Foxtel hasn't “been damaged” by arrival of Netflix: Roy Morgan

Rachael Micallef
By Rachael Micallef | 11 August 2015
Netflix show: House of Cards

Netflix has made waves in the Australia subscription television on demand (SVOD) space, reaching 8% of the local population already, but new research from Roy Morgan suggests it is expanding the market rather than poaching audience from competitors.

In its monthly data from July, Roy Morgan found that Netflix reached 1.89 million of people aged 14+ in July, with 737,000 household subscribers.

This compares to January where pay TV was “practically synonymous with Foxtel” with 95% of the 2.4 million homes with pay TV having Foxtel, and 5% having another service.

The pay TV market is now almost 3.1 million homes which is up almost 30% since the start of 2015.

Roy Morgan Research GM media, Tim Martin, said this suggests many of Foxtel's customers are trialling Netflix as an add-on rather than a replacement.

“For many years prior to the arrival of Netflix, total uptake of pay or subscription television had remained steady in the region of 25-30% of households, unable to break through to a wide audience. Clearly there was plenty of space for the market to grow,” Martin said.

“In just four months, Netflix has expanded the total market up to over a third of all homes. So far, it appears Foxtel hasn't been damaged by the arrival of Netflix.”

The research found that only 7.3% of Foxtel's households were subscribing to Netflix, a rate close to the national Netflix take-up of 8% of all households. It means that while Foxtel's share of audience has dropped to 76% from 95%, the size of its customer base is relatively unchanged at 2.3 million.

“It may turn out to be that the two are not direct competitors after all: Foxtel subscribers will view Netflix as an add-on provider, and non-subscribers were never going to get Foxtel anyway,” Martin said.

It follows a study from Citi Research yesterday on the SVOD landscape in Australia this year. The research, by analyst Justin Diddams, estimates that SVOD households will reach 3 million by 2018, “with Netflix leading the market and some spillover into Presto and Stan in heavy consumption households.”

It also found that Foxtel will remain the provider of premium sports and drama content reaching 35% penetration by 2018.

In the current market it found Netflix was by far the most popular in the Australia, with 1.6m active users (including those on free trials) and 0.9m paying as of July. It was followed by Stan with 332, 000 sign-ups and 153,000 paying users and Presto with 193,000 sign ups and 80,000 paying users.

“We estimate Netflix has 1.6m active users in Australia, based on our research and market segments,” the report said.

“This represents an incredible growth rate considering the Australia version only launched in March 2015. In our minds this just highlights the pent-up demand for content in Australia and as a likely substitute for illegal downloading.”

It also looked at the “potential risk” to free-to-air television suggesting that SVOD penetration of 35% could impact to FTA market by 10% : “Not great but not a train wreak.”

The report said that this year, FTA audiences dropped by 9% year on year yet the TV advertising market was flat, with 0.2% growth to June 2015.

It said this is “implying both a larger impact on FTA viewing relative to the penetration of SVOD but also that advertisers are still investing dollars in TV despite the audience declines.

“The key question is how much longer can FTA TV broadcasters sustain this level of CPM increases on advertising dollars, as real audiences continue to decline.”

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