After many years and hundreds of thousands of illegitimate users being on their service Netflix has finally arrived in Australia, much to the delight of Australian’s everywhere. In the short time it’s been available Netflix has already managed to account for 15% of all of iiNet’s traffic a sure sign that many people have wanted their service for some time. However, as expected, the content catalogue is a small subset of what’s available overseas leading many to keep their VPNs and over circumventions in order to get access to the same content people overseas get. On the surface that would appear to be a big issue for Netflix, given the pressure they’ve been under in the past to shut down dirty VPN users, however the CEO of Netflix (Reed Hastings) has revealed that they’re a small issue and his focus is squarely on converting long term pirates to legitimate customers.
In the interview (which is well worth a read in its entirety) Hastings says that VPN users are “a small little asterisk compared to piracy”, and further goes on to say that they’re users who are willing to pay for content but can’t for some reason. The solution to that problem he says for Netflix to “get global” and remove the incentive to use a VPN with their service. Essentially this would boil down to making the whole catalogue available to all users of their service, regardless of their location around the world. Whilst this idea is highly commendable, and demonstrates Hasting’s understanding of how media consumption has changed in the digital age, it’s ultimately doomed to failure given the challenge that they’re up against.
Netflix’s main issue with their catalogue isn’t the ability to deliver it, that’s been a solved issue for them ever since they switched from mailing DVDs to streaming services, it’s always been securing the rights deals to distribute content in certain areas. This is why their current catalogue in Australia is so paltry when compared to the one in the USA as Netflix, lacking a presence in Australia for so long, has been usurped by other distribution partners like Fox. Indeed Netflix even sold the rights to distribution for their flagship series House of Cards to Fox (through Sony) for the first two seasons, although that seems to have been time limited to coincide with their Australian launch.
Therein lies the rub; Netflix’s catalogue can only grow as fast as it can secure rights to distribute content in the countries that it has a presence in. In order to make their catalogue truly global they’d have to secure rights for every show in every region, something I’m sure they’re attempting to do but will run up against the rights holder empires that have cemented themselves in an old-world business model. They could, in theory, make global licensing rights a condition of any show being on their service however most popular shows are either backed by big production houses with distribution rights already in place or the fee required to do so would be so high that Netflix would be unlikely to sign up for it.
Netflix does have the advantage of being the biggest single provider of content across the globe, giving them a little clout in negotiating these content deals, however they’re running up against an empire that’s been extremely resistant to change for the better part of 100 years. They’ve definitely been at the forefront of changing how consumers want their media delivered to them however the lumbering giants that give them the content are steadfast in defending their regionally based business models. I’d honestly love to be proved wrong on this (although I’d still hold onto my VPN for other reasons) but I honestly can’t see a global Netflix in our future.
There are few industries that can claim to have been disrupted by the Internet as much as the media industry has. In the span of a couple decades they’ve gone from having fine grained control over what content goes where to a world that’s keenly aware of what’s available and will take it if it’s not given to them at the right price. At the same time however we’re far more likely to spend more than we would have done in the media world of the past, just that now we’re asking for much more value for our money. This back and forth battle between the Internet’s innate ability to break down geographical barriers and the rights holder’s business models that rely on them ultimately leaves both sides feeling hard done by, but it doesn’t have to be this way.
The latest shot fired in this battle comes in the form of Netflix cracking down on subscribers that use VPN services to circumvent their geographical restrictions. For countries where the Netflix service is available this is usually done to access the broader catalogue but for places like Australia it’s necessary just to access the service at all. Indeed the user figures for Australia are pretty strong, enough so that a blanket ban on VPN users would see Netflix lose millions of dollars per month in subscriber revenue. The rights holders don’t seem to be to phased about this however likely thinking that we’ll revert to the other, far more expensive, options when our Netflix is taken away from us.
However that’s likely to be the last thing that any of the current Australian Netflix subscribers would do. You see setting up a VPN to get Netflix to work is, whilst not exactly hard, a non-trivial affair, requiring just as much technical know how to set up as your average piracy enabling client. Thus when their legitimate source of media is cut off from them they’ll likely turn to the illegitimate sources, either their old haunts of Usent and Bittorrent or the new world of media piracy provided through Popcorn Time. I honestly don’t know how you’d expect anything different especially considering that Australia consistently rates as the highest consumer of illegitimate media worldwide.
