Whither Netflix ?

In March 2015 Australia became the 50th country in which US video streaming company Netflix had set up a local operation to supplement its planned global expansion in 200 countries. Newcomers Presto and Stan also joined in to further add to the extraordinary rate of growth of all forms of video traffic in Australia, now over half of Telstra’s Internet business. So who is Netflix, and how well might it expand its business in addition to those customers in Australia who are already using virtual private networks (VPNs) to access and pay for their programmes? The company began as a DVD on-line mail rental service in the US over fifteen years ago, but its management always saw the huge potential to use the Internet as –“direct mail on steroids”– for the on-line delivery of movies to homes. Whilst Netflix commendably offers more choice of programmes for Australian viewers, an examination of its business model could hardly support the notion that the established commercial television networks now face a fundamental existential threat. Nor should the notion of “mass digital connectivity” be taken for granted – not only because Australia still has so far go to reach ubiquity of the connection of homes to high capacity broadband, but also because of the serious lack of affordability of direct user pay services for so many Australians. The most likely future scenario is the on-line streamers will be welcomed by a growing number of paying customers, but as a complementary sector to the strong network television incumbents.