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Hurrah for Netflix!

 May 2016

When apple first introduced the iPhone in 2007, its impact was instant. Tasks which were clunky and awkward on the then current generation of phone were intuitive on the iPhone. Consumption of content became simple. Browsing, emailing and texting all got easier. The screen was more usable, and clearer. Other phone and operating system manufacturers not only had a new benchmark in usability but also a major new competitor. We are seeing the same effect with Netflix .

Many broadcasters and pay TV platform operators are nervous about the impact of Netflix on their businesses. Some pay TV operators are more inclined to embrace this new arrival and, I understand, are happy to earn around 15% of the revenues which Netflix makes from customers which sign up through their portal. Others worry. They worry that revenues will decline, that customers will become less loyal, and churn. Perhaps, but the reality is that these changes are happening anyway, it just happens that Netflix is being held up as the cause of change. You see, I’m doing it again now, perpetuating the same belief that Netflix sits at the heart of evolving TV consumption habits and is the catalyst in the emergence of a new age of connected consumers watching TV everywhere. And perhaps, to some extent, it does.

Accedo is expecting that 2016 will see a greater number of more explicit competitors emerging for Netflix. Showmax is launching in 36 sub-Saharan countries, bringing its total market coverage to 65 countries. Ericsson’s nuvu tv service, announced at the end of 2015 will be making waves in multiple emerging markets throughout 2016. Both these OTT services are arguably more tailored to the markets they are targeting – both will offer local as well as studio content, and both plan to combat the delicate nature of African connectivity by offering downloads to optimise the quality of the service. In the developed markets we will see a greater mix of free-to-air as well as subscription content, even within the same OTT service.

The established pay TV operators and broadcasters are in a unique position. They already have strong customer awareness and billing relationships in local markets, as well as an intimate understanding of how to buy and package premium content to drive consumer demand. A mix of studio and local content will help engage more intimately with their audiences. This will allow them to define and launch services to defend against the arrival of Netflix in their home markets. Or, to look at it from a different angle, it will simply help them to offer the kind of service that a new generation of consumers wants to buy

A good example is the Seeso comedy service recently launched by NBCUniversal in the USA. It provides subscribers with an ad-free service containing a vast catalogue of comedy entertainment. By also featuring exclusive original series and stand-up comedy, it is carving out a niche for itself and further generating consumer interest and demand. Expect to see a wider range of niche OTT services launching in 2016.

Netflix has certainly helped to raise the game of the OTT market, not least of all in consumer awareness and giving industry pundits so much to chatter about. It is clear that TV operators are having to offer more to protect their share of the market, so the consumer will get a better choice at more competitive rates and with a better user experience. TV lovers everywhere are getting a much better deal.

Rather like Apple and its iPhone it just happens that Netflix hit the mass market first, and did it well. For that, Netflix, the TV-viewing public must thank you. Whether it subscribes to you or not.

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