Netflix Challenged to "Play by the Rules" in Australia

Netflix

Quickflix says the company, which hasn't announced plans to launch down under, allows "unauthorized" access to its U.S. service

As streaming giant Netflix rolls out its service in six new European markets, Australian DVD rental and streaming company Quickflix has told Netflix CEO Reed Hastings to play by the rules down under.

In an open letter to Hastings, Quickflix founder and CEO Stephen Langsford challenged Netflix to compete by coming in “through the front door,” saying the company is enjoying a “free ride” by “ignoring unauthorized access to your U.S. service.”

Netflix has reportedly amassed 200,000-plus Australian customers who circumvent the company’s geoblocks by accessing its U.S. service through virtual private networks (VPNs). One study by online accounting firm Pocketbook reported that Netflix currently has a 47 percent share of the Australian video streaming market without having formally announced plans to launch in the market.

According to reports fueled by recent visits by Netflix acquisition executives, the firm plans to launch in Australia in 2015.  

"Netflix not only knowingly collects revenues from subscribers with unauthorized access to your U.S. service, investing nothing in the Australian market nor paying for Australian rights to the content you make available, but also tacitly encourages Australian consumers to inadvertently breach the copyright of the content owners," Langsford wrote.

"Unlike yourself, Quickflix has obtained all necessary Australian rights to the content on its platform, faithfully meets all necessary security requirements, including geo-filtering imposed by the content rights holders, and continues to reinvest in its service with the goal of offering the very best service in the market to its customers," the letter said.

"So Mr. Hastings, we challenge Netflix to play by the rules. It’s how we do it here in Australia. Stop turning a blind eye to the VPN services acting as a gateway to your service. Be honest and face up to the issue of unauthorized access to your U.S. service. Have the courage to limit your service only to the territories where you have legally obtained the rights to operate by abiding by the geo-filtering obligations required by your content license agreements. And do so immediately,” Langsford challenged.

Netflix didn't comment on the issue.

Quickflix this month reported a customer base of 137,000 in its latest financial report, with revenue of $16.2 million (AUS$18 million) and a loss of $9 million for the fiscal year ended June 30. It has since returned to profitability, it said.  

Other players in the nascent Australian streaming market, including pay TV giant Foxtel and start-up Stream Co, have recently announced major plans to meet the competitive threat posed by Netflix’s potential entry.

Foxtel this month said it would slash the cost of its entry-level pay TV subscription package to $22.50 a month and is launching a “Box Sets” premium drama channel that will play full seasons of major TV series back-to-back for binge viewing. That comes after the company halved the monthly subscription price of its Presto subscription VOD movie service to $8.95.

Foxtel owns the Australian rights to Netflix's original programs such as House of Cards and Orange Is The New Black.

Foxtel CEO Richard Freudenstein told an industry conference recently, "We've heard [Netflix] are coming; I don't think it's 100 percent confirmed, but we're planning as though they are...sure, there's more competition than ever before. But the great thing about Foxtel is that every time there's been looming competition we've reinvented ourselves, listened to customers, driven forward...we are always going to grow."

And Nine Entertainment Co, owner of the Nine television network, has taken on a joint-venture partner in publisher Fairfax Media for the launch of its subscription VOD service, Stream Co, in the first quarter of 2015, each putting $45 million into the start-up. 

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