Netflix is scaring the living daylights out of Australia’s media industry

Hail to the chief.
Hail to the chief.
Image: MRC Studios
We may earn a commission from links on this page.

Netflix hasn’t launched in Australia—or even spoken publicly about any plans to do so—but it is already freaking out the country’s media establishment.

Reed Hastings’ online video-streaming company has, according to local reports, already amassed as many as 200,000 users in Australia, who access the US service using virtual private networks  (VPNs) which mask IP addresses and camouflage locations.

Just 200,000 users might not sound like much in the context of Netflix’s 50 million users globally, but it’s nothing to sniff at, especially since Netflix spent no money to acquire those users. And for a country of Australia’s size (its population is 23 million, or about 7% the size of America’s) it is hugely significant. One study by the personal finance company Pocketbook claims that Netflix has now become the second most popular paid online media company in Australia, with 27% of Australians who use paid content services now subscribing to it. The biggest remains Foxtel, the dominant pay TV company, which is controlled by Rupert Murdoch’s News Corp.

Australia is a world leader when it comes to online piracy. But the use of VPNs to access Netflix and other sites is completely legal there, from a user perspective—consumer groups actively encourage it because the costs of content, software (and many other things) are extortionately high Down Under.  The problem is, Netflix hasn’t signed rights agreements with content owners to stream movies and television shows in Australia. Weirdly, this includes Netflix’s own original shows, such as Orange is the New Black and House of Cards: The Australian rights for those, confusingly, were bought by Foxtel for both online and cable.  ”Netflix is not paying for those shows in this country, they shouldn’t be able to show them,” Foxtel’s CEO Richard Freudenstein told ZDNet’s Josh Taylor.

There have been calls for Netflix crack down on the use of Australian credit cards to pay for its  US service. And Foxtel wants movie studios to put pressure on Netflix to stop violating the rights it has bought from them. Neither seems likely, at least until Netflix actually firms up plans to launch officially in Australia, which could be as soon as next year. In the meantime, almost every established media company, including TV broadcasters, newspaper outlets, and even Foxtel itself, is rushing to tie up rights and establish their own online video-streaming services before Netflix arrives.

Netflix did not immediately respond to a request for comment. At the moment it seems squarely focused on its long-awaited expansion  (paywall) into France, Germany, Switzerland, Austria, Belgium, and Luxembourg.