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Netflix New Zealand Dominance is Forcing Market OTT Video Streaming Reshuffle

April 24, 2020

Filippo Giachi

VP – Asia, Middle East & Africa

Most of New Zealand’s 4.8m citizens (93%) are active Internet users, and the smartphones are playing an increasingly integral part in their online entertainment and eCommerce activity, which is set to increase in 2020 with the wider availability of fifth-generation (5G) network infrastructure and services.

The vast majority of 16-64-year-olds (which make up 63% of the country’s population, according to GlobalWebIndex) own smartphones but the use of other devices is also high – laptops and desktop computers 84%, tablets 48%, games consoles 37% and streaming TV devices 25%, for example. Citizens in that demographic spend an average of just over six hours a day accessing the Internet using a combination of those devices, compared to just three hours spent watching television and forty minutes using a games console.

Average mobile Internet connection speeds in the country are high, hitting around 55Mbit/s according to Ookla speed tests conducted in January this year; an increase of 28% compared to January 2019. Yet they are still significantly slower than the average bandwidth offered by fixed Internet connections – 103Mbit/s – in a country with a mature fibre broadband infrastructure. Despite the gap in capacity, the share of web traffic by the device in the country is split almost identically between mobile phones (46.8%) and laptops and desktops (46.3%) for now, even as mobile is expected to take the lead looking ahead.

Mobile phone coverage is already among the best in the world, with 96% of all connections being either 3G or 4G enabled. Both Vodafone New Zealand – divested from the Vodafone Group in a  US$3.4b sale to two private equity companies in July 2019 – and Spark, already offer limited 5G coverage in certain parts of Auckland, Wellington, Christchurch and Queenstown, for example. However, much of it is focussed on fixed wireless broadband, in areas where wired equivalents are either scarce, slow or expensive. The country’s third mobile network operator (MNO) – 2degrees – is still working on a timeline for 5G deployment and appears in less of a hurry to roll out infrastructure and services.

SVOD penetration and revenue

The availability of faster, lower latency and more reliable 5G mobile networks is expected to drive greater consumption of entertainment content on smartphones, including games and video. That will include OTT streaming services, both free and subscription-based, with New Zealanders already proving to be avid watchers of subscription video on demand (SVOD) services available in the country. Like other countries impacted by lockdown restrictions imposed in response to the COVID-19 epidemic, those subscription numbers will likely have surged in March and April of 2020.

GlobalWebIndex reports that 94% of citizens aged between 16 and 64yr watched some form of online video in the third quarter of 2019, for example. Almost three quarters reported that they watched TV content via a streaming subscription service each month with 76% saying they use mobile entertainment video apps.

A survey of 1,000 citizens commissioned by the Office of Film and Literature Classification and conducted by UMR Research last year also found that 77% of New Zealanders have used a paid online service for watching movies or TV shows. Of the various commercial video streaming services in the country, Netflix dominates. Netflix.com was the 6th most visited website in New Zealand in January 2020, according to market intelligence platform Similarweb, while reports from Nielsen Data suggested Netflix had access to as many as 1.2m New Zealand subscribers (not necessarily all paying) by the start of 2018.

That number rose almost 36% year on year, to hit almost 2m by mid-2018. according to figures compiled by Roy Morgan Research. And almost three-quarters of 72% of respondents surveyed by UMR Research said they subscribed to Netflix, compared to 30% for Lightbox, 12% Amazon Prime Video and 10% Sky TV’s Neon (though it should be noted that with shared accounts and multiple screen viewing options, not all are paying subscribers).

Netflix dominance has forced market reshuffle

Reports suggest the dominance of Netflix was one of the reasons behind Spark’s decision to sell its own video streaming service – Lightbox – to rival Sky TV for an undisclosed fee. Having launched a year earlier than Netflix in 2014, Lightbox reported having 300k nationwide subscriptions in 2018. However, that figure appears to have fallen considerably to 130k by the time the deal was completed in February [2020]. How the merger will affect Lightbox’ existing pricing policy is yet to be revealed. The company previously charged around US$7.72 a month for its Standard Plan (two screens), rising to US$9.50 for Premium Plan that offers viewing on four screens simultaneously. Single titles can be rented for US$3 or US$4.16 for newly released films. By contrast, Sky TV’s existing Neon OTT video platform has recently revamped its pricing to deliver a single plan costing US$8.90 a month. Whatever the future holds for Lightbox now, it will continue to be offered through Spark’s mobile and broadband services once it has launched in mid-2020.

