According to Phil Harpur, senior analyst with the BuddeComm group, there are two major categories of paid online video content — pay-per-view video-on-demand (PVOD) and subscription video-on-demand (SVOD) services — with SVOD now emerging as the major category of paid online content in Australia.
"The global streaming revolution is gathering pace. The Internet now rivals broadcast TV as a vehicle to deliver consumer content. Their shift in user behaviour continues to drive change in the TV and media industries, prompting a move away from old formats and business models and ushering in an era of high-quality, on-demand entertainment," says Harpur.
“Streaming is closing in on broadcast TV,” he notes.
“Netflix has emerged as the SVOD dominant operator, but both Stan and Presto have built up a significant customer base, and both have the substantial financial resources of their backers at their disposal.
“With such a large number national and international players competing consolidation is starting to take place. Quickflix has been forced to exit the market, followed by Foxtel’s Presto service later on the same year.”
Harpur also says Foxtel during the last few years has struggled to increase pay TV penetration in Australia.
“Viewing habits have also been affected by the advent of catch-up TV services, which are available from the main broadcasters. In addition, subscription video services from VOD operators such as Stan and Netflix are further eroding live TV viewing as subscribers choose instead to watch programs at a time of their choosing.
“Also the distribution advantage held by Foxtel is slipping away as the NBN becomes built out over a greater number of premises, so expanding the reach of capable broadband infrastructure which enables subscribers to access OTT and IPTV content. These changing market conditions are impacting both the FTA and pay TV industries.”
According to Harpur, broadcasters have been late entering the market and their focus has been on protecting their traditional business which is under threat from declining revenues, rather than establishing a strong foothold in the SVOD market.
“Amongst the existing pay TV and free-to-air subscriptions there will be increased pressure on profitability as competition for content pushes up the cost of licensing,” Harpur added.