In 2015, the maturation of New Zealand’s SVOD market was tracked in the column inches of media journalists across the industry. And this trend has already continued this year with Netflix making headlines by extending its service to 130 countries across the world and then saying that it was looking into clamping down on VPN users to ensure they can’t log into global content.
How Netflix plans to clamp down on backdoor users logging into the US sites is yet to be seen, but it certainly risks provoking ire in its customer base if it’s successful.
That said, clamping down on VPN users will in some ways level the playing field in the local market, because it will mean that all the SVOD players are able to vie for exclusive rights against the international giant without fear of having users access the same content through one of Netflix’s international sites.
Lightbox chief executive Kym Niblock believes Netflix’s VPN move could have a major impact on the market this year.
“A lot of what they do will shape how the rest of the year turns out,” she says.
Niblock says Sony’s hacked emails already showed how concerned the organisation was about VPN issues and this will only be exacerbated with Netflix’s expansion into more territories.
What’s more is that Niblock says that many content owners are hesitant when it comes to signing global rights deals.
“Netflix tries to set up global deals, but what we’re finding is that studios really aren’t that interested in helping Netflix out. They’re making more money out of regional deals, whether they’re with TVNZ, Lightbox or Sky.”
A further complication is that Netflix has in fact sold the rights to some of its shows to local streaming services.
“Lightbox launched with a number of Netflix shows in this territory. We’ve been carrying House of Cards, Orange is the New Black and Vikings. So, for Netflix, waiting for those deals to run out means that those properties, as popular as they are, will still be older content.”
Despite Netflix being a major global player with enormous spending clout, Niblock says it isn’t intimidating for Lightbox to bid against it when it comes to securing content.
“They’re channelling a huge amount of their money into programme production, which means they have less money to buy new programmes. And that suits us just fine.”
Investing in programming has certainly paid off for Netflix with shows like Making a Murderer, Orange is the New Black and Narcos becoming massive global favourites. But for every successful show there are also a few flops along the way—Arrested Development, Richie Rich, Marco Polo and Hemlock Grove are just a few examples.
While content production is expensive and risky business, Niblock says Lighbox has initiated discussions with a few regional players in other markets.
“We’ve been talking to all sorts of people. There’s a really vibrant group out there who are doing SVOD in lots of different territories, and we’ve definitely explored ways to work together—whether around content creation or content acquisition, we’re all about beating Netflix basically.”
Niblock also makes the point that Netflix might be big, but it certainly can’t buy all the content that’s out there.
“[Hypothetically,]if there’s 100 percent of content made available to a market in any given year, our experience is that Netflix will buy only 30 percent of that. That leaves 70 percent to be shared out. What we’re experiencing now is that of that 100 percent of content, about 50 percent of it will never be made available to Netflix, because it will have big studio hook-ups. HBO, for example, will never sell to Netflix, because they have a deal with Sky.”
As intense as the competition was in the local market last year, Lightbox still managed to land a collection of very popular shows, as illustrated by its top ten list from 2015:
• Breaking Bad
• Modern Family
• Dance Moms
• Downton Abbey
• Parks and Recreation
• Orange Is the New Black
And in early weeks of this year, Lightbox has already sent out various press releases trumpeting a few of the shows it has added into its portfolio.
Niblock is particularly optimistic about the new season of Better Call Saul, Flesh and Bone, Outlander, Vikings, and Black Sails.
However, at a time when new TV shows seem to be popping up all over the place, viewers are finding it increasingly difficult to keep track of what’s worth watching (some are calling it peak TV)—and Niblock admits this is certainly something Lightbox is concerned about.
“One of the things we found in our research was that people want us to talk to them more,” she says. So, we’ve really stepped up our email communications with our customers telling them what’s coming and telling them what to look for. An example would be Deutshland 83, which premiered just before Christmas, and the show has done amazingly well. Flesh and Bone is another example of us emailing subscribers and telling them about the show.”
One thing that is clear is that the streaming market is maturing. Recent data from Nielsen shows 53 percent of online New Zealanders are watching TV or movie content via the web.
“This number suggests it’s moving from the early adopter phase to mass majority,” says Niblock.
The percentage of those actually paying for content is, however, still relatively low, with Roy Morgan data showing that only one in ten Kiwis have a Netflix account (Lightbox lags further behind).
The willingness of consumers to pay for online content is a particularly important issue for Lightbox, given that many of its complimentary subscriptions are set to expire this year—the biggest of which was a one-year deal given to all Spark broadband subscribers.
“We ran a number of other offers throughout last year, which have already expired, and those people have already moved over, so we’re not concerned,” says Niblock.
“We know what the numbers look like, and of course some people will choose to vote with their feet, but we think we have a very fair price point, and people are responding to it.”
Niblock does however believe the challenge exists in convincing a bigger proportion of the Kiwis who currently stream content that it's worthwhile paying for the shows they love.
“I think the responsibility rests with the SVODs and the entertainment companies to educate the viewers as to why this is important for them.”