Up to 8 million Australian households will be subscribing to either Netflix or Stan in coming years, with the Australian-owned streaming service expecting to turn a profit by early 2018.
Stan has 600,000 active subscribers and a total of 1.4 million have tested the service since launch in early 2015, according to a recent investor briefing.
Active subscribers includes people currently on free trials, but with a conversion rate of 75 per cent, Stan expects paying subscribers to reach 600,000 within a few months, chief executive Mike Sneesby said.
This is the first time Stan has revealed its subscriber numbers and projected profitability. Its main competitors are Netflix, owned by the US company, Presto and Quickflix. Netflix does not reveal Australian subscriber numbers or local revenues.
Presto’s owners, Seven West Media and Foxtel, recently announced it would be shutting down in January 2017. Users will be transferred to Foxtel Play.
Quickflix was recently bought out of administration by an American company and its future plans are unknown.
“Stan is Australia’s SVOD success story,” Mr Sneesby told BusinessDay. Stan is a joint venture between Nine Entertainment Company and Fairfax Media, which publishes BusinessDay.
Each media company is tipping in half the $160 million needed to get Stan to break-even point, Mr Sneesby said.
While Stan is spending heavily on content deals to attract new viewers, it expects content costs to stay flat as subscription revenues increase, he explained. Each show is bought on a life-of-series basis.
Streaming subscriptions usually peak over summer as television enters the non-ratings period.
“School holidays, non-ratings season, and rain is a golden opportunity for us,” Mr Sneesby said.
Stan may produce up to four more original series on top of two existing originals No Activity and Wolf Creek. It co-owns copyright to these shows with production houses Jungle and ScreenTime. While original content costs a lot to create upfront, it then turns into an asset, Mr Sneesby said.
“We have already got international revenues coming in from season one of Wolf Creek,” he said, adding that Stan has made millions from these sales, but not enough to recoup the total cost of production.
“We haven’t gone out to build ourselves as a production company to make a profit, but our business model has always been that we want to make Australian programs.”
Netflix plans to spend $US5 billion ($6.6 billion) on original content over the next year.
“What they are really doing is pumping up that asset, which is cash intensive upfront and then sits on their platform. Fifty per cent of Netflix’s content will be original content [in coming years],” Mr Sneesby said.
Netflix currently values its content at $3.6 billion. In 2015 its net profit was $US123 million from revenues of $US6.7 billion.
Online Source: The Sydney Morning Herald.