Earlier this month, Roy Morgan Research revealed that Netflix had lifted its Australian subscriber base to 9.8 million households after a 30% annual surge in subscribers. By contrast, Foxtel’s subscriber base slid by 2.7% to 5.4 million households:
Yesterday, Roy Morgan Research released similar analysis of the New Zealand subscription television market, which revealed similar findings, with Netflix subscriber numbers jumping 35% year-on-year:
Like in Australia with Foxtel, Sky TV has lost its monopoly grip on the pay TV space and has pivoted desperately to ward off competition from online streaming services.
Whereas Foxtel began offering no contracts and equipment-free packages from December 2016 in a bid to attract price-sensitive customers (such as SVOD monthly packages starting from $15, such as the “Pop” pack and the “Drama” pack), Sky TV has done similar with its fast growing Neon SVOD service at $20 per month.
While it is good to see Foxtel and Sky TV competing harder for customers and offering a better deal for consumers, they are facing a losing battle against Netflix, which will continue to dominate the market and steal market share.
First, Netflix recently passed Disney as the largest media company in the world. It has a global reach of around 124 million paid subscribers, very deep pockets, and a wide variety of first party content that is unavailable elsewhere and appeals to a wide variety of tastes.
Second, Netflix’s cost base and price point is far lower. Unlike Foxtel and Sky TV, Netflix is unburdened by legacy hardware like set top boxes attached to traditional cable. This keeps its costs low and enables Netflix to offer Australian and New Zealand subscriptions for around $10. This is 33% below Foxtel’s cheapest offering and half Sky’s cheapest offering, and arguably provides deeper content.
Finally, Netflix’s technology is superior. Its App works seamlessly on most devices, allows content to be downloaded offline, time stamps progress, and rarely crashes. By comparison, Foxtel’s App is clunky, regularly crashes, and cannot download content for offline viewing. Being an Australian, I am yet to try Sky’s Neon service.
Overall, Netflix represents a classic disruption of an entrenched monopoly by a new technology. Barriers to entry have been smashed and costs lowered, with consumers the ultimate winners.
The best Foxtel and Sky TV can hope for is to stem the loss of subscribers through its sports offering. But ultimately, they can’t win against the internet.
