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Wednesday, 29 June 2016 06:49

Netflix hurt by Australian competitors and VPN blocking Featured


The news of explosive SVOD growth in Australia over the past year has not been good for the global market leader Netflix which finds that two well-resourced local competitors are nipping at its heels, while it appears to have cut off its nose to spite its face by blocking access to its big differentiator.

As reported in iTWire this week, SVOD subscriptions would have grown by almost 900,000 during the 12 months to the end of June 2016.

However, the main beneficiaries of that growth have been local players Stan (jointly owned by Nine Entertainment and Fairfax Media) and Presto (jointly owned by Foxtel and Seven West Media).

A major problem for Netflix in the Australian market, strangely enough, has been lack of content.

While both Stan and Presto, owned as they are by large local media groups, have been busily developing portfolios of local content, Netflix has hamstrung its Australian subscribers by working to geoblock their access to the vast repositories of content offered by its US service.

Before Netflix launched in Australia in March 2015, the popular SVOD service already had an estimated 200,000 Australian subscribers to its US service using VPN providers. This enabled them to access a wealth of on-demand content that had previously never been available locally.

When Netflix Australia launched, with a dramatically reduced content range, it was enthusiastically adopted by many local consumers who had never previously been exposed to a cheap SVOD service. Meanwhile, the VPN users continued to subscribe to the far superior US service for about the same price.

Then, obviously under pressure from global content providers, Netflix started blocking VPNs in overseas markets such as Australia and the UK from accessing its US catalogue of content.

Despite claims to the conrtrary from VPN providers, the Netflix geoblocking action appears to have worked to at least some degree. At the very least it has disrupted what was previously a relatively seamless service and made life difficult for Netflix users outside the US.

While Netflix does produce its own content in the US, unlike Stan and Presto it does not produce Australian content.

The wash-up, as has been starkly demonstrated over the past 12 months, is that content-starved Australian consumers have been forced to supplement their local Netflix service with subscriptions to its two main competitors.

A danger for Netflix is that at least some Australian users of Presto and Stan, having been forced to try the alternatives, may well decide to drop the severely hamstrung local Netflix product. Thus Netflix may find that its vision of taking its service global has been thwarted and the biggest losers will be consumers.

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Stan Beer

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Stan Beer co-founded iTWire in 2005. With 35 plus years of experience working in IT and Australian technology media, Beer has published articles in most of the IT publications that have mattered, including the AFR, The Australian, SMH, The Age, as well as a multitude of trade publications.

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