Foxtel CEO Richard Freudenstein has said that Netflix is exploiting the rights held by the pay TV company in Australia by allowing Australians to subscribe to the service before it has launched in Australia.
The US streaming-video giant is rumoured to be launching in Australia in 2015, and ZDNet has reported that the company is already negotiating with content owners to obtain rights for the content that would be in the Netflix library should it launch in Australia.
Until then, the common industry wisdom is that roughly 200,000 Australians are currently subscribed to Netflix, using virtual private network services to make their IP address appear in the US to get around the geoblock, while paying for the service using Australian credit cards and entering in a US post code when signing up for the account.
At the Online Copyright Infringement Forum held in Sydney last night, Communications Minister Malcolm Turnbull cited Pocketbook statistics claiming that roughly 27 percent of Australians with one media subscription have signed up for Netflix.
Freudenstein, whose company owns the licences for much of the content that Netflix would want to include in its library for an Australian launch — including Netflix's own shows Orange is the New Black and House of Cards — told ZDNet after the forum that Netflix has no right to be selling services to Australians without the rights agreements in place.
"I'm opposed because Netflix doesn't have the rights to sell those shows in Australia," he said.
"It's a contractual issue. We have the rights to those shows in this country, Netflix is not paying for those shows in this country, they shouldn't be able to show them."
Some rights holders have referred to the use of Netflix in Australia as "illegal downloads", despite the access not being against Australian law and just a breach of Netflix's terms of service. For all the complaints about Australians accessing Netflix, the rights holders are not seeking for the government to crack down on the use of VPNs as part of its overall plan to reduce online copyright infringement in Australia.
Freudenstein said it is a matter for the rights holders to pressure Netflix to stop Australians from accessing the service.
"This is not an issue for government; this is an issue for the people who are selling programming to Netflix, and other people like that," he said.
"They are selling rights to us, and they are our rights that Netflix is exploiting in this country. So it is not a government issue; it is an issue for content owners to sort out with Netflix."
The forum last night was dominated by content groups in Australia, with a panel including Freudenstein, Telstra executive director Jane Van Beelen, Rake writer and producer Peter Duncan, iiNet CEO David Buckingham, Australian Performing Rights Association CEO Brett Cottle, and Choice CEO Alan Kirkland.
Village Roadshow co-CEO Graham Burke also made a surprise return to the panel, after initially refusing Turnbull's invitation to attend the forum. Burke told ZDNet yesterday that he had been encouraged to attend by people in the content industry, and said that the ISPs were calling him a "wimp and coward" for not planning to attend.
Burke admitted last night that the delayed release of The Lego Movie in Australia after the release in the United States to coincide with the school holidays was a mistake.
"We made one hell of a mistake with Lego. It was an Australian film, we financed it together with Warner Brothers, it was made here in King's Cross. Because it was so important, we held it for a holiday period; it was a disaster," he said.
"It caused it to be pirated very widely, and as a consequence — no more. Our policy going forward is that all of our movies we will release day and date with the United States."
Freudenstein said that shows like Game of Thrones are played on Foxtel within two hours of airing in the US, but that such responses aren't enough; the government needs to step in and encourage ISPs to help reduce copyright infringement in Australia.
"If we sit and wait, and we don't introduce some schemes soon, there won't be an industry," he said.
"It is really expensive [to make TV shows and films] and if there aren't business models that can make that work, if we're relying on advertising-supported YouTube to support the content industry, it is going to be a very, very, very different type of content.
"There will be a lot more cats on skateboards; we'll have a lot less Game of Thrones."
Both the ISPs and rights holders were reluctant to give ground on the best way forward, with both disagreeing over who should fund a notice scheme to alert customers when they are alleged to have infringed on copyright using file sharing.
Van Beelen said that while ISPs could do more to prevent copyright infringement, it is not up to the ISPs to monitor what their customers do online.
"We think when we play a role to try to address online piracy, our customers' rights and expectations of privacy also need to be protected. We shouldn't have to enforce the rights of others against our customers without some form of judicial oversight," she said.
"Our customers wouldn't want us looking at what they're doing online. Rather, we would want an independent third party to indicate to us where there is a site which should be blocked or infringing activity taking place."
Choice's Kirkland said that no one is endorsing copyright infringement, but that content needs to be more easily accessible in Australia.
"We've still got this problem around price and availability. Until we grapple with that, we're not really going to be able to grapple with these problems," Kirkland said.
Will Page, the chief economist for Spotify told the forum that access to affordable services can reduce the incidence of copyright infringement in Australia, revealing that in the 12 months between August 2012 and August 2013 since Spotify's launch in Australia, infringement of music has dropped by 20 percent, according to the company's studies of peer-to-peer activity.