Online tussle for video on demand
SEVEN months ago I wrote a column noting the further demise of DVD rental and retail CD businesses as music and video on demand started to expand from the awkward and expensive service provided by itunes and Xbox.
I took a ballpark guess that by 2014 we’d have decent competition, with Spotify operating locally, and that Australian Quickflix was likely to be an early mover. As usual, internet reality moved a lot quicker. In November, it was ‘‘leaked’’ that Swedish online music streaming service Spotify was coming to New Zealand and Australia with its monthly all-youcan-eat peer-to-peer service.
Two weeks ago, Quickflix announced it was gearing up for a May launch of its video streaming service in New Zealand. Punters will be able to consume older movies and TV shows on their computer, TV and Playstation for $9.99 a month. In addition, it will offer a $6.99 pay-per-view option for new release movies.
Two internet service providers have jumped on the Quickflix bandwagon with both Orcon and Slingshot offering zero-rated broadband for customers when they consume Quickflix content. So if you connect to the web via these two ISPS, you can view the latest movies for $6.99 a shot.
This is cheaper than I pay to rent DVDS at my neighbourhood rental, better for the environment, plus I get to avoid embarrassing phone calls with my wife as we disagree over which DVD to rent.
Quickflix said it was seeking to work with other ISPS and noted that broadband data caps in New Zealand were restrictively low.
It also suggested it wasn’t just data caps constraining competition but that ‘‘antisiphoning’’ laws should be introduced to prevent broadcasters like SKYTV siphoning off exclusive rights to sporting events. Quickflix head honcho Chris Taylor was quoted in The Dominion Post as saying several ISPS had ‘‘ridiculous’’ clauses in agreements with SKYTV that prevented them zero-rating subscription entertainment services such as his.
Taylor’s comments are close to those made by Telstraclear chief executive Allan Freeth to Computerworld about the ‘‘asymmetrical’’ contract his company had with SKYTV.
Freeth admitted Telstraclear was not allowed to source video content from anywhere else and charge for it without going through SKYTV, and that SKYTV had the same deal with the other two large ISPS: Telecom and Vodafone.
Freeth also confirmed that if ISPS like Telstraclear wanted to source extra content, then it had to appoint SKYTV as their agent and pay a fee for the service.
Taken in the abstract this seems a nutty arrangement: one which gives the ISPS content from SKYTV but severely constrains their liberty to enter into arrangements with other content providers. Why would you enter a contract with one provider that means you need to get its permission (and pay it an agency fee to boot) if you want to deal with any other provider?
It’s all about context. For a long time, SKYTV was the only shop in town with heaps of quality content. This was sold to the likes of Telstraclear, who would onsell it at a margin that delivered good returns and enabled them to bundle packages.
Such an arrangement made perfect sense when dealing with the biggest fish in a small pond, and quality content was scarce.
While Quickflix is no big fish, it’s clear evidence the big fish is no longer alone in providing content: Skytv’s pond is being sucked into the ocean. Like the ocean, the internet is a force of nature. Three of the strong currents that flow through it are disaggregation, disruption and consumer empowerment.
Disaggregation is about removing the middlemen and unnecessary overheads.
Disruption comes from the way the web works, delivering packets of data from one place to another, with no regard for their acceptability or context.
And consumer empowerment results from the liberating effect of search engines and social recommendations, which reverse the information symmetry of traditional marketing.
Right now the likes of Telstraclear, Vodafone and Telecom will be working out how their business models will work in this new environment. Meanwhile, SKYTV will be aware Quickflix is the thin end of a wedge that may bring its real enemy: subscription video on demand (SVOD). SVOD subscribers have unlimited access to a large range of on demand movies for a set monthly fee.
So instead of having to wait till Monday night at 8pm to watch that Arnie movie you’ve been waiting for, you can watch it any time – and thousands of others – for a fixed monthly fee.
This fee is transparent and not bundled up with other offers.
SKYTV has history of running a great business and being very commercially focused.
Even now, it is likely there are teams of people working out how to respond to the latest threat and roll it into its next venture: discount pay TV and movie service Igloo.
Meanwhile, I’ll give up making predictions. Mike ‘‘MOD’’ O’donnell is a professional director, ecommerce manager and author. His Twitter handle is modsta.