Subscriptions to video on demand services in Australia have hit 12.3 million. (ABC News: Matt Eaton)
Like many Australians, Anthony Squadrito reaches for the television remote to unwind or catch up on his favourite shows, but that’s where his use of the channel-changer ends.
- More than half of Australian households have a video on demand subscription
- Advertising revenue from broadcaster video on demand surged 32 per cent last financial year
- Seven says it’s on the hunt for new opportunities and looking at subscription streaming partnerships
“When we first moved in, we didn’t have an aerial, so we didn’t want to go to Bunnings and buy an aerial. When we set up the TV we could just watch YouTube or Netflix which is a lot easier,” he told The Business from his Sydney home.
Instead, Anthony and his housemate use their phones to control what they watch, from subscription services like Netflix to live streaming the commercial networks — although he thinks some of the free-to-air networks have a way to go.
Anthony Squadrito has forgone free-to-air in favour of live streaming and on demand. (ABC News)
“They’re slowly getting there but everyone’s aiming for Netflix I think,” said Anthony, who works in the streaming space.
Video on demand subscriptions and ad dollars on the rise
It’s little wonder viewers see Netflix as the benchmark for streaming — it continues to be the market leader since arriving in Australia, with 4.9 million subscriptions at the end of June, according to a survey by Telsyte.
Its nearest rival Stan, owned by Nine and Fairfax, boasts 1.7 million subscriptions.
The research found more than half of Australian households pay for a video on demand service, totalling 12.3 million subscriptions. 43 per cent having more than one subscription.
The rise and rise of on demand is shaking up the television advertising market.
ThinkTV is a lobby group set up by the three commercial networks — Nine, Seven and Ten — and Foxtel, to champion television advertising.
Total TV advertising revenue was down more than 4 per cent last financial year, across metro and regional markets, but revenue from advertising on broadcaster video on demand services surged 32 per cent.
“I think it’s been a tough year for the entire advertising market, the worst since the GFC,” ThinkTV chief executive Kim Portrate said, citing economic conditions and political uncertainty.
ThinkTV boss Kim Portrate says content is still king in television. (ABC News: Elena De Bruijne)
“What we saw was massive growth in broadcaster video on demand products and they continue to grow, off a really strong performance the year before.”
“Television isn’t the experience it was in the sense that we all used to sit in the living room around a large black screen … In Australia there are, on average, 6.6 screens per household.”
Viewers pay for services with time or money
Broadcaster video on demand includes the free-to-air networks’ apps accessed through smart TVs, mobile phones and tablets for catch up viewing or live streaming.
Unlike subscription services, they can be accessed for free but at a different kind of cost.
“You either pay with your time, or you pay with your pocket … what we’ve seen is there’s more than enough people willing to do both, and that’s why we’ve seen both the growth of broadcaster video on demand as well as subscription services,” Ms Portrate said.
Victoria University screen media lecturer Marc C-Scott agrees that services with ads do have a place in the market.
“People will pay a lower rate just to have some ads … I think we’re going to see a blend of both of those models in the future,” he said.
Subscription streaming in Seven’s sights
However, in the present, things are tough in the free-to-air market.
Seven West Media reported a $444 million loss for the past financial year, just days after the swift departure of chief executive Tim Worner.
New boss James Warburton has made no secret that Seven needs a major overhaul, saying nothing’s off the table.
“We’ll be a hunter and explore [merger and acquisition] opportunities,” he said following the release of the results.
“We need to look to distribute our content widely on more platforms and we are looking to explore meaningful streaming partnerships in the [subscription video on demand] space.”
Seven was an early entrant in the space, with its Presto joint venture with Foxtel, but it sold its stake and the service shut in January 2017.
“I think for Seven to really push through in the future, they need to be involved in this space,” Dr C-Scott said.
“They’re really going to have to look at how they situate themselves in the market … We have Nine with Stan, we have Ten with Ten All Access. The issue is where does Seven fit into that.”
Marc C-Scott thinks subscription and ad-fuelled services will continue to coexist. (ABC News)
International streaming services vie for local viewers
In addition, international players are also flooding the market. In November, Disney+ will arrive and Apple is expected to launch its service in coming months.
However, new entrants can take some comfort from the fact that Telsyte’s survey found one in three Australians had no set limit for how many subscriptions they would take out.
“Content is absolutely still king,” Ms Portrate said.
“In the end, the business model is you have content that you monetise, that’s either done through a subscription service or through ad-funded models.”
“If you’ve got content that people want to watch, then there’s always a market for it.”
But Mr Squadrito is nearing his limit for subscriptions.
“If you have Netflix and then a Stan and then a Disney+, suddenly your bill’s around $35 already and you might not still have the movie that you want to watch on any of those services.”
When he attempted to watch State of Origin via live stream this year, he found there was something else that could hold streaming back in Australia.
“The internet is just not as strong or not as reliable … We tried to connect but it was overloaded so we had to go to the pub around the corner to watch it.”
It is a frustration familiar to those who tried to watch last year’s football World Cup through Optus or Game of Thrones via Foxtel’s streaming services in 2017 and shows why free to air is still on the remote, for now, in the age of on demand.