Netflix Rivals Down Under Readying for a Fight

Netflix will launch in Australia and New Zealand with 'Marco Polo'

The company will enter a competitive market where pay TV giant Foxtel has the rights to 'House of Cards' and 'Orange Is the New Black'

Netflix CEO Reed Hastings shouldn't expect to have the welcome mat laid out for him by his media rivals when the streaming video giant starts offering its service in Australia and New Zealand in March, as the company announced on Wednesday local time.

Australia is relatively small, with a population of 25 million, but it is arguably one of the most competitive media markets in the world, and the emerging SVOD market is where the nation's media giants, including News Corp, the Seven and Nine TV networks, Fairfax Media and players like Quickflix are already staking their claims.

Quickflix CEO Stephen Langsford was bullish at the prospect of fierce competition: "It's game on. Netflix's entry will assist in building consumer awareness of the streaming category, which in turn will boost demand for all services in the category, including Quickflix," he said.

The long-expected launch of Netflix in Australia has led to new partnerships forming to create homegrown steaming services amid furious behind-the-scenes dealmaking to stitch up exclusive content rights.

Stream Co, run by Australia's second-ranked TV network, Nine, and publisher Fairfax Media, has set itself up as the most direct competitor to Netflix, announcing last week that it would launch the country's newest SVOD service, Stan, in the coming months. It has secured exclusive rights to Breaking Bad and its spinoff Better Call Saul, as well as struck a supply deal with MGM. Stan is expected to have a soft launch in December. Nine also has extensive exclusive programming arrangements with Warner Bros., although it is not clear how much of that product will go to Stan.

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Stream Co CEO Mike Sneesby tells THR that it was incumbent on the new entrants like Stream Co and Netflix to grow the market.

"Netflix will launch and be a strong competitor. But we'll all be starting from single-digit penetration and see it moving in a few years to 40 percent. That will take a lot of category building," Sneesby says. "We are interested in getting to 50 and 60 percent, but we've got a job to do."

At the same time, Australian pay TV operator Foxtel — jointly owned by News Corp and telecom giant Telstra Corp — is implementing a four-pronged strategy to both grow its subscriber base from the current 30 percent and counter Netflix's competitive threat.

Their plan involves slashing the cost of its pay TV packages by up to 50 percent (which it did earlier this month); announcing an exclusive multiyear, multiplatform supply deal with HBO; launching a box sets channel that allows viewers to binge-view drama series; and expanding its on-demand service. In direct response to Netflix, Foxtel is also reconfiguring its own SVOD movie service, Presto, initiating a price cut to $9.95 per month and announcing it will add TV programs to the Presto lineup in the coming months.

Foxtel CEO Richard Freudenstein admitted that the company had "got it wrong" with Presto's $20 a month launch price and product.

"The first was price. The second was we didn't have TV in it," Freudenstein told an audience at the Screen Producers Association annual conference on Tuesday about the early missteps.

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Presto will soon add a "very strong TV offering to go with the movie offering that we will launch sometime in the near future. It would be a good decision to be out before Netflix," he added.

It's expected that top-rated TV broadcaster the Seven Network will join Foxtel in Presto. And, perhaps galling for Netflix, Foxtel is currently the exclusive home Down Under of its signature originals series House of Cards and Orange Is the New Black. Both shows were absent from the announcement of Netflix's content lineup for Australia.

Even Australia's public broadcasters are getting more involved in streaming services. The ABC said last week that it will allow users of its free iView catch-up TV service to purchase library product directly from iView, while the Special Broadcasting Service (SBS) is rolling out a 600-title movie-on-demand service — for free.

Netflix, however, won't be operating from a standing start. The company already has an estimated 200,000 Australians signed up to its U.S service, who circumvent the company's geoblocks through virtual private networks. Rival streaming service Quickflix and rights holders are pressing Netflix to cut those users off when it launches Down Under.

But as Stream Co's Sneesby says, there's a long way to go. "The market's not going to be won or lost on a couple of 100,000 subscribers," he said.