Multi-device Strategy Key to Australian Video Streaming Market

April 22, 2020

Gregory Sigel

VP – Partnerships

Australians’ fondness for over the top (OTT) streaming video subscriptions is expected to more than triple associated revenue from US$197m in 2016 to US$601m in 2022i, driven by high penetration of smartphones, PCs and games consoles, the ready availability of fast fixed broadband networks and the early rollout of fifth-generation (5G) networks offering greater reach and mobile bandwidth.

GSMA Intelligence estimates that in a population of 25.4mii, 88% are active Internet users with smartphone ownership (93%) almost at saturation point. But most Australians also own a laptop or desktop computer (83%) and over half (51%) tablets too, while 38% have games consoles and 23% streaming TV devices (a fifth of the population also own smartwatches or wristbands).

The differential between hours spent using the Internet by 16-64yr olds (5hr 41 minutes on average) and watching TV (3 hours 15 minutes) is smaller than say in countries in South East Asia (games console usage average less than an hour per day) according to statistics compiled by GlobalWebIndexiii. Internet users of all ages in the country spend an average of two hours and thirteen minutes a day on mobile devices, with 85% using smartphones.

The bandwidth offered by current mobile data networks is amongst the highest in the world, with 100% of the connections on Ookla measuring average download speeds at just under 68Mbit/s in December 2019, considerably faster than equivalent fixed Internet connections offering 42Mbit/s. Both cellular and fibre broadband infrastructure have undergone significant upgrades over the previous year, which increased that bandwidth by 20% and 26% respectively. Australia’s mobile network operators (MNOs) are poised to make further improvements to fifth-generation networks offering minimum download speeds of 100Mbit/s which have already been rolled out in some parts of the country.

5G Growth and High Mobile Usage to Drive Demand for Video Content

Singtel subsidiary Optus currently offers limited 5G services in parts of Canberra, Melbourne, and Sydney for example, with early launches, focused on 5G home broadband. The telco plans to build 1,200 5G sites across Australian Capital Territory (ACT), Victoria, New South Wales, Queensland, South Australia, and Western Australia by the end of March 2020.

Telstra’s 5G network already covers limited parts of 38 Australian towns and cities, with trials in the city of Gold Coast having achieved network speeds of around 3Gbit/s. A combined Vodafone-TPG Telecom 5G network is a little behind the curve compared to its two competitors, but commercial services are currently planned for mid-2020. The pace of 5G development will be such that GSMA Intelligence estimates over half of the total mobile connections in Australia will be 5G by 2025

While large numbers of Australians own desktop/laptop PCs and tablets, most still spend more time browsing the Internet on their smartphones. The share of web traffic served to mobile phones in December 2019 jumped 25% on the same month in the previous year to represent 48% of the total, overtaking those served to PCs and laptops (down 12% to 45%) and vastly outnumbering tablets (which fell 31% year on year to 7%).

Much of that activity centres on video consumption. Most 16-64yr olds in the country (88%) watch some form of online video every month. And 71% watched TV content via a streaming subscription while 67% use some form of entertainment or video app. Netflix was ranked the 6th most visited website in the country in January 2020, according to Similarweb and averaged 7th place in terms of total monthly active users throughout 2019. Its mobile app was the second most downloaded last year and trailed only Tinder in terms of total consumer spend, according to App Annie.

US, UK and AU Content Among the Most Popular

AMPD Research, a subsidiary of independent research and consulting firm Media Partners Asia, believes that Australia’s adoption of streaming subscription video on demand (SVOD) services is unmatched by any other major developed economy. Given the predominance of English in the country, content from the US and the UK is highly sought after, and there is little demand for services which offer content in Asian languages.

AMPD estimates that more than half of Australian citizens over the age of 15 were paying for services as of April 2019iv. Netflix is the clear market leader with 11.5m subscriptions, while the local SVOD player Stan now has nearly 3m subscribers, according to Roy Morganv. YouTube Premium, which provides ad-free video streaming and access to original YouTube movies and TV shows, at the time was estimated at 1m paying viewers, and growing at a steady clip.

Netflix basic standard definition (SD) service for a single device costs around US$6 a month, going up to US$8 for HD content on two devices, and 4K quality on four devices for US$12 a month. The company also expanded its headcount, and opened a new office in Australia last year, suggesting it will shortly begin carrying more local content after researchers found less than 1% of its films and TV shows were original to the Australian market. The Australian government is making its effort to smoothen that process, extending its Post, Digital and Visual Effects and Location Offset tax breakers to OTT streaming providers alongside broadcast, pay-tv and film producers in the country.

