It was never going to last: three major streaming services, launched within three months, in a market as tiny as Australia.
Last year, small player Ezyflix closed. Then Quickflix went into voluntary administration in April. Now, the streaming wars have produced their first major casualty, with Presto due to shut in January 2017.
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Presto video service to close
Seven West Media announces plans to sell its share of Presto to Foxtel, with current subscribers getting access to Foxtel Play from December.
It began with a rumour, a couple of years ago, that American entertainment giant Netflix was plotting a local service. But a hefty chunk of us were already using geo-blockers to access its vast American catalogue.
Suddenly, media companies scrambled to create their own streaming services – and to open before Netflix hit our shores.
A re-vamped Presto, most recently backed by the Seven Network and Foxtel, launched in January 2015. Stan, owned by Fairfax Media and Nine, debuted a couple of weeks later. Finally, Netflix unveiled its Australian operations in March.
Turns out we did want a wide selection of TV shows and movies, at a low monthly fee. Who knew?
It's no accident Aussies are among the worst pirates in the world. We're sick of being held hostage to ridiculous network schedules, and paying through the nose for our entertainment.
The sudden boom in local streaming services was not just about "giving consumers what they want". There was nothing actually stopping our big media companies launching a Netflix-style service years ago. Except a tacit understanding they could extract greater profits via older technologies: DVDs, pay-per-download, cable, and so on.
Local media outfits wanted to beat Netflix to the punch to protect their turf. But countries with much larger populations have fewer streaming services. In just a few short months, we became oversupplied.
Presto had always lagged behind Stan* and Netflix, the clear market leader. Being partly owned by Foxtel meant it had to (though you won't find anyone admitting that on the record).
Foxtel is a lucrative business. The last thing it needed was to make itself redundant by waving a tantalising – yet vastly cheaper – alternative in front of consumers.
Unlike Netflix, Presto was light on first run exclusive content. Unlike Stan, it didn't boast much in the way of unique Australian content. It launched in standard definition. Not enough viewers signed up (or kept paying) to make it viable.
Turns out Aussies did want a wide selection of TV shows and movies, at a low monthly fee. Who knew?
Seven West Media will sell its stake to Foxtel, who will give subscribers access to its Foxtel Play service from December.
This is where it gets even trickier for Foxtel.
On one hand, it must cater to – or at least seriously compete with – the booming streaming market. There are many Australians who now refuse to be locked into any kind of contract. And they baulk at spending more than $20 or $30 a month on television.
Allowing consumers to stream its content via the Foxtel Play service will cost as little as $10 a month – down from $25. This makes sense, and could provide growth for the company.
But the greatest danger is that its loyal cable subscribers – who often pay much more – defect to a cheaper Play package. Or deem the whole thing too expensive, and opt out when their contract is up. (Already, Foxtel has slashed its fees to boost growth and retain customers.)
How does Foxtel make its Play packages enticing enough to compete with Netflix and Stan – but not so enticing that it cuts its own lunch?
Obviously, there are benefits to cable, not least the superior quality and services such as IQ.
But in competing with low-cost streaming services, Foxtel must avoid its brand becoming synonymous them.
Sure, each offers an abundance of movies and quality international drama. But there is a reason Foxtel costs more, and it's not (just) because they've had a grip on the pay market for so long.
The company produces an enormous amount of Australian content – drama, comedy, reality, news – which gives it a major advantage. (Local programs generally rate better than imports.) It has the local rights to popular programs, including Girls and Game of Thrones. It has a live news channel, an arts channel, several music channels.
But its biggest asset, by far, is sport.
Programmers spends a fortune on local and international codes – knowing enough Aussies will stump up a tidy sum to watch them.
The company has a lock on most of its rights for the forseeable future, but some analysts predict this will change.
Says one media expert: "There will come a time when it's cheaper for each code to sell access to the game straight to fans. Not just cheaper, but more profitable. Maybe the AFL or the NRL will stream the game live, to each viewer, for an annual fee. That will depend on technology, and whether we ever get a decent NBN, of course. But we're already seeing that happen oversees.
"If it happens here, it will be the biggest shake-up in television – both free-to-air and cable – in decades."
*Stan is co-owned by the Nine Entertainment Company and Fairfax Media, publisher of this masthead.
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