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The transformation of the Australian market

 November 2015

Australia has always been a strong market for Accedo. After entering the market in 2010, we have continued to invest to establish us as a strong vendor. I was speaking at the Australian OTT Summit in Sydney this week and my observation is that the market has evolved very rapidly over the past year. Since Australia contains elements of the trends we see elsewhere in the world as well, I’d like to take a few minutes to analyse the current market trends.

As recently as a couple of years ago the Australian market was essentially made up of one strong pay TV operator (Foxtel) and a handful of FTE broadcasters. On top of this you had a couple of new initiatives from Telstra and other telcos as well as a couple of stand-alone OTT initiatives. Every time I visited Australia it struck me that there was no sense of urgency. The emergence of new technology was a possibility to reach some new potential customers and potentially reduce some churn, but was fundamentally no major change to the business. Foxtel’s new TV platform IQ3 literally took years to get out to the market and while broadcasters were friendly towards new platforms, only heavy subsidies from the manufacturers or the operators caused them to move to deploy catch-up TV services.

In 2014, Netflix’s plans to launch in Australia became clear. Australia was a prioritized market since an estimated 200,000 Australians used Netflix already using US payment details and VPN connections. From Netflix’s perspective they had some difficult discussions with content providers, but realized that brand building in Australia would be easy. A significant part of the market already knew what Netflix was, and marketing costs would be limited. The launch in Australia happened in March 2015 and in less than a year we estimate that they have exceeded 1 million subscribers. While this is truly impressive, I find that the indirect impact on the market is even more interesting.

For the first time ever, a sense of urgency has engulfed the market. Two strong local Netflix competitors, Presto (a Foxtel OTT service) and Stan have launched on the back of stronger, more local content offering. At the same time, the local telcos have stepped up their game. Optus are executing on a close bundling partnership with Fetch TV and Netflix, with themselves winning the bidding war for the English Premier League. Telstra have launched Telstra TV, a Roku-powered OTT service, which quickly will be a market power since it’s being bundled with a number of Telstra’s standard offerings. In addition, it’s increasingly apparent that Telstra’s Big Pond TVOD service has a place in the market, even with strong SVOD competitors, since it’s operating in earlier, more expensive rights windows, and is essentially the only TVOD choice among Telstra’s customers. At the same time, FTA broadcasters have realized that while paid services are not direct competitors, consumer attention and consumption patterns have shifted towards OTT distribution and away from linear. Event-based services are becoming more prevalent, investments into catch-up services increase and the understanding that they need to change as broadcasters over the coming years is clear.

Australia’s very strong FTA presence makes the market more similar to Western Europe than North America, and after lagging behind in the transformation compared to e.g. the UK and the Nordics, Australia is quickly catching up and will be a very interesting market to follow over the coming years.

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