Both Neon and Lightbox subscriptions still look to offer better value than Netflix however, which increased its New Zealand prices by up to 19% last year, with its Premium plan rising to US$13 a month, Standard costing US$10.11 and Basic US$7.14. Adding to the mix is Disney+ which launched in New Zealand in November 2019, costing a more reasonable US$5.95 a month or US$59.50 a year.

Another provider, Quickflix, was something of a pioneer in the New Zealand video streaming market when it first launched in 2012. However, the company has changed ownership and strategy after entering administration in 2016. Reflecting the intense competition from Netflix and others, Quickflix tried various approaches, including a transaction video on demand (TVOD) service available on multiple devices and platforms and focussing exclusively on movie rentals rather than TV series. However, at the time of writing (April 2020), it’s future looks uncertain.

Following Spark’s sale of Lightbox, the MNO still operates its Spark Sport OTT streaming service, launched to coincide with the 2019 Rugby World Cup, and providing access to live coverage of various tournaments ranging from the English Premier League to F1 racing and NBA basketball. Vodafone NZ doesn’t have a streaming service of its own, but launched its Vodafone TV service in 2019, based around a broadband TV STB which offers various preloaded apps, including Netflix and Amazon Prime Video to subscribers.

Elsewhere local broadcaster Television New Zealand (TVNZ) has an OnDemand platform that offers a library of its free to air content. At the same time, the country also offers a range of small, specialist SVOD and AVOD services which offer limited content tied to specific topics and hobbies. With English as the national language, few SVOD providers in the country find the need to produce regional focussed content, though Lightbox has commissioned original New Zealand productions.

Mature mobile eCommerce and payment landscape

Usage and penetration numbers suggest that New Zealanders are comfortable paying for SVOD content and have adequate means to do so. Almost every adult in the country (99%) has an account with a financial institution, and associated credit/debit card ownership is also high at 61%.

Overall, eCommerce activity is well developed too, with the World Bank financial inclusion data estimating that 80% of adult New Zealanders make purchases or pay bills online. Statista’s Digital Market Outlook calculates that 3.7m New Zealanders purchased goods online in 2019, spending just over US$3bn collectively in the process (and around US$835 each). The 2019 and 2020 editions of PPRO’s payments and e-commerce reports put those figures even higher at US$4n for total business consumer (B2C) e-commerce spend, averaging US$1,854 per B2C consumer.

The smartphone is a key e-commerce enabler too, with a third of the total B2C spend conducted on mobile devices, estimates PPRO. GlobalWebIndex figures suggest that 72% of 16 to 64yr olds purchased a product online in the third quarter of 2019, with 51% doing so using a laptop or desktop computer and 37% via a mobile device.

Preferred e-commerce payment methods vary but are dominated by credit cards which account for 55% of transactions, alongside bank transfers (18%) and cash (5%). New Zealanders have also shown themselves willing to adopt new digital payment methods, with 19% of B2C e-commerce spend in the country being conducted via electronic wallets (eWallets) – popular versions supplied by Google Pay and Apple Pay, as well as bank branded services like ABS Pay and Westpac Pay. Half of all 16-64-year-olds in the country use mobile shopping apps, and 55% banking apps according to GlobalWebIndex, with other activities including the use of QR codes to facilitate purchases (25%), using the smartphone as a ticket or boarding device (29%) and transferring money to friends or family (56%).

That fact that 45% of mobile phone accounts in New Zealand are post-paid rather than pre-paid lays a strong foundation for further expansion of the mobile eCommerce and payments market. That should have a knock-on effect on video streaming services, with each of New Zealand’s three MNOs now seemingly backing three different services in their face for subscribers. Spark has its partnership with Sky TV, while rival Vodafone NZ offers 12-months of free Netflix subscriptions to customers on its premium mobile plans, which automatically revert to standard monthly charges on completion.

And Amazon Prime Video, currently priced at NZ$9 a month, is available through mobile subscriptions to 2degrees services, with the first 12 months of access free through the MNOs unlimited data plans, with additional payments charged to subscribers fixed or mobile broadband accounts.

With New Zealanders strong demand for streaming video only expected to go north, the MNOs could consider leveraging third-party payment platforms to enable subscriptions with multiple providers simultaneously.

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