These kinds of idiotic decisions are driven by business models that are simply no longer viable in the Internet driven world. Sure, back in the days when physical media was king there was an argument to be made for this style of business however now, when digital media reigns supreme, it just doesn’t make any sense. It’s not likely consumers are unwilling to pay for it, indeed the hundreds of thousands of Netflix subscribers in Australia is testament to that, it’s that the companies that hold the rights to that media are simply unwilling to provide it. It’s been shown time and time again that should no reasonable cost alternative be provided users will simply turn to other sources and won’t stop until such a service materializes.
Not that it really matters what Netflix, or any other service for that matter, does to try and block people it’s only a matter of time until someone figures out how to defeat the detection methods used, allowing everyone to use it once again. This is a game of cat and mouse that no service provider can win as there are far more individuals out in the Internet’s ether working to crack such schemes than Netflix has to create them. I’m sure eventually the rights holders will come around and give up this crusade to protect their outdated business models but until then things like this are just going to cost them paying consumers and swell the ranks of those filthy pirates who won’t give them one red cent.
The age of the Internet has broke down the barriers that once existed between Australia and the rest of the world. We’re keenly aware that there are vast numbers of products and services available overseas that we want to take advantage of but either can’t, because they don’t want to bring it to us, or won’t because it’s far too expensive. We’re a resourceful bunch though and whilst companies will try their darnedest to make us pay the dreaded Australia Tax we’ll find a way around it, legitimately or otherwise. Probably the most popular of services like this is Netflix which, even though it’s not available here, attracts some 200,000 subscribers here in Australia. That number could soon rocket skywards as Netflix has finally announced that they’ll be coming to our shores early next year.
Australia will be the 16th country to receive the Netflix service, 7 years after they originally launched in the USA. Whilst there’s been demand for them to come Australia for some time now the critical mass of semi-legitimate users, plus the maturity of the cloud infrastructure they will need to deliver it here (Netflix uses AWS), has finally reached a point where an actual presence is warranted. Details are scant on exactly what they’ll be offering in Australia but looking at the other 14 non-US countries to get Netflix we can get a pretty good idea of what to expect when they finally hit the go live button for the Australian service.
For starters the full catalogue of shows that the USA service has will likely not be available to Netflix Australia subscribers. Whilst original content, like House of Cards or Orange is the New Black, will be available the content deals inked by rights holders with other companies in Australia will unfortunately take precedent over Netflix. This doesn’t mean that this won’t change over time as it’s highly likely that rights holders will look to move onto Netflix as old contracts expire but it might put a damper on the initial uptake rate. Considering that there are numerous services to change your Netflix region to get the full catalogue though I’m sure the restriction won’t have too much of an effect.
The DVD service probably won’t be making it here either, although I don’t think anyone really cares about that anyway.
Probably the biggest issue that Netflix will face coming to Australia is the dismal state of the Internet infrastructure here. Whilst most of us have enough speed to support some level of streaming the numbers of us that can do anything above 720p is a much more limited market. As long time readers will know I have little faith in the MTM NBN to provide the speeds required to support services like Netflix so I don’t think this is a problem that will be going away any time soon. Well, unless everyone realises their mistake at the next election.
Overall this is good news for Australia as it has the potential to break the iron grip that many of the pay TV providers have on the content that Australians want. It might not be the service that many are lusting after for but over time I can see Netflix becoming the dominant content platform in Australia. Hopefully other content providers will follow suit not long after this and Australia will finally get all the services it’s been lusting after for far too long. Maybe then people will realise the benefits of a properly implemented FTTP NBN and I’ll finally be able to stop ranting about it.
One thing that not many people knew was that I was pretty keen on the whole Google TV idea when it was announced 2 years ago. I think that was partly due to the fact that it was a collaboration between several companies that I admire (Sony, Logitech and, one I didn’t know about at the time, Intel) and also because of what it promised to deliver to the end users. I was a fairly staunch supporter of it, to the point where I remember getting into an argument with my friends that consumers were simply not ready for something like it rather than it being a failed product. In all honesty I can’t really support that position any more and the idea of Google TV seems to be dead in the water for the foreseeable future.
