Netflix landed on Australian shores on March 31st 2015, at least without using a VPN to access its US cousin. While the initial offerings were a bit underwhelming, as the catalog grows so to does the customer base, but are people dropping Foxtel like many predicted? The answer is “no”. In reality, many people have both Netflix and Foxtel because Netflix is so cheap, the common plan is $12 per month. This is smart positioning by Netflix, if they charged more in Australia than in the US, the Australian consumers would avoid them out of principal but more importantly, they have a relatively small cataogue and the low price has avoided a product war with a strong competitor.
When Netflix launched, Foxtel had around 2.8 million subscribers, thats roughly a third of Australian homes and that number has hardly changed. However, when it comes to Streaming Video on Demand (SVOD) services, Netflix has taken Australia by storm shooting well ahead of local rivals Presto and Stan. Netflix has done so well that Foxtel is now debating whether to put Netflix on its upcoming “puck” streaming device. It would seem that Foxtel have been doing some research on their consumers expectations. People don’t want another “box” in their house, they want to stream from their laptop, tablet or smart phone, often the don’t even watch it on their TV.
The standard Netflix package is just $12 per month, Foxtel’s comparable package was $49 per month , however, in November 2014 Foxtel slashed their base plan by 50% to just $25 with no contract. For years Foxtel had a monopoly over the on demand market and they held their customers to ransom. While other companies that had to compete were always improving their offerings, Foxtel remained static and this kind of complacency is not accepted by todays consumers. This has affected how consumers , myself included, have evaluated the service. For years I had no real option for premium content and Foxtel knew it. Foxtel would refuse to bargain on cost, when other service providers would, and I begrudingly stayed with them.
But Foxtel has learnt from this mistake, the frontline staff are now more empowered to resolve issues, largely in the form of upgraded packages or reduced costs and this can change customer dissatisfaction into satisfaction. Foxtel have also just launched a new marketing campaign, video below, on 20/3/16 that is all about the consumer, it is actually called “empowering the consumer” and comes with the tag line” Make it Yours”. The ads are focused on the consumer and push two key benefits of the Foxtel platform: content selection and streaming ability, this is to tackle not just the SVOD market but also the Free to Air (FTA) market.
It is important to consider the level of customer involvement when purchasing a product like Foxtel. For an existing customer this is low involvement, it probably just comes out of your account manually, you may not even realise. However for new customers the level of involvement is very high. Trying to compare what you get for how much and how you can view it can very difficult for the average consumer. One of the biggest things Foxtel has going for it is live content… SPORT, oh and Game of Thrones! However when the price is as low $12 per month for Netflix many new consumers will default to this as the easy option when presented with such complicated choice.
So, will consumers give Foxtel the Netflix..? No, not in the short term at least. The Netflix catalogue is just not big enough and the appeal of live sport is too great for many Australians. But we should all thank Netflix for providing the competition that Foxtel needed.
Daniel Morgan / 214533584 / danielmorgan8