'Here is the PWC report that made my tummy compass spin'

"Here is the PWC report that made my tummy compass spin."

So tweeted of Australian Broadcasting Corporation MD Mark Scott yesterday in reaction to a new PwC survey on the impact of services like Netflix.

As the head of a traditional broadcaster, Mr Scott's tummy compass should have been gyrating for some time.

And in both Australia and here in NZ, the landscape is about to get a whole lot more complicated.

Sky TV tells NBR it's still on track to launch its Netflix clone, Neon, by the end of this month. Tick tock.

Netflix itself has confirmed it will launch in Australia and NZ in March, with a "subset" of its US content but ambitions to grow.

The developments just keep on coming, this week Google launched its $61 Chromecast into NZ, a thumb-size gadget that makes it easier to watch content from services like Google Play and Quickflix on a regular telly (and which extends Quickflix' lead over Spark's Lightbox in the race to support as many video-delivering platforms as possible).

From February Sky TV will kick-off an 18-month, $100 million swap-out project to modernise the 460,000 or so older decoders amid its customer base of 875,000 or so — making all decoders on its network PVR-capable for the first time (though the feature will only be enabled for those who pay). Sky Go ondemand content (currently computer and tablet only) will also be added to decoders, giving them a Neon-like feature (although it won't be called that). The upgrade will effectively double Sky's satellite capacity, because it will no longer have to broadcast a lot of content twice to accommodate viewers with older settop boxes. Sky tells NBR the extra bandwidth will be used for more channels and/or broadcasting more in HD or, down the track, ultra HD (4K). *

NBR expects a major Freeview announcement around hybrid broadcast broadband in the new year.

And sports-focused online Kiwi contender Coliseum will expand into golf from January.

ABOVE: A snipped from PwC's report. Click to zoom.

So what was it about the PwC report that gave the ABC boss butterflies?

The consultancy reckons the online video tremor is turning into a quake.

Up til now, analyst wisdom has been that services like Netflix are not an extreme threat to traditional broadcasters.

Pay TV subscriber numbers have been stable because people use streaming video ondemand services as a complement, not a replacement (and although it has a handful of its own shows, Netflix' focus is no back-catalogue content, and it doesn't do sports).

But the PwC study finds more and more customers are also using Netflix, or its smaller rivals like Hulu or Amazon Prime.

That translates to customers paying for fewer premium channels from their pay TV provider. They're not cutting the cord with their cable TV provider but they are "shaving the chord" as The Wall Street Journal put it in a recent over-view (though see also Bloomberg's TV Subscriptions Fall for First Time as Viewers Cut the Cord, which quotes research that sees a marginal fall to 100.8 million earlier this year from 100.9 million in 2013).

Bundles of channels imposed on you by a pay TV provider is out. Choosing what you want and when you watch it is in.

“Four channels and Netflix—that’s all I need," as one woman in the 21 to 34 bracket told PwC (for me, it's Freeview plus subs to Netflix and Hulu, plus a la carte content from iTunes US for access to contemporary TV series and recent movies).

Sky TV is fully aware of this threat, and how it could play out.

Last week, a Sky insider told NBR the company sees some people taking a Sky Basic sub, then coupling that with Neon. In terms of average revenue per user that's no idea. But cannibalising your own is better than losing them, and it's a way to reach out to a new generation of viewers, and winning back middle-aged types who have already strayed to new over-the-top options (if you were wondering, igloo was never mentioned until NBR brought it up).

The other major trend uncovered by PwC: people are starting to cut the cable chord, especially the under 35s, where subscriptions to traditional pay TV providers dropped 6% in a year (though note this is among those surveyed, not hard figures from cable companies).

Traditional pay TV providers are, finally, getting a bit more flexible in the ways they offer content. And, as noted, Sky TV has big plans later this month with Neon, and through next year. And NBR knows Sky is also keeping a sharp eye on the trend for people to get their viewing recommendations from social media, and mulling how social sharing could be baked into future upgrades.

Still, more and more threats lie ahead.

Will Coliseum make a move on a major sport, in concert with a free-to-air provider, or Spark (and here I'm looking at the way British Telecom bid £900m to steal Champions League soccer rights from ITV and BSkyB, then used football as a loss-leader to push people to upgrade to more expensive broadband plans).

And in 2015, all eyes will be on HBO's move to provide content directly to subscribers via broadband, cutting pay TV providers out of the look if viewers choose. That will happen in the US, and several other countries yet to be named. NZ won't be one of them; Sky recently signed a new, four-year deal with HBO that includes online rights.

Still, it's a taste of things to come. If, like me, you're already dabbling with various US-based streaming services, you'll be aware HBO already has an app on many devices, including Apple TV. At the moment, an extra step has to be inserted into the viewing process before you can sign up for HBO Go and watch its programming on your PC, laptop or (via the likes of Apple TV) a regular telly. You have to shoot off to your Pay TV provider's website to get a code. So HBO going direct would actually simply things. All the technology is there. Expect a lot of commercial and political pushback from traditional broadcasters, however.

ckeall@nbr.co.nz

Follow @ChrisKeall

RAW DATA: Read PwC's report (PDF)

* Sky TV is also open to delivering all of its content over UFB fibre (as Vodafone does already with its clone Sky TV box under their marketing partnership). Netflix' settings screen gives an indication of the stonking amounts of data you can chew through when watching TV and movies over broadband:

The average Kiwi household is on a 60GGB plan, but unlimited plans are increasingly cheap and popular.