How Channel Nine Killed Quickflix, Australia's Streaming Pioneer

Quickflix became the first victim of the streaming wars in Australia yesterday, announcing it is in voluntary administration, a move many anticipated.

The company founded in 2003 by CEO Stephen Langsford’s garage in Perth, was originally, like Netflix, an online DVD rental service where customers paid a flat fee to have an unlimited number of DVDs delivered to their door.

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Building upon that DVD delivery service, Quickflix aspired to become an online community for movie buffs, with Langsford saying in an interview from 2005 that “Quickflix is building an online community of people sharing their movie reviews and ratings information and we now have over one million ratings of titles”.

“The real blue sky around Quickflix is where the community might intersect with the likes of or”.

Its IPO in May 2005 got off to a shaky start, struggling to get enough investors to raise $3 million to float, but listed on the ASX one month later.

At the time, there were no Netflix, Stan or Presto. Quickflix had just acquired one of its rivals, the James Packer-backed HomeScreen, almost doubling its customer base and its biggest rival was Telstra’s Bigpond Movies.

To fight Telstra’s might, Quickflix signed distribution deals with nearly every big Australian online player, including Ninemsn, Optus and Yahoo!

A year on, in 2006, Quickflix entered the digital movie space, with online downloads to match the Bigpond Movies offering. There were no smart TVs a decade ago, so users had to download to a computer and use a set-top box to watch it on a TV.

“It’s more about facilitating consumers to get their set-top boxes and get their PC wired to their television screen,” Langsford said in an interview.

In 2011 Quickflix announced its move into streaming, becoming the first in Australia to offer all-you-can-watch for a set fee. At first it was limited to just 300 movies for $14.95 a month via a Sony TV or Blu-Ray player. Competitors only offered rental services on demand.

Quickflix’s downfall began in 2012 with a move that was meant to be a massive boost. US cable giant HBO made a $10 million investment in the company for 83.3 million preference shares – equal to a 16% stake. On top of the extra capital, the deal gave Quickflix HBO’s back catalogue of TV shows.

Despite HBO’s involvement, and 95,000 paying subscribers, 2012 was rough for Quickflix. A third of the staff were sacked and cash reserves ran low as the company looked to renegotiate content deals with studios. The idea was to offer “season passes” to a TV show.

“We think [a season pass] would be an exciting proposition in the marketplace,” Langsford said at the time.

“There’s fantastic TV out there with Hollywood-level budgets, and given the episodic nature of TV, we think a payment model like this would prove popular with consumers.”

But finally, in July 2014, Quickflix’s fate was sealed. It had failed to sign any meaningful content deals and subscriber numbers were stagnant. HBO wanted out.

The US giant sold its shares to Nine Entertainment for just $1 million, just 10% of what it paid. Nine, just months away from launching its own Quickflix competitor in the $100 million Fairfax joint venture, Stan, became the majority shareholder.

Australia’s impending streaming revolution in Australia and the imminent launch of Netflix, the company which Langsford had modelled his own off, Quickflix needed a restructure.

However at every step, Nine, wanting to protect Stan, made it hard to do anything.

Nine’s preference shares rank ahead of ordinary shareholders for dividends and capital returns. And the value, $11,653,329, has to be shown on the books as a debt.

Quickflix says that Nine would only accept the restructure if it was paid $4 million in cash – money Quickflix didn’t have – or make a payment of $1.25 million, as well as transfering all its customers to Stan, becoming a subset of the company and removing the competition.

Quickflix tried to raise $5 million in May last year to buy out the shares, but managed just $750,000 in capital raising.

By mid-2015, after the launch of Netflix, Stan and Presto, the company was losing 5000 subscribers a month and bleeding cash.

At this point, Quickflix tried several options. They all failed. The first, which looked to be its saving grace, was a deal with Presto, giving Quickflix content and Presto a much-needed distribution platform, plus software.

It was the perfect deal for both sides — until Nine blocked it.

“Neither Nine Entertainment nor Stan have ever participated in any capital raisings to assist Quickflix’s growth and its ability to raise capital from any source has been constrained,” the company said yesterday.

Of course it was not all Nine’s fault, Quickflix made plenty of mistakes before the TV company came on board.

And were also other failed deals, such as attempting to get into the Chinese market in August last year.

But at the end of the day, the moment Nine, which had more important interests to protect, bought the Quickflix shares, the fate of Australia’s pioneering streaming service was sealed.

Business Insider reached out to Quickflix and CEO Stephen Langsford for this story, but we’ve not yet heard back. We’ll update the story when we do.

Disclosure: Stan is a 50/50 joint venture between Nine Entertainment and Fairfax Media. Allure Media, the company which publishes Gizmodo Australia, is also owned by Fairfax.

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