CITI: Netflix subscriber rates will overtake Foxtel within the next three years

Frank Underwood from House of Cards on Netflix Australia. Photo: YouTube Screenshot

Netflix and free-to-air TV better watch their backs if Netflix’s staggering growth continues, a new Citi analyst report forecasts.

Research by Citi media analyst Justin Diddams shows within three years the video streaming service will overtake Foxtel’s subscription numbers.

He estimates there are already 1.6 million active Netflix users in Australia, with about 900,000 paying a monthly subscription at end of July.

Diddams describes Netflix as a “complementary product” to premium pay TV in the Australian market.

Netflix launched locally in March and has not released its local user numbers.

Diddams expects that by 2018, 3 million Australian homes will use some form of video-on-demand service. He estimates Foxtel currently has 2.7 million subscribers, but doesn’t think it spells the death of Foxtel, rather it will mean an explosion of content consumption in Australia.

“For free-to-air broadcasters, increasing penetration of SVOD could place further downward pressure on audiences but this doesn’t mean [free-to-air television] is dying, but likely to limit earnings growth as focus on differentiated content is needed,” he said in a note.

Netflix’s penetration is already five times higher than its next competitors Stan (332,000 sign ups and 153,000 paying users) and Presto (193,000 sign ups and 90,000 subscribers), Citi estimates. Quickflix, which recently admitted losing 5000 subscribers a month since Netflix arrived, didn’t even rate a mention.

This Citi chart shows the numbers.

Diddams says Netflix’s staggering growth highlights the “pent-up demand for content in Australia and as a likely substitute for illegal downloading”.

“The market is well and truly gripped by the SVOD revolution, everyone is talking about it and, more importantly, everyone is now watching something “on-demand” in the Australian market,” Diddams said.

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