Launched in 2015, Stan, owned by Australian media company Nine Entertainment – formerly the Packer family’s Publishing and Broadcasting Limited (PBL) – which produces local Australian content for streaming on the platform. Stan also has extensive content partnership deals with Sony, ABC, SBS, Viacom Global Networks (MTV, Comedy Central and Nickelodeon), BBC Worldwide, Showtime, CBS and Warner Bros. Pricing is very similar to Netflix, ranging from US$6 a month for a single device SD stream up to US$10 month for 4K resolutions over four devices. Currently the only billing options available involve debit/credit cards, PayPal, and Stan gift cards, as well as iTunes accounts.

Amazon Prime appears to have reconsidered its pricing strategy to grow its Australian customer base. As of this year, Prime Video costs considerably less than Netflix or Stan – US$4.25 a month or US$36 a year – and includes the retailer’s usual benefits and access to the Twitch live streaming platform and Music catalogue. Billing relies on payment methods linked to the Amazon Prime account, exclusively credit/cards and gift cards, however, it may be too early to judge the impact that the new pricing strategy will have on Amazon Prime Video’s performance in the country, just as it is for Disney+ which launched in Australia in November 2019, costing US$5.50 a month or US$55 a year for access from web browsers, mobile apps and Smart TVs.

Elsewhere Acorn TV is an SVOD service delivered by AMC Networks, that offers a selection of UK TV shows for around US$4.25 a month, while Madman Entertainment’s DocPlay documentary streaming platform offers a curated library of around 130 films, at last count, for the same price. NBCUniversal-owned Hayu too provides access to around 250 reality and true-crime TV series – often as soon as they are aired in the US – also for US$4.25 a month within a web player and mobile app. It is also available to Amazon Prime Video, Apple TV, and Telstra TV subscribers, though sometimes at additional cost.

Exclusive sports streaming services are popular too, including the NRL, AFL and Optus Sport. Optus Sport has grown in popularity especially since it secured exclusive rights to the English Premier League. While Foxtel backed Kayo subscriber numbers were boosted by its exclusive coverage rights to the India Premier League (IPL) cricket in previous seasons, these have since been acquired by YuppTV which charges around US$6.10 a month for access alongside a range of Hindi channels for Australia’s Indian community. Free to air television broadcasters the Seven Network (or Channel 7), Nine Network (or Channel 9) and SBS stream television and live sports content over their respective 7Plus, 9Now and SBS on Demand web and mobile apps.

Direct Carrier Billing a Viable Option for Secure & Convenient Payments

With most mobile phone accounts in Australia (69%) being post-paid rather than pre-paid, telcos in the country are in a strong position to facilitate payments for digital goods like OTT video subscriptions through established customer billing processes. Consumers in the country are well versed with conducting financial transactions online, with just under half of all 16-64yr olds (47%) using banking apps and 57% using shopping apps every month.

Smartphones themselves are often the fulcrum of commercial payment activity, with 23% of Australians using or scanning QR codes, 25% using their mobile device as a ticket or boarding pass, and 45% transferring money to friends or family monthly. A third (33%) also made an online purchase via some form of mobile device, though less than the number using laptops or desktop PCs for the same purpose (47%). The digital payments market too is healthy, calculated at just under US$42bn in 2019, according to Statistavi, with over 20m Australians making digitally enabled payment transactions either over the Internet or points of sale (PoS) terminals using mobile payments or smartphone apps (up 12% year on year).

Despite the large percentage of its citizens owning bank accounts and credit cards – the World Bank calculates that everybody in Australia aged over 15 has a bank account and 60% have credit cardsvii – evidence suggests that alternative methods of funding e-commerce transactions are growing in popularity. Statistaviii estimates consumers spent US$3.9bn on electronics and physical media via e-commerce platforms in 2019, an increase of 5% in 2018. And PPROix calculates the overall percentage of e-commerce transactions conducted by credit card at 52%, while 22% were completed using some form of electronic wallet (eWallet) and 22% via bank transfer.

A small portion of the remainder is also likely to have been completed via direct carrier billing (DCB), though Australian telcos need to distance themselves from the mistakes made with downloadable ringtones, game content and other digital transactions precipitated by immature billing platforms between 2010 and 2015, and subsequent fines from the country’s telecommunications watchdog. Vodafone Australia’s current DCB service while subject to tighter regulation, as a result, has been greatly improved after deploying DOCOMO Digital’s payment platform-as-a-service. This managed service helped Vodafone Australia comply with the new regulations while being able to bring onboard new merchants like Netflix, Amazon Prime and Spotify Premium. Vodafone Australia’s post-paid subscribers can add these services to their phones bills, and access billing information through a self-care portal. Netflix subscriptions were also made available to Telstra’s post-paid customers via DCB in May 2019, with a simple checkout process that led to better sign-up rate.

When deployed carefully, addressing the data protection and other regulatory requirements, DCB offers a fast, convenient, and relatively secure way for mobile phone owners to easily pay for content and for OTT video providers to reach a wider audience.

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