US streaming video-on-demand giant Netflix is going global by keeping content local, making it as easy as possible for internet service providers to get hold of the content, and making it faster to access for locals.
After months of speculation, Netflix announced on Monday that the service will launch in Australia from Tuesday with three pricing tiers:
- Standard definition for one stream at a time for AU$8.99 per month
- High definition for two streams at a time for AU$11.99 per month
- Ultra-high definition and high definition with up to four simultaneous streams for AU$14.99 per month.
The entry-level price puts Netflix on par with rival streaming services Stan, Presto, and Quickflix, focusing the battle for subscribers entirely on the content on offer.
Behind the scenes, Netflix has been working for months to prepare for the local launch in Australia. ZDNet first revealed last year that Netflix had been in discussions with local content owners to get the rights to content in Australia ahead of the 2015 launch, but much more went into the launch outside of the content negotiations.
Speaking to ZDNet on Monday, Netflix's Cliff Edwards, director of corporate communications and technology, said the team was on the ground months in advance with product planning, talking to partners and working on what devices to make the service available on at launch.
"It's a very long and very involved process," he said.
iiNet and Optus have both announced that customers can access Netflix unmetered, with data downloads not counted against their monthly quotas. This places Netflix at a competitive advantage over rivals like Stan and Presto, which still have data counted.
Edwards said this is not in breach of the company's strong stance for net neutrality, because it is the ISPs themselves that made the decision to offer the data for free.
"That's something they decided to do because we bring the bits closer to the customer to ensure a better experience," he said.
Netflix has an open peering policy, and is peering out of Megaport, Equinix, and NSW-IX in Sydney. This makes delivering the Netflix traffic from the Australian library much easier for Netflix and the ISPs.
"The idea is essentially they don't have to pay as much for the use of the trans-Pacific cable to get the content, so they can pass on the savings to customers," he said.
The use of local content distribution networks (CDNs) could potentially place Netflix in breach of Australian copyright law, as it is unclear and untested whether the practice is acceptable. Edwards said that Netflix cleared it through the content deals signed with the owners.
"When we acquire licensing rights from content owners, that's all part of our licensing."
So far, no ISPs other than iiNet -- its subsidiaries such as Internode and Adam -- and Optus have offered Netflix unmetered, but Telstra has announced that streaming from Foxtel's Presto will not count against monthly download quotas for BigPond customers.
The catch for unmetered Netflix will be that customers accessing the Netflix library in another country, such as the US or the UK, will still have that data counted towards their monthly limits, because the data will still have to travel back from those locations.
It has been estimated, but not verified, that as many as 200,000 Australians have been accessing Netflix using virtual private network (VPN) services to make their IP address appear in the US or other locations where the company is already operating. Edwards said people would eventually look to give up the VPNs as the library grows.
"A lot of people are surprised that the library is as robust as it is," Edwards said.
"You [also] don't have to factor in VPN prices, and the potential for disruption because you're going such a distance to get content. VPNs are going to be a historical footnote for a lot of people, because as you bring all of the content catalogues into parity, there is no need to go to another country to watch a particular service."
The library for Australia, which was reportedly leaked last night, contains much of the original Netflix content, including House of Cards, Unbreakable Kimmy Schmidt, and Orange is the New Black. However, there is still a significant discrepancy between the Australian and US libraries.
Netflix now approaches its content negotiations looking to sign global deals to get access to TV shows and movies in every country at the same time to avoid library discrepancy, but it will still take a while for Netflix to get to a single, global platform for content.
In Australia, for example, prior to Netflix announcing its local launch, the company signed a deal for Foxtel to air Orange is the New Black. The company did not initially have the rights to the third season of its own show, which is due to air in June.
Edwards said that Netflix has subsequently negotiated an agreement with Foxtel so that Foxtel can air the third season week by week, but the whole season will be dropped on Netflix in Australia at the same time as the rest of the world.
The shift towards a multi-technology mix model of the National Broadband Network (NBN), bringing with it a move away from high-speed fibre to the premises to fibre to the node, fibre to the basement, and hybrid fibre-coaxial (HFC), has caused some concern that Australia's broadband will not cope with the arrival of Netflix.
Edwards said the situation facing Australia was better than that in Mexico when the company launched there.
"When we launched in Mexico, the Mexican connections were much worse than what people say Australian connections are. You can get with 1Mbps a pretty good streaming quality from us. We recommend 3Mbps for HD, so it is not requiring a huge amount of bandwidth," he said.
Netflix's own site recommends a minimum of 5Mbps for HD. Edwards said Netflix had worked to ensure HD could work on slower connections.
"We spent a lot of time making sure you can get a good HD picture with very little bandwidth. The majority of people here can get pretty decent HD pictures; I don't think that is really an issue."
He said that the change will come when people demand 4K services on Netflix.
"As people stream more and more, they will demand more from broadband providers and that puts pressure on broadband providers to make sure people have access to high-speed connections," he said.
As of launch tomorrow, Netflix faces local competition from the Nine-Fairfax joint venture Stan; the Foxtel streaming service Presto; Quickflix; and a number of smaller ventures including Dendy and EzyFlix. Edwards said he believes there is possibly room for two or three streaming services in every country.