It’s a huge category in fast paced change and has far reaching impact into its neighbouring markets, with the potential to compete with both traditional free-to-air (FTA) and Pay TV revenue streams.
Presto, Stan & Quickflix are all battling it out and now a big global giant, Netflix, looms on the horizon.
Traditional pay TV and FTA players are right to be concerned.
The price points to entry are low, and with free trials the barrier to acquisition are increasingly slim.
There’s seemigly no doubt there’s a big, bloody battle ahead, the major players are extremely well-funded and have too much to lose to simply roll over.
It’s seemingly a fight to the death, but CEOs of the top providers have been busy telling the market that there’s room for everybody to get along in the Australian market.
None of the major players would have entered the market with such an investment without employing teams of analysts to scope out every detail, looking at other market results and coming to a conclusion that it was worth a shot.
But how will the battle actually play out, and is the talk about being enough room for everybody simply about calming nervous investors who fear losing?
More importantly, is there really room in the marketplace for everybody?
How will consumers react and how quickly?
A lot comes down to how the adoption curve will play out in Australia.
If the question is whether there’s room for everybody in the marketplace right now, the answer is clearly no, but is SVOD a short-term game?
We are at the very beginning of the adoption curve in this market, we can see from our site data at www.comparetv.com.au, that the initial interest segments are dominated by technophiles.
The early adopters are aged 25-44 and skew about 65% male, a classic early adopter of technology demographic set.
This curve will likely pan out across the next three years, at least until we start to hit the late majority.
I think the interesting behaviours to watch out for are going to be how consumers deal with the choices on offer and the evolving make up of their viewing platform habits.
Pay TV didn’t kill FTA, but the personal video recorders that came with it changed the way consumers viewed FTA content..
In much the same way, SVOD will not kill traditional Pay TV, but rather change habits.
SVOD will force Traditional Pay TV to re consider their price points (we have already seen a price reduction by Foxtel).
Next will be a pressure to change traditional package bundling in a world of granular, title driven viewing, as we move from linear programming to On Demand.
I expect that given the low price points of the SVOD competitors, people will consume a mix of FTA, Pay TV and SVOD to suit their needs.
We saw this in the UK with BSkyB still retaining a solid base despite the advent of Netflix and Amazon Prime.
So that again begs the question, will the SVOD market be big enough in Australia to sustain everybody?
There’s no doubt that all SVOD players have certain adoption rates in mind for the category. If it’s shorter than expected, great. But if it’s longer than expected, could it become a war of attrition?
How quickly the adoption curve plays out depends on a number of factors.
What will affect the curve?
The NBN
There’s no doubt that SVOD is both bandwidth and data intensive. The evolution of broadband data packages, uncapped data bundling tactics and the speed and effectiveness of the NBN roll out, will determine the adoption rate of SVOD.
Currently Australia is 44th in the world when it comes to broadband speeds, an appalling statistic for a western country, this clearly needs to change and is a potential barrier to adoption.
Device capability
Device compatibility is the other big factor in adoption. If SVOD is to dominate, it needs to be seamlessly compatible with the lounge room TV and in such a way that even my 90 year old gran can suss it out.
Currently there’s a mixed bag of compatibility solutions from smart TVs to connectivity devices such as Apple TV and Google Chromecast. It’s nowhere near as seamless as it needs to be and many of the apps still have niggly bugs when it comes to compatibility.
Content
Content quality, breadth and depth are fundamental to success. Local players have been buying up titles, cutting deals and exclusivity windowing arrangements and forming strategic alliances with former foes.
Foreign players are creating their own content and this is an interesting strategy, and an effective one when they get it right.
Netflix are the kings of content creation with extremely popular titles such as House of Cards and Orange is the New Black. Popular content available only on one provider will ensure subscription to their platforms.
This will be messy and fragmented for some time to come and this in turn will prolong the war.
So, who wins?
If I had a crystal ball to be able to accurately predict how this would all play out, I suspect I’d be commanding a huge salary in TV land.
Nobody can really predict how it’s going to play out, but I suspect at the end of the day there will be room for at least three players, but only one or two dominant platforms.
The rest will have to pivot into niche offerings or be bundled up as part of a broader entertainment product.
It’s not cut and dried when it comes to viewing habits and consumers will continue use a blend of FTA, Pay TV, SVOD and VOD.
A long and bloody war will ensue, the length of which will be determined by the rate of consumer adoption, which will in turn be determined by device compatibility, broadband speeds and cost of data.
Watch this space to see how it all turns out.
By Oliver Mistry at comparetv.com.au