The launch of three SVOD platforms heralds a new era in the Australian video market. Our proprietary survey of 5,300 consumers suggests there will be high adoption of SVOD with Netflix the early winner. We expect SVOD to have the highest impact on TVOD and Physical Media. The risk to Pay TV is real, but not game changing while the immediate risk to FTA is less apparent.
With the success of SVOD in offshore markets, there is much debate on the impact SVOD will have on the local market. At a time when there is much debate about the evolution of the video/TV market, this report looks at these trends.
Netflix the early winner, competitor offers do differ: 32% of Australian online consumers are SVOD aware with 9% of all online consumers considering an SVOD service. Netflix leads in both awareness (32%) and consideration (7% considering buying Netflix), likely reflecting its well-known global brand (our survey estimates 150-200k current Netflix US subscribers).
Our respondents view convenience (binge viewing, anytime viewing), TV content (over movies) and recency of titles are most important with barriers to entry being cost and contracts (suggesting education is required given SVOD has no contracts). Consumers are 3x more likely to view SVOD via the main TV than via PC’s (~5x more likely for tablets and mobiles). In terms of the propositions, our analysis shows that Stan is skewed towards TV content (32% of titles), Presto to movies (88%) with Netflix more balanced. In terms of recency, 8-9% of Netflix titles are less than a year-old (~3x that of Stan and Presto).
Direct substitutes likely to lose to SVOD:Respondents suggested much of their SVOD usage would be complimentary to existing media (see figure 13). We see a bigger risk than the survey implies and view TVOD and Physical Media (ie DVD) as the most substitutable. On this basis, they face the biggest risks in our eyes (potentially bigger than the 17% and 4% of respective industry revenue implied by the survey, see figure 14).
Risk for Pay TV but FTA risk less apparent in near term:FTA has the lowest proportion of SVOD considerers and we believe the impact from SVOD is likely to be the less pronounced (across the medium term) given its differentiated content proposition (sports and event TV) coupled with its revenue model (ie advertiser rather than consumer based). And while Pay TV has a strong sports focus, we see the risk that some consumers cut the cord or downgrade (particularly for those who are not sports focused). The survey suggests 3-6% of Pay TV revenue is potentially at risk.