Australia’s government intends to implement a local content quota on the major streaming platforms by mid-2024.
Key takeaways:
- Netflix Australia brought in $1.1bn in 2022; Disney has discontinued physical sales in the country.
- The streaming giant’s churn rate doubled in Q2, with 30% of Australians cancelling because of the password-sharing crackdown.
- Streaming subscribers in Australia could hit 30 million by June 2027.
Australia may not be one of the world’s most mature streaming markets, but the country is the leading streamer in the Asia-Pacific region, according to research from last September by consultancy Media Partners Asia (MPA).
Australians streamed 24 billion minutes of premium video in the first eight months of last year. Netflix [NFLX] accounted for half of these streaming video on demand (SVOD) minutes, while 16% were spent watching Disney+ [DIS] and just 9% on Amazon [AMZN] Prime Video. Nine Entertainment’s [NEC.AX] Stan had an 8% share of the time spent watching.
In terms of subscriber base, 22.1 million Australians had signed up for streaming services at the end of August 2022, among which Netflix had a 30% share. Both Disney+ and Amazon Prime Video accounted for 17% of sign-ups, with Stan at 11%.
“As the Australian SVOD market matures, platforms are increasingly focused on monetisation,” commented Vivek Couto, MPA executive director.
According to Finder, 69% of Australians are signed up to at least one streaming service. Netflix is by far the most popular streaming service, with 62% of Australians subscribed, followed by Disney+ (29%), Prime Video (24%) and Stan (23%).
Netflix Enjoys a Billion-Dollar 2022
Given the growth in streaming and the shift to digital platforms, it’s no surprise that Disney discontinued physical releases for Australia back in July, as reported by Sky News. The last film made available on DVD and Blu-ray was Guardians of the Galaxy Volume 3, which was released last month.
Disney doesn’t break down its revenue numbers by country, but Netflix does offer some insight into how lucrative the Australian market is. The country brought in $1.1bn in 2022, up from $30.7m in 2021, although this huge leap is related to a change in the way it bills and taxes users in Australia — prior to January last year, revenues from the country were earned through a Netherlands-based subsidiary, as the Australian Financial Review explained.
Netflix Australia made just $22.7m in 2022 after paying the Netflix Group $966m in distribution fees and other costs. Profit for the year was $15.8m.
Amazon Prime subscriptions, including its streaming service, brought in $102.7m last year, up from $63.6m, according to regulatory filings seen by the Australian Financial Review.
Password Crackdown Leads to Cancellations
Despite a bumper 2022, Netflix’s user numbers have been falling this year, especially since cracking down on password sharing.
Kantar Worldpanel’s Entertainment on Demand data shows that Netflix’s churn rate doubled to 6% in the three months to the end of June, while the number of users planning on cancelling their subscription in the following quarter rose to 8%. Of users cancelling subscriptions, 42% cited the need to save money as their reason, while 30% cited the new password-sharing restrictions and reluctance to pay for additional members who were previously eligible to share their accounts.
“It remains to be seen whether those lost users will eventually return and pay for the extra household member access or if they’ll continue not to see value in Netflix’s new sharing fees,” said Tamsin Timpson, Kantar’s Strategic Insight Director for Australia.
Calls for Local Content Quotas
Nevertheless, Netflix’s billion dollar-plus 2022 in Australia has led to calls for the company to reinvest some of the money it makes into locally produced content.
“As more and more of us choose to watch our content online, it is essential that we see our communities, culture and stories reflected back to us,” said Australian Greens Senator Sarah Hanson-Young last June. She has called for the government to impose a quota of 20% of local revenue directed towards children’s programming, documentaries and drama, as well as “appropriate intellectual property protections for local creators”.
For its part, the government intends to introduce streaming quotas in order to prioritise Australian content by the middle of 2024, but as yet the finer details haven’t been ironed out.
“The ready availability of mass content produced in other countries, particularly the US, risks drowning out the voices of Australian storytellers,” a cultural policy document issued in January states.
Local Content could Drive Future Subscription Numbers
Financing locally produced content should help to sustain the Australian television and film industries. Meanwhile, TV shows and films made by Australians and featuring Australians could help Netflix and the other major players to attract and retain a loyal viewer base.
In the long term, technology analysis firm Telsyte has forecast that SVOD subscriptions could hit 30 million by June 2027, which may be driven by a wave of new content and subscription plans. The streaming giants could face increased competition from new incumbents, however.
Foad Fadaghi, Telsyte’s Managing Director, commented: “Profits, partnerships, and more aggressive behaviour. There’s going to be increasing competition to win people over from other platforms.”
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