Why will Netflix or other similar streaming services inevitably beat out Foxtel and Free to Air services? Advertising.
Today I managed to finally plug my TV into the Free to Air satellite and I’ve had the TV on for most of the day and during that time about 50% of the viewing has been advertisements and it got me thinking. Why do people pay for Foxtel still when services like Netflix exist now? Lets take a look at the current offerings in Australia.
Free to Air
- Pros: it is free
- Cons: advertising and a lack of choice for content
Free to Air is based solely upon advertising revenue. It is a “free” service, all the shows produced and the services provided are paid for by companies getting their message out to the public. This results in TV shows being peppered with advertising. Currently in Australia the commercial TV networks are allowed 13 minutes of non-program matter during peak hour and up to 16 minutes at other times per hour. That means that during peak hour, a 30 minute show will consist of 7 minutes of advertising.
- Pros: more channels than Free to Air
- Cons: costs at least $25 per month for the basic channel, still get advertising
Foxtel is essentially the only choice for Cable TV in Australia and when it first came out one of the big selling points was the lack of advertising. The government actually restricted Foxtel from advertising during programs for the first two years of it running. Since then Foxtel has bumped up their advertising to include up to 5 minutes worth of advertising for every 8 minutes of programming. There are a couple of channels that run ad free however they are usually included in a package that adds an additional cost to the base rate. Why would anyone want to pay money AND get advertising inserted into their paid content?
Netflix and other streaming services
- Pros: pick what show you want to watch, when you want to watch it, costs at least $11 a month with no advertising
- Cons: uses valuable bandwidth which in Australia can cost extra
Out of the three choices Netflix and other streaming services have the least amount of advertising involved. Based on data from Netflix, you pay a flat rate for as many TV shows as you can consume and you get no advertising. Granted you may not get access to every show available due to licensing issues, you still get a varied library of media to consume and you don’t have to spend a third of your day watching advertisements.
Netflix and other streaming services have one big bottleneck that is currently affecting their take up in Australia. Poor internet connectivity. With the average Australian having ADSL speeds it is hard to stream HD content to a TV without extensive wait times or having to resort to lower quality streams. Had the plans for a proper Fibre roll out come to be I think the TV ecosystem would be vastly different to what it is now. Foxtel would have lost the major share and newer services like Netflix, Stan, and Presto would be able to compete on a more level playing field. As it is, Foxtel manage their own cable infrastructure which ensures the speedy delivery of their content, and the Australian ISP ecosystem is based around quotas, not speed, like it is in many other markets.
There are other services out there currently that side-step all of these options, the chief being SickBeard and Torrenting. By downloading the shows illegally to a local hard drive consumers are able to side-step the bandwidth requirements for streaming, and more importantly, they are able to side-step the geographic licensing issues that plague many shows in Australia. For example, you can’t get the latest episodes of Game of Thrones on any streaming service in Australia unless you are a Foxtel customer. Game of Thrones requires the Premium Movies & Drama package which results in a monthly cost of $50 per month just to see the latest episodes in Australia. Is it any wonder that Australia holds the record for pirating TV shows because it isn’t possible to get the show legally through multiple services? Monopolies will drive consumers to the illegal methods when the prices are to high.