Netflix man confirms NZ service will be crummier than the US

Netflix director of corporate communications and technology Cliff Edwards confirms what most following the online streaming video market have already guessed: his company will launch in NZ (in March) with “a subset” of the content available to Netflix users in the US.

The reason is no surprise, either: “Licensing issues,” the San Jose-based Mr Edwards tells NBR. Sky has online rights to a lot of content tied up. But there are other complications: TVNZ is already showing the Netflix original series Orange is the New Black, and the prison drama is also available through local streaming contenders Quickflix and Lightbox.

Has Netflix found Sky TV has more content wrapped up in exclusive deals than traditional pay TV broadcasters in other territories?

Mr Edwards won’t comment. He does add that while it’s usual for Netflix to start with a subset of its parent’s content when it enters a new country, “we ramp up as we go along.”

And, in the long run, “Our vision is to be a global television station so what you see in one territory will be the same as another, or almost the same,” he says.

With a market cap of $US26 billion, annual revenue of $US4 billion, and 50 million subscribers and climbing, Netflix definitely has a shot at becoming a genuinely global service.

Meantiem, thousands of Kiwis already access the US version of Netflix on the sly, aided by ISPs like Orcon and Slingshot, and various free and low-cost bits of software that let you mask your country of origin.

More aggressive geo-blocking?
Will Netflix get more assertive in its efforts to geo-block Kiwis trying to access its US service? That would be one way to foster the NZ version, given its slimmer range of content.

The question matters. NBR's thesis is that if Netflix does make more serious moves to block Kiwis from its US service then, perversely, it's local launch will be a positive for the likes of Spark and Sky TV — who are keenly aware that many are already tapping offshore sources for their online content fix.

“We’re already geoblocking,” Mr Edwards says. “We do try to block content that’s not legally licensed to them.”

But will Netflix get more aggressive in ring fencing its US content once Netflix NZ launches?

“It’s hard to say given we don’t even know how many people are accessing [Netflix US] from New Zealand,” Mr Edwards says.

NBR tries to point out this is tangential logic, but the Netflix exec is not interested in addressing the question directly.

Does Netflix have a handle on how many Kiwis access its US service?

“No, there’s no way to really track people who use VPNs*. It’s like playing a game of whack-a-mole, people who use a VPN just pop up again [if they’re blocked],” he says. Another option would be to crack down on people who are paying for Netflix using an offshore credit card.

What about Unblock-us, one of the makers of geoblock-busting software, which guesstimates there are around 30,000 Kiwis accessing Netflix US? Or Nielsen’s report that 25,000 New Zealanders visited Netflix.com during September?

 “It’s very difficult to put any credence to those figures,” Mr Edwards says. “The figures are all over the map. We don’t think it’s a massive problem.”

NBR has other questions, such as the content line-up, whether any content will be commission for Australasia (Netflix has a small put growing pool of its own shows in the US); what pricing will be; whether they’ll be an Apple TV app (as in the US) and other device support; and whether Netflix will have boots on the ground in NZ.

Mr Edwards answer to all is to chuckled and say more will be revealed closer to Netflix’ March 2015 launch date across Australia and NZ.

10% of Kiwi homes
What about the 10% figure that’s being bandied about?

Mr Edwards says Netflix goal is to gain 10% of the market among NZ households with broadband (that is, almost all of them these days). But he won't say if that's in the first 12 months, the first five years, or whatever point before the Sun becomes a red giant and engulfs the Earth.

Sky says it will launch the $20-a-month Neon TV in December. Like Netflix in the US, and local contenders Lightbox ($15/month) and Quickflix ($12.99), it will let subscribers download all the shows they want for a fixed monthly fee. Neon content will be delivered over an internet connection to an iPad or computer, with options to watch it on a regular TV via wi-fi gadgets or HDMI cable.

The modest nature of Netflix initial launch won't have Sky TV shaking in its boots. But investors' concern (and perhaps that of already departed major investors Todd Corporation and Craig Heatley) has to be death by 1000 cuts. It might not be Netflix or Lightbox or Quickfix or EzyFlix or Coliseum Sports Media or YouTube that dilutes Sky's position, but the cumulative impact of countless "over-the-top" content providers, especially as it becomes easy and easier over time to watch broadband-delivered content on a regular TV. 

The real winners could be those who make content (like HBO) and those who deliver it into homes (like Chorus).

Key developments to keep an eye on include HBO's plan to sell content directly to viewers, and telcos bidding for online sports rights then using them as a loss leader.

ckeall@nbr.co.nz

Follow @ChrisKeall

* A VPN or virtual private network is one of the technologies used to beat geographic restriction on online content.