This huge shift in viewing behaviour, particularly among the young, has shaken up the free-to-air television industry and pay-TV. And now they're fighting back

Is catch-up catching up?

In the past 12 months, Ten general manager of digital Liz Baldwin has seen a shift from catch-up viewing towards content that complements what is on TV. She says the Ten app, called tenplay, is a way to give more to “super fans” of shows, with behind-the-scenes videos, cast interviews and “program extensions” like After Paradise – an addition to Bachelor in Paradise.

"Advertisers continue to embrace [broadcast video-on-demand] which is reflective in the significant revenue growth," she says.

For this reason, free-to-air networks want to encourage audiences to watch TV through their own platforms, rather than heading to subscription TV rivals. But there is speculation the networks are  eyeing a shift towards paid-for content.

In a matter of months, Ten will throw its hat in the ring for subscription video-on-demand with its owner, CBS, launching Ten All Access, modelled on the US platform CBS All Access.

Seven has the rights to the next big sporting event: the Tokyo Olympics in 2020.

Seven has the rights to the next big sporting event: the Tokyo Olympics in 2020.Credit:AP

The broadcaster has kept quiet on what content will be shown on Ten All Access and how much it will cost, however CBS All Access costs $US5.99 for "limited" advertisements, or $US9.99 without ads and the ability to download for offline viewing.

In the future, Baldwin says it is “entirely possible” broadcast and subscription on-demand services could “work closer together and complement each other”.

Seven has already started including premium upgrade options around major sports events like tennis and the Olympics for its app 7Plus to allow some audiences to reduce advertising, access extra content and ensure higher-definition coverage, chief digital officer Clive Dickens says.

The next “big event” that could include a premium layer is the Tokyo 2020 Olympics; Seven has the exclusive Australian broadcast rights.

Dickens says: “We’ve also talked about a subscription service we would expect to arrive some time in 2019 that would allow you to enjoy some of your favourite shows from Seven pre-broadcast offline probably with significantly less advertising, so we see a layer coming to Seven Plus in that way.”

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This isn’t Seven’s first attempt to encourage television audiences to pay. In January 2017, Seven and pay-TV platform Foxtel axed their subscription TV and movie platform Presto amid criticisms it had an inferior content library, clunky user experience and ultimately didn’t manage to hold onto enough subscribers.

“I get asked by my board each quarter, when do we think we’ll want to enable a subscription layer to enable our own [revenues per user], and I say we’ll keep it under review because as soon as you put some content behind a paywall, some people will pay and some won’t. I think having a lighter ad-load product is definitely interesting," he said.

“We’ll have a greater chance at capturing a chunk of peoples’ time by focusing on ad-funded, free, broadcast video-on-demand because we feel as soon as you launch into [a paid] product there is a limit to how much money Australians will spend on a subscription."

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Foxtel (majority owned by News Corp) is on the brink of launching its own sports-focused subscription proposition, which chief executive Patrick Delany describes as the “Netflix of sport”. He intends to have a “gold standard” home entertainment option at a higher price, and a lower priced option for those wanting to stream sports content.

While Nine declined to comment for this article, a planned merger with Stan co-owner Fairfax Media could see some crossover between Stan and Nine's free app 9Now.

Certainly, industry sources believe there would be benefits in merging back-end operations and cross-promoting even if they are kept separate.

Nine hopes it can convince advertisers of its ability to target different demographics on its app, due to forced sign-ins that ask for personal details, and sees this as a way to make digital video more lucrative.

Bob Iger, chairman and chief executive office, of Disney.

Bob Iger, chairman and chief executive office, of Disney.Credit:Bloomberg

A media industry executive who wish to remain anonymous said pay per view rather than a monthly subscription (known as transactional video-on-demand), could become a popular model.

However, this would require the added expense of additional rights and a library of content, and the margins might not be large enough to convince the free-to-air networks. There’s also doubts the broadcasters are willing to increase spending to compete with the likes of Netflix, which expects to spend $1.3 billion in technology and development this year.

Even if broadcasters don't move towards paid content, there is speculation that offshore giants are eyeing an Australian expansion that could change the game.

Media companies streaming to video

Disney chairman Bob Iger recently told analysts the over-the-top apps, allowing video to be streamed over the internet, has seen “the development and the growth of an entirely new media marketplace” that he is keen to play in. Disney has a 30 per cent stake in the US’s Netflix-rival Hulu, but Iger says this is the “tip of the iceberg” for what can be done in video streaming.

In 2019, Disney will launch its own US subscription platform with exclusive content, like Toy Story 4, Avengers, Frozen, Lion King and Aladdin, 5000 episodes of Disney television and an original series. He flagged adding National Geographic when Disney has finished buying Rupert Murdoch’s 21st Century Fox assets. Commentators expect it's highly likely Australia will be one of the early targets for a global Disney rollout.

“We ... need to contend with disruption in the most effective possible way, and one way to do that is to participate in the very business that is doing the disrupting,” Igor said recently. (This mirrors Delany's recent comments that Foxtel's streaming plans were "disrupting ourselves".)

Stan chief executive Mike Sneesby is confident there is enough space in Australia for several companies to have subscription video platforms even while historically certain categories have been able to “only sustain two or three players” before mergers and rationalisation.

Take telecommunications, where analysts have long doubted TPG Telecom’s plans to launch a fourth mobile network would be sustainable (and have welcomed plans to merge the telco with Vodafone Hutchison Australia) because of the comparatively small population of Australia and its large geography.

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“These businesses [like telecommunications and airlines] require high levels of capital expenditure ... [subscription video] is a very different category, it doesn’t require building out infrastructure and so I think the market can sustain multiple players competing on distribution and content,” Sneesby says.

With prices at around $10 to $15 typical for streaming services, he expects there could be some “niche” products launched with different propositions. Already, NBCUniversal’s Hayu is priced at $6.99 a month, specialising in reality TV, and telcos like Optus and Telstra have moved into digital sports rights with specific sporting code-related apps and streaming.

Sneesby thinks this differentiation is likely to increase with more competition, noting Stan’s Australian content is a point of difference. Screen industry association Screen Producers of Australia have estimated Stan’s Australian content at 9.5 per cent and Netflix at 2 per cent, although this figure does not show the size of the overall library of titles.

When it’s only a few dollars a week to subscribe, Australians have shown surprising willingness to pay to have access to more of their favourite sport or television shows. In this highly competitive space, content is the make or break.

For this reason, Sneesby refuses to rule out making a play for sports content in the future. “I wouldn’t be surprised to see maybe live sport, I wouldn’t rule anything out,” he says, noting investments in documentaries and some form of current affairs could be on the platform in the future.

Regardless of where the future of content goes on these platforms, there’s broad agreement among analysts and researches that video streaming on mobiles is only going up. Research firm PwC forecasts subscription video will overtake the traditional premium TV box for subscription revenue by 2022. What remains to be seen is how much Australians will be willing to pay for it.

Jennifer Duke writes about media and telecommunications.

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