Forget the NBN – movies streamed almost instantly over the net are here already and a swarm of new entrants are putting a strain on traditional players like DVD stores.
A report released this week by Credit Suisse found that while not yet mainstream in Australia, “IPTV is here” and would continue to drive the take-up of internet video over the next few years.
The newest player in the IPTV market is Quickflix, which has long offered mail order DVD rentals but recently began unlimited online streaming services via PCs, Macs, internet-enabled TVs and the PlayStation 3.
It joins existing players offering cheap online access to movies and TV content including Fetch TV, Telstra’s T-Box, TiVo, PlayStation 3, Apple TV and Xbox 360.
All are stealing eyeballs and business from commercial TV networks and bricks and mortar DVD stores. The number of DVD rental stores in Australia has dropped from about 4000 in the late 80s to 1400 today, with about 200 stores closing in the past year.
IPTV is set to increasingly challenge even players like Foxtel, which has done more than others to harness new technologies and consumer products like Xbox for delivering content.
Quickflix founder Stephen Langsford is hoping to mirror the success of US service Netflix in Australia.
He says there are five million Australians households with one megabit internet connections so you “don’t need NBN to enjoy instant movie watching”. The catch is, however, that movies streamed over Quickflix are not yet in high definition unless you’re on a Sony Bravia TV.
Netflix accounts for 20-30 per cent of US internet traffic on peak days and its subscriber numbers reached a peak of 24 million in June.
“More movies are streamed legally through Netflix than illegally through BitTorrent,” said Langsford, who hopes his service will reduce piracy levels.
Netflix, unavailable in Australia, has a selection of over 20,000 titles, much more than Quickflix’s 200 or so. The lack of a broad range of new titles is also hindering other online video services like Sony’s Video Unlimited.
But Langsford says “don’t worry this will steadily increase”.
Quickflix is growing its subscribers quickly and plans to go from 80,000 to 200,000 by the end of next year (and to one million within five years).
Quickflix provides unlimited access to its streamed movies for between
$7 and $14.99 a month depending on whether you’re an existing member.
But to date the growth in IPTV has been driven by telcos.
“Telcos have been aggressive over the past 12 months in driving take-up of internet-delivered video, namely Telstra with over 200,000 T-Box units sold,” the Credit Suisse report found.
“The launch of Fetch TV by Optus and improvements in the Fetch platform over the past 12 months will likely see penetration of IPTV devices grow materially over the next 24 months.”
Fetch TV, with 10,000 Aussie subscribers so far, is growing strongly with Optus, iiNet, Internode and soon, TPG, all offering set-top boxes with their internet connections. But other overseas services such as Google TV and Hulu have yet to have an impact here.
“We believe the telcos are likely to be the most aggressive in driving take-up of internet video in the Australian market over the next one-to-two years,” said Credit Suisse.
Credit Suisse said internet video watching was not yet mainstream, pointing to a recent ACMA survey that found 33 per cent of Australians watched short-form video (53 per cent for the 18-29 bracket) while just 17 per cent watched long-form video online (31 per cent for 18-29).
Credit Suisse said the growth of IPTV risked damaging traditional players such as commercial TV networks further. “A more aggressive rollout by IPTV players risks a continuation of the audience fragmentation which has resulted from multichannel launch,” it found.
Guy Cranswick, an analyst at IBRS, said IPTV was not currently a significant threat to traditional players but “that will change over the next three years”.
“Streaming will grow and when it does its impact on TV won’t produce a fall in ratings or the popularity of some shows,” said Cranswick.
“But it is likely to have an effect on margins and the financial measures of the TV stations.”
Cranswick said video stores like Blockbuster had “taken a hit” over the last couple of years but it couldn’t all be due to legal IPTV and illegal downloading.
“Single factors rarely account for that. Video stores, like music retailers, will struggle and disappear with faster broadband availability in the future,” he said.