In our regular analyses over the last decade we have talked about the need for the traditional players in the broadcasting market to change their business models. But, apart from a few digital additions to their services, so far little has happened. The industry remains reluctant to change. What hasn’t helped either is the fact that broadcasting can continue to be a helpful cash cow during a relatively long period of decline, so there has been little appetite for transformative changes. The reason for the slow volume of change has been that when changes did start to take place – driven by broadband access and the internet – there was still a whole generation of people using traditional broadcasting as their only form of broadcast entertainment.
Now, a decade later, that part of the market has shrunk even further and, while we still might have another decade of broadcasting as we know it today, changes – coming in from the outside – are well and truly underway, driven by streaming video services such as Netflix – a stunning 32% of the global population is now using this service, within two months after it launch in Australia over one million people had registered with the service.
An important subset of the new video streaming services is TV catch-up, and although the content for these services is still provided by the broadcaster it is no longer delivered in the traditional broadcasting format; and, given the globalisation and commoditisation of content, the supply of content will increasingly be carried out by others.
While in the case of the popular Game of Thrones series Foxtel still had the lead in delivering the service during the exclusive 3-month period, the day after the final screening of series 5 the service became available through just about all the other video-streaming services. This shows that the forces outside the traditional industry are stepping up their activities, and this will fast-track further changes in the broadcasting model. These developments will also have a positive effect on addressing the piracy issue – the key reason that piracy exists is because the ageing business models are not well-fitted for the new ways people are using content, and, rightly or wrongly, users will try to bypass those archaic systems.
The BBC believes that, based on the current licensing system, broadcasting might have another ten years of life in it before the whole broadcasting system will have changed to a subscription-based service. In the case of the BBC they have the luxury of being funded through a broadcasting tax; but for commercial broadcasters the situation is much bleaker, as their model is still totally reliant on advertising revenues, and with viewer audience numbers dwindling they are facing problems attracting advertisers.
The fact that the commercial broadcaster TEN and pay TV operator Foxtel are forging closer relationships is a clear indication that the market is moving towards subscription-based services. However, this doesn’t take into account that the real action is moving away from national to international services and we still haven’t figured out how we are going to address this change. In this context it is also interesting to note that Foxtel’s revenue is already larger than the combined revenues of the three commercial free-to-air services – this despite the fact that pay TV in Australia has only about 30% penetration among TV households.
The globalisation of content mentioned above might work for movies and TV series and certain sports and major events, but what about local news, current affairs, local sport, etc? Surely we can’t have 5 broadcasters looking after this! What consequence would that have for diversity, competition and a well-informed society?
These are issues that need to be discussed well before the current system ceases to exist.
The ABC has already staked its claim here. Its aim is to be the leader in Australian content. The company is already the Australian leader in catch-up TV; their iView service now has something like 30 million views a month. The use of iView has seen an enormous increase after the launch of Netflix – this extremely well designed American service has really kicked off the video streaming market in Australia.
No doubt this is an interesting industry, with more massive changes coming up in the future, driven more and more by the customers of these services rather than by the rigid business models offered by the traditional players in the market.
Another issue that keeps coming back is that all of this depends on the availability of good quality high-speed broadband infrastructure, while other countries are building FttH networks, Australia has abandoned their FttH plans and have reverted back to a second class technology based on the old copper and coax cable networks. In the US Netflix already accounts for 54% of monthly broadband traffic and within weeks of the launch of the services in Australia iiNet reported that 25% of its traffic was based on this service. It clearly shows that proper broadband infrastructure is essential and Australia doesn’t have a plan for this.
- Australia – Digital Media – Video Streaming – Major Players
- Australia – Digital Media – Video Streaming – Trends, Developments and Statistics
- Australia – The Broadcasting Market in 2015
- Australia – National Broadband Network – Developments and Analyses 2015
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