What I didn’t know was that whilst Google, Sony and Logitech might have put the idea to one side Intel has been working on developing their own product along similar lines, albeit from a different angle than you’d expect. Whilst I can’t imagine that they had invested that much in developing the hardware for the TVs (a quick Google search reveals that they were Intel Atoms, something they had been developing for 2 years prior to Google TV’s release) it appears that they’re still seeking some returns on that initial investment. At the same time however reports are coming in that Intel is dropping anywhere from $100 million to $1 billion on developing this new product, a serious amount of coin that industry analysts believe is an order of magnitude above anyone who’s playing around in this space currently.
The difference between this and other Internet set top boxes appears to be the content deals that Intel is looking to strike with current cable TV providers. Now anyone who’s ever looked into getting any kind of pay TV package knows that whatever you sign up for you’re going to get a whole bunch of channels you don’t want bundled in alongside the ones you do, effectively diluting the value you derive from the service significantly. Pay TV providers have long fought against the idea of allowing people to pick and choose (and indeed anyone who attempted to provide such a service didn’t appear to last long, ala SelecTV Australia) but with the success of on demand services like NetFlix and Hulu it’s quite possible that they might be coming around to the idea and see Intel as the vector of choice.
The feature list that’s been thrown around press prior to an anticipated announcement at CES next week (which may or may not happen, according to who you believe) does sound rather impressive, essentially giving you the on demand access that everyone wants right alongside the traditional programming that we’ve come to expect from pay TV services. The “Cloud DVR” idea, being able to replay/rewind/fast-forward shows without having to record them yourself, is evident of this and it would seem that the idea of providing the traditional channels as well would just seem to be a clever ploy to get the content onto their network. Of course traditional programming is required for certain things like sports and other live events, something which the on demand services have yet to fully incorporate into their offerings.
Whilst I’m not entirely enthused with the idea of yet another set top box (I’m already running low on HDMI ports as it is) the information I’ve been able to dig up on Intel’s offering does sound pretty compelling. Of course many of the features aren’t exactly new, you can do many of the things now with the right piece of hardware and pay TV subscriptions, but the ability to pick and choose channels would be and then getting that Hulu-esque interface to watch previous episodes would be something that would interest me. If the price point is right, and its available globally rather than just the USA, I could see myself trying it out for the select few channels that I’d like to see (along with their giant back catalogues, of course).
In any case it will be very interesting to see if Intel does say anything about their upcoming offering next week as if they do we’ll have information direct from the source and if they don’t we’ll have a good indication of which analysts really are talking to people who are involved in the project.
I learnt a long time ago that one of the biggest factors in pricing something, especially in the high tech industry, is convenience. For someone who was always a do-it-yourself-er the notion was pretty foreign to me, I mean why would I spend the extra dollars to have something done for me when I was equally capable of doing it myself? Of course the second I switched from being a salaried employee to a contractor who’s time is billed in hours my equations for determinting something’s value changed drastically and I begun to appreciate being able to pay to get something done rather than having to spend my precious time on it myself.
The convenience factor is what has driven me to try and find some kind of TV solution akin to those that are available in the USA. Unfortunately the only thing that comes close are the less than legal alternatives which is a right shame as I would gladly pay the going rate to get the same service here in Australia. I’m not alone in this regard either as many Australians turn to alternative methods in order to get their fix of their favorite shows. What this says to me is that teh future of TV is definitely moving towards being a more on demand service like those provided by Netflix and Hulu and less like traditional TV channels.
Some industry executives would disagree with me on that point, to the point of saying that watching TV on the Internet is nothing short of a fad that will eventually pass. There’s been a couple clarifications to that post since it first went live but the sentiment remains that they believe people who abandon their cable subscriptions, “cable cutters” as it were, are in the minority and once economic conditions improve they’ll be back again. I can understand the reasoning behind a cable exec taking this kind of position, but it’s woefully misguided.
