Australian SVOD operators Quickflix and Presto announced a deal this week in which Quickflix will become Presto’s content reseller, while maintaining its current DVD and Blu-ray subscription rent-by-mail and TVOD business. The resell arrangement is technically a distribution agreement, circumventing the resell arrangement Presto already has in place with FTA operator Nine’s SVOD company, Stream Co, which operates Stan. Upon launch, Quickflix will shut down its current independent SVOD service.
Quickflix is reinventing itself by ceasing its independent SVOD service
Quickflix has been in operation for over a decade but only during 2014 and 2015 has competitive pressure increased. Rival SVOD launches (chiefly Presto, Stan, Netflix) have all entered what has traditionally been Quickflix’s terrain. As the sole national standalone OTT operator, it would have been difficult for Quickflix to survive the status quo for the next five years and could have been a target for acquisition. It is now in the process of reinventing itself.
Nine, which operates SVOD service Stan, would naturally not be pleased with this deal, as Quickflix is now doing the same thing – just as an additional arm of Presto, instead of being an independent and separate reseller. The additional worry for Quickflix insofar as due diligence and funding arrangements are concerned is that Nine is a majority shareholder in Quickflix, having acquired HBO’s convertible preference shares in Quickflix in 2014. There is now a perceived conflict between the interests of parent and subsidiary. This matter will not go away until Quickflix and Nine have publicly resolved it, and there are a few months before Presto is integrated into Quickflix. There has not yet been any comment on this potential loggerhead by either Quickflix or Nine.
Quickflix announced in its press release that the launch of Presto on the Quickflix platform would coincide with an upgrade of Quickflix’s user interface (UI) in the coming months. With this in mind, there is also a possibility that Quickflix’s apps and platform will eventually be rebranded to that of Presto, and its UI realigned with that of Presto’s.
What about Netflix? The acquisition of Quickflix by Presto means there is now one large player that the international giant has to contend with in Australia. Customers will now have a far simpler choice to make: either go for the local player or the international player.
The benefit for Quickflix is that it can now boost its movie and drama portfolio, in which it has been outgunned by both Presto and Netflix (Presto has a streaming catalog three times larger than Quickflix’s). It can also now outsource the hard graft of subscription licensing of non-PPV content to Presto owner Foxtel, and focus on delivering services to end users. For Presto, Quickflix’s wider range of access devices and 100,000+ subscribers is appealing enough to go through with its side of the deal. More importantly, the combination of Presto's superior content catalog and Quickflix's rent-by-mail disc service (which is still profitable in Australia) and superior range of devices will make the business stronger and a credible force against Netflix. Customers who have been reluctant to sign up to either due to their particular disadvantages will welcome the combined service and will be keen to test it out once it launches.
However, will Netflix have gained a stranglehold on the Australian market by then? And will Nine scupper any distribution deals between its wholesaler Foxtel-Presto and its subsidiary Quickflix? We expect these difficult yet unavoidable questions to be answered before 2016. An answer in the affirmative to either question would be disastrous for Quickflix as it has now demonstrated it is seeking to transform itself by pulling out of its own SVOD business and backing Presto’s.
Quickflix: Assessing an incumbent’s future in the latest SVOD battleground that is Oceania, ME0003-000540 (March 2015)
Ismail Patel, Research Analyst, Global TV Markets