Chasing Viewers – Part 3
It may just be the straw that breaks the camel’s back. Free-to-air television advertising that is! Recent data published by Roy Morgan Research on Streaming Video On Demand (SVOD) services shows that since launching a few months ago, Netflix in Australia is absolutely killing it.
The numbers are really quite staggering.
Despite Presto, Stan, Quickflix and Foxtel Play existing in the Australian market place well before they first officially opened their doors to customers, Netflix has amassed over 1 million subscriptions in over 408,000 households. That’s over 10x more than Presto and Stan. Mindboggling. 
Source: Roy Morgan Single Source, May 2015 n = 2,088 Australians 14+
As a result, shares of Nine Entertainment Ltd (ASX: NEC), Seven West Media Ltd (ASX: SWM) and Southern Cross Media (ASX: SXL) all continue to experience further price declines. This is despite the fact that their shares continue to look cheap.
We don’t expect this trend to reverse anytime soon;
One simply cannot expect to have so many viewers, in such a short space of time, consume content via Online Streaming as opposed to free-to-air TV and not expect some material impact on advertising dollars. Those dollars will simply turn to wherever the viewers are. And they are not alone.
Take Facebook’s announcement last week– they just signed a deal to host selected HBO content. Facebook is already widely known as the biggest viewer platform in the world. Indeed the business mantra is now “the passport of the internet”. So a push further into this space (online video) is just a natural extension for them in order to continue grabbing advertising dollars.
You can watch the video here, but here’s the rub; Facebook are making a push into online streaming with a quality partner like HBO given they already experience over 2 trillion video views per annum and growing. That’s right 2 trillion.
Facebook is already challenging the new-age incumbents such as the likes of Youtube.com in terms of the number of video views. Imagine where they could be in the next 5 years. Again mindboggling.
The old guard in Australia, being Nine Entertainment, Seven West Media and Southern Cross Media really seem powerless to prevent what is going to occur and what is clearly an ever growing threat to a business model that appears almost on a daily basis to become more and more obsolete.
Avoid…
Russell Muldoon is the Portfolio Manager of The Montgomery [Private] Fund. To invest with Montgomery, find out more.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
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Michael Shapiro
:
Interesting analysis. I wonder what you make of SKT as an investment opportunity. SKT seems to be growing and enjoying a monopoly position in NZ, despite threats from SVOD and VOD. Is it an opportunity or a trap?
Russell Muldoon
:
Im not up to speed with SKT, so cant comment on its investment merits one way or the other unfortunately. Though just because a business is a major player in its sector doesnt make it a ‘blue chip’. Ive seen many old incumbents loose out to changing technology.
Chris B
:
It is hard to evaluate Facebook. But there will be a lot more people getting online in the next 20 years. There will be 1-2 billion more people getting online in the next 10 years. Google searches only touch a small fraction of information on the internet. Big companies must have a Facebook presence.
Russell Muldoon
:
Tech based businesses operate in a constant environment of quick change which they need to stay ahead of if they are to remain relevant. Understanding if they can do that it often problematic but also creates the opportunity if you get your assumptions ballparked.
Chris
:
A big part of this is the old business wisdom of “give your customers what they want” and “freedom of choice”. For years, the free to air channels have not and now they complain they are suffering.
There are some shows on TV (especially those which are “cult” followings or not “mainstream”) which are inaccessible – not delayed, just completely inaccessible – on the big three channels because purely and simply, they are “not shown here” as they would not make enough ratings due to the fact the audience numbers are not there. Thankfully, SBS and ABC do show some of them, but in the majority, the only solution is to go online and find them somehow (e.g. Youtube) and that’s considering that you even know of their existence in the first place !
In the UK, they used to screen these shows during the middle of the night as a filler, so for years, people have been deprived. It is the equivalent of three restaurants in the one town all serving the same stuff, but up until now, it was too hard to go anywhere else for “other food” and if you did try, you were taxed, severely hindered or it was made illegal.
This is already the case with content providers here – when compared to their US counterparts, we get a “lite” version, so if you want to watch all of the TV shows, you potentially need all three of the bigger platforms, which is unfair (see ABC’s “The Checkout” story on this)
Another problem that you have on TV is that there will be a part run of a series, and because viewer numbers fall off, they stop running the show – so you are effectively left in the middle of a series.
Personally, I also don’t have any time to watch TV when “they” say I can, which is why I have to binge-watch a series on Blu-Ray (assuming it comes out on it) or record it for later viewing.
Russell Muldoon
:
Thanks Chris. Totally agree with you here.