Stephen Langsford, CEO of Australian DVD rental and video on demand streaming service Quickflix, has hit out at international competitor and current streaming king Netflix, saying that the US video on demand giant should play by Australian rules and therefore block access to its estimated 200,000 current Australian subscribers, who are accessing Netflix through a method of uncertain legality.
Disclosure: Campbell Simpson previously owned shares in Quickflix (ASX:QFX).
The one-page letter, reproduced in full below, is upfront in its attitude: "If you want to compete in Australia, come in through the front door." Langsford and Quickflix are fighting against a company that is not playing on a level playing field -- Netflix does not operate an official service for Australian customers and does not hold the rights to distribute its licensed content in Australia, and Aussies that access the service do so through various geoblocking circumvention tools like VPNs and DNS unblockers.
The letter says Netflix is getting a "free ride", taking away revenue from "local services" (that'd be Quickflix). It also says that if Netflix continues to "filch revenues", competition from Quickflix and other local services will be unviable and Aussies will "suffer in the long run with fewer choices, less compelling offerings and higher prices." It isn't immediately clear how continued illegitimate access to Netflix will raise prices for Australian users, though.
"So Mr Hastings, we challenge Netflix to play by the rules. It's how we do it here in Australia." The argument is mostly emotional, and is likely tailored to tug heartstrings rather than present reasoning that will sway existing Aussie Netflix subscribers from continuing their plans.
In the letter, Quickflix says it has almost half a million devices registered to access its online streaming service. Quickflix's just-released annual report says the company has 122,682 paying Australian customers, around 60 per cent of Netflix's established Australian user-base (according to vague estimates).
According to similarly brand new research from (allegedly) independent group IHS Technology and the Australian Home Entertainment Distributors Association, Australia is the cheapest place in the world to watch SD and HD video on demand, with average prices of $5.19 per HD movie and $4.25 per SD movie across 36 digital platforms. This research, though, very clearly does not take into account the all-you-can-eat nature of services like Netflix and Quickflix that offer tens of thousands of movies for a monthly flat rate.
The local streaming service will also face strong local competition from StreamCo, the imminent video on demand offering from a partnership between Nine Entertainment Co and Fairfax Media. StreamCo is a $100 million venture to capture Australian streaming viewers, and a competitor to the already-launched Presto of Foxtel and Seven West Media.
Quickflix also released a fact sheet on the difference between the two companies. Of particular interest is the fact that Quickflix subscriptions include access to HBO TV series where Netflix does not -- in the US, HBO is a competitor to Netflix. It is, however, apparently considering offering its HBO GO online service without a mandatory bundled cable television subscription. The base price of Quickflix versus Netflix plus a VPN is also compared -- $9.99 versus $15.70 -- but does not take into account free services like Hola or free VPNs.
Let's be clear: to the best of my knowledge, there is nothing obviously illegal about accessing Netflix from Australia -- 'obviously' being used in the legal sense. It is definitely of dubious and uncertain legality, though, because Section 10 of the Copyright Act 1968 makes it an offence to circumvent an access control technological protection measure which is in place to protect copyright. Because case law has not been established and tested in the particular circumstance of VPNs, the legal community is split on whether geoblocking is a protection measure in the strictest sense.
In any case, there is a moral argument that Australian citizens should be paying local rightsholders for the rights to access copyrighted materials, and this is the argument that Quickflix is making today. Whether Netflix takes any notice, and whether Netflix's Australian users take any notice, is another question entirely. [Quickflix]