After driving up sales of media players and smart TV’s, Netflix the US Company who are stripping tens of millions out of Australia are now looking at new ways to inflict more pain on Australian Media Companies.
Fairfax Media said that senior executives from Nine Entertainment, Seven West Media and Network Ten have called for Australian broadcasters to set aside their differences and join forces against the onslaught of foreign digital media giants such as Netflix, which have bigger budgets and global viewers.
Free-to-air and pay TV providers have traditionally been the dominant providers of video services due to the limited availability of broadband and video-on-demand services in Australia.
While linear TV viewing continues to dominate the average time people spend watching TV, developments such as the national broadband network’s construction, the rising popularity of streaming service Netflix and Singtel-Optus’ recent purchase of the English Premier League’s broadcast rights are all threatening to pull audiences away from the broadcasters’ traditional medium.
In the USA where Netflix has been competing with TV stations for several years a move is afoot to dent the growth of Netflix, a move that Australian TV Companies are watching as they face the real risk of losing hit shows to Netflix as contracts with US content Companies expire.
Licensing content to Netflix has become a fast-expanding, high-margin source of revenue for the biggest content owners, including Walt Disney, Time Warner, 21st Century Fox, CBS, Viacom, Discovery Communications and AMC Networks all Companies that currently licence to Australian TV networks.
In the US the move to subscription TV via Netflix is hurting traditional TV ratings, which drive ad revenue.
The Wall Street Journal said that while pulling content from Netflix may be the right thing to do for media companies, the situation poses a classic prisoner’s dilemma: Who will be first to forgo short-term profits for the good of the industry?
Time Warner suggested recently it may be a candidate, if only because it didn’t appear to be shying away from short-term pain.
It is also investing more aggressively in content, technology and the consumer experience to help better position it for the future.
Time Warner, too, is considering whether to take a stake in Hulu.
Chief Jeff Bewkes acknowledged the toll licensing has taken on his company’s business, telling analysts Time Warner is evaluating whether to hold on to the rights to shows for a longer period before selling them to Netflix and its ilk, or even to forgo licensing them entirely.
Disney Chief Bob Iger said it had the flexibility to retract and cut back if it thinks a licensing deal with Netflix will have a “long-term negative impact on businesses.” That seemed a marked shift from his language in the second quarter when he called Netflix “more friend than a foe.”
Next year Disney content is set to be rolled out on the Netflix network in a move that could hurt Foxtel who currently have several Disney Channels.
But for Disney, whose three-year film deal with Netflix is set to begin next year, it might be a while before it can put its money where its mouth is.
Most media Companies in Australia won’t face the moment of truth until deals with streaming services face renewal.
In that sense, it could be a slow weaning off licensing, giving content companies the ability to find new ways to replace any foregone revenue.
Granted, there may be a workable solution somewhere in between rampant licensing and cold turkey such as licensing only older content and selling it to Netflix.
For investors in Australian TV networks, media companies must find better ways to take back their rights.
Until they do, Netflix may continue to be the real winner as Australians desert local networks for a Company that is stripping revenue from Australia with not one cent coming back in the form of tax or investment in a local business.
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