The Netflix Problem

Every time somebody complains about Australian TV choices, Netflix gets brought up as the gold standard that “we really all should have”. Here’s why that’s not quite the whole story.
Don’t get me wrong; what Netflix has managed to do in a relatively short space of time is quite impressive. It’s transformed itself from a DVD-by-mail operation — a losing battle I’d say in the current entertainment climate — into an entertainment powerhouse, especially in the US.
But you can’t officially get Netflix here.
Undeniably, there’s a segment of the population using any number of geoblock-dodging applications, from Unotelly to Hola to Unblock-US to get around the technical issues, and Netflix doesn’t seem that fussed about the location of a credit card used to pay for its service. I’d be pretty certain though, that if they felt like it, they could cancel your service for a breach of terms and conditions, and you’d have very little comeback.
Still, while it’s held up as the gold standard, there are issues. We discussed some of them in a recent episode of Vertical Hold, which you can watch below:

But that discussion focused around whether or not Netflix would become available locally, as well as briefly touching on the fact that while Netflix has a lot, it doesn’t have everything.
What it does have are some interesting problems.

Netflix is still the all you can eat model

Everyone has the programs that they love. I could watch Doctor Who, Red Dwarf, Chelmsford 123 and The Young Ones until my eyes bled, but that might not be to your taste.

It’s a common complaint against services like Foxtel that you end up paying hundreds of dollars for a lot of programming that you don’t actually want to watch, but that if “you” had the choice, you’d just take a bit of a la carte programming, picking the channels that you wanted and leaving the rest.
See also: A La Carte Pay TV: Why it won’t happen
Leaving the economics of that aside for the moment, this is exactly the model that Netflix uses. It’s just cheaper — or at least cheaper for now, presuming the Australian dollar doesn’t collapse any further against the greenback.
There’s an interesting contrast here with some rather more niche services emerging. I’ve made not secret of the fact that I’m something of a fan of professional wrestling, and the largest wrestling organisation on the planet, the WWE, has recently launched its own Internet-only network. In a fit of pure originality, it’s called the WWE network, and for $US9.99 a month, it’ll offer up a smorgasbord of wrestling, including current live pay-per-view events, meaning that if you were a wrestling fan it’s quickly cheaper than just buying a single Pay-Per-View event.

While the WWE loves to crow about the size of its audience, the WWE Network is still a niche play, in the same way that if the AFL launched an AFL Network, that’d be a niche play. If you’re not interested in the content on offer, there’s no appeal whatsoever, but this is what so many people say they want — total control over their media choices. WWE says it’s launching its Network in Australia in late 2014/early 2015, and it’ll be interesting to see how it’s priced down under.
Still, that’s not the Netflix model — or at least not yet. You’re still paying for everyone to have everything, rather than paying for the content that you actually want.

Netflix doesn’t exist in a vacuum

This is the other commonly overlooked factor with Netflix. While it does produce its own programming now — most recently the excellent House Of Cards — the quantity of programming it’s making is a real drop in the bucket.

House of Cards is good stuff, and as a long term comics geek I’ll be keen to see what they make of Luke Cage, Iron Fist and Daredevil, but they’re still not producing all that much actual programming.
Would you pay US$9.99 a month for 1-2 hours of content? Because in terms of original series, that’s all Netflix has going right now. It seems likely that will ramp up, but still, the vast majority of its content comes from outside sources.

The movies side of things mostly takes care of itself in a financial sense through cinemas, direct sales and finally then TV rights, but without the big US (and in lesser scope, European) networks producing TV for Netflix to buy options on, there’s not much at all to see. Netflix is part of that ecosystem, but that still means you’re talking about traditional, free to air television, supported largely by advertising. If Netflix is going to eat them up, then it’s going to be left with very little to actually show apart from re-runs of the A-Team.

Did I just put this video in to earworm you? Yeah.

If that model is dying, and Netflix is the replacement, it’s going to need lots of cold hard cash to make it happen, and the easiest way that it could do so would be by the same method that so many people rail against right now.
That’s right. More advertising. It’s something that plenty of people moan about in relation to Foxtel. I think that complaining is justified to an extent, because you’re paying for the service and you’re therefore a customer, whereas with free to air you’re the product that the stations sell to the advertisers.
How happy would you be with an ad-heavy Netflix? Or a Netflix that charged double to make up its programming costs?
Right now, you can access Netflix from Australia, but even leaving the legal grey area of whether or not you should, the simple truth is that the whole model is supported by the millions of Americans paying for it. If Netflix suddenly had to relocate to Australia and exist purely off local subscribers, they’d be gone faster than a speeding bullet.

That doesn’t mean that Netflix is doomed, any more than it means that traditional TV models are doomed. It’s all an evolving market, and none of these problems are insurmountable. I’ve no doubt it’ll be fascinating to see where video-style entertainment and its delivery goes over the next decade.
However, simply holding Netflix up as the “gold standard” of where TV must go ignores a lot of cold, hard reality.

3 thoughts on “The Netflix Problem”

  1. Good summation.. however it is still the current gold standard that Australians want Quickflix and other up-starts to become.. Just like all the FPS games get compared to CoD.. it’s a gold standard for a reason, whether that ignores the cold, hard truth or not, it’s still the gold standard. I’ll continue to use Netflix until either Quickflix or similar get their acts together (and I wouldn’t mind paying the extra amount) and/or I get kicked off Netflix.. I always said I’ll pay for non-scheduled (ie. on-demand) content as long as it is reasonably priced and while it may be a grey area legally/morally, I am happy with the $8 for Netflix.

  2. I think you are right in many points, but miss the main one – netflix is so cheap that it doesn’t matter that it has a lot of content you are not interested in. Your WWE example shows, a single niche content would actually cost more than netflix overall.
    Yes, it doesn’t have everything but it is so cheap that combined with the odd iTunes rental, SKY and other pay TV options become almost redundant. I haven’t watched much live TV since I got netflix working….

    1. Not missing that entirely salient point at all, and I’m sure it’s how people justify it. That’s why I led with it into my second point; if Netflix becomes the dominant market, it’s got to fund new programming somehow… at which point, prices go up for the multi-use package. That, and as I pointed out later, the reason Netflix can offer prices like that is because of mass demand, primarily from the US market.

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