For starters Netflix alone counts for around a third of peak bandwidth usage in the USA. To put this in perspective that’s double all BitTorrent traffic and triple YouTube, both considered to be hives of piracy among the cable cartels. This is in conjunction with the fact that people are using their Xboxs to watch movies and listen to music more than they’re using them to play games, usually through online services. Taking all of this into consideration you’d be mad to think that the future is still in traditional pay TV services as there’s a very clear trend towards on-demand media, provided through your local Internet connection, is what customers are looking for.
There’s two reasons to explain why cable companies are thinking this way. The first, and least likely, is that they’re simply unaware of the current trends in the media market space. This is not entirely impossible as there have been a few examples in recent times (BlockBuster being the first that comes to mind) who simply failed to recognise where the market was moving and paid the ultimate price for it in the end. The far more likely reason is simple bravado as the cable companies can’t really take the stand and say that they’re aware of the changing market demands but will do nothing about it. No for them its best, at least in the short term, to write off the phenomena completely. In the long term of course this tactic won’t work, but I get the feeling none of them are playing a particularly long game at this point.
As I’ve said many times before media companies and rights holders have fought tooth and nail against every technological advancement for the past century and the only constant in every one of them is that in the end the technology won out. Eventually these companies will have to wake up to the reality that their outdated business models don’t fit into the current market and they’ll either have to adapt or die.
I spent the better part of my youth pirating nearly every bit of software I wanted. It’s not that I was doing it on principle, no it was more that I didn’t have the cash required to fuel my insane desire for the latest computer hardware, software and everything else that I had my eye on back then. Sure you can argue that I should have just gone without instead of pirating but in the end they were never going to get money from me anyway. For those software and games developers that did make a decent product they’ve since received a well paying customer in the form of my current self who spends lavishly on collector’s editions and any software that he needs.
One area I’ve never paid a dime for (although I happily would, as I’ll explain later) is TV shows. I was a pretty big TV watcher as a kid, even going to the point of recording shows that I couldn’t watch in the morning (because I had to catch the bus) so that I could watch them in the afternoon. As I discovered the wonders of playing video on your PC I started to consume most of my media through there as it was just so much more convenient than waiting for a particular show to come on at a certain time. Australia is also quite atrocious for getting new shows as they’re released, usually coming to our shores months after their release to the rest of the world, if they do at all. However whilst I might be able to get everything for free it’s still somewhat of an inconvienence, especially when I see a service like Steam that has no replica in TV in Australia.
It’s not like these services don’t exist either. The USA has things like Netflix and Hulu that stream TV shows to users and the latter will even do so free of charge. From a technical standpoint there’s no reason why these services can’t work anywhere in the world, they’re just another set of packets travelling alongside all the others. However both of those services employ heavy geo-fencing, the process by which anyone connecting to it is identified by region and, should they be outside the USA, be blocked from viewing the content. Primarily this is because of licensing agreements that they have with the content providers who want to control which content goes where. For places like Australia however this just leads to people pirating the content instead of watching it on TV or buying it in stores, something I’m sure they’re not entirely happy about.
This issue came up recently when a bunch of ISPs got together and proposed a new system to deal with copyright infringement. On the surface it looked like long time supporters of privacy were caving under pressure from rights holders but it’s actually anything but. More its an idea to make the discovery process more open and focuses on educating the end users rather than punishing them. Whilst I don’t like the system proposed I did like the fact that they recognised rights holders needed to do a better job of providing content to Australia residents. The fact of the matter is many turn to piracy for the simple reason that they simply can’t get it anywhere else. A service like Hulu in Australia would be wildly popular and would be as good for the rights holders as Steam was for the games industry.
Steam has shown that convenience and service are what drive people to piracy, not strictly price. Of course Steam’s regular fire sales have made sure that people part with more cash than they usually would but the fact is that they deliver a product that’s on the same level of convenience (sometimes better) than the pirates do. Right now rights holders are still delivering products that are less convenient (and sometimes, even worse overall) and so the piracy option is far more attractive. I know this is asking a lot of an industry that’s feared technology for the better part of a century but in the end the problem doesn’t lie with the pirates, it lies with them.