Before Netflix officially launched in Australia there were some 200,000 or more locals using VPNs to circumvent geo-blocking and access the video streaming platform in the US.
Australian streaming competitor Stan CEO Mike Sneesby says it was a workaround which was quickly forgotten about.
“Everyone seems to be surprised that when you go out and survey the market that Netflix comes up as the leader,” he said.
“On the 26th of January, when we launched, they were already the leader in the market.”
It’s been over six months since Fairfax and Nine officially launched Stan, its $100 million video streaming platform. And while Stan has burst onto the market with a solid offering, it has come at a time when the video streaming subscription industry is being hotly contested. Especially after Netflix became legitimately available at the end of March.
A recent note by Citi media analyst Justin Diddams estimates 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).
“There’s no doubt that in terms of Australian players competing in this category, Stan is clearly the main competitor to Netflix in this space at the moment,” Sneesby said. “There really is a big gap to third place.
“We started with the world’s biggest streaming service having a 250,000 subscriber head-start. To have established ourselves so significantly with a six-month time frame, we’re really happy with that result given it’s better than our business plan projections.”
In the same Citi note, Diddams conducted a survey to understand what the customer conversion rates and some of the user habits were.
Diddams found that Netflix had the highest proportion of users that were “likely to subscribe” at 39%, while Stan was just 11%. Foxtel and Seven’s Presto had the highest percentage of free trial users unlikely to subscribe (31%), but also had a healthy 28% of users saying they’d sign up.
But Sneesby says the numbers aren’t a fair representation of what’s happening in the market. He claims about 70% of the company’s free trial customers are converting to monthly paid subscriptions.
“Whilst there’s no doubt Netflix has the biggest brand in the category, it tends to skew their numbers to even higher than what they are,” he said.
As a subscription business, Sneesby is closely tracking gross signups to Stan’s 30-day trial. And given Stan is a no-contract service which a user can cancel at any time, he also exerts a lot of energy managing length of tenure and watches the churn of customers.
“I track, in real-time, every day’s cohort of subscribers and how they’re performing,” Sneesby said.
Ensuring the churn rate remains low and conversion high, Sneesby told Business Insider Stan is watching how it markets itself, and which channels it uses, very carefully so the right type of user is attracted to the platform.
“If you’re bringing in subscribers who know what they’re signing up to, they’re much more inclined to stay with you,” he said.
“Our objective is to build the number one streaming service in Australia in terms of proposition, brand and more importantly, to hit or exceed our business plan.”
Diddams expects by 2018, 3 million Australian homes will use some form of video-on-demand service. Roy Morgan research released on Tuesday shows more than one in three households now pay for some form of subscription content, up almost 30% since the beginning of the year.
So Netflix is having a huge impact on the size of the TV content market, and has increasing market share in the category, but it’s also opened up the category for all the smaller local players, including Stan.
“The market looks at least as big, if not bigger than what we projected it to be and we’re taking the share of the market that we expected to be taking,” Sneesby said.
This week Stan revealed it had landed a multi-year deal with Warner Bros which will see a number of exclusive shows fast-tracked to the platform. It will also see the entire 10 series of Friends added in a few months.
Sneesby, who himself watches about 10 hours of Stan content a week, says it’s deals like this which has resulted in Stan having more hours of content on its platform than Netflix does locally.
He sees Stan’s differentiator as first-run content and revealed there were 20 exclusive shows premiering in Australia, fast-tracked from the US, between now and December this year.
“The real challenge for us now is to actually move from Australians knowing about Stan, to actually knowing why (to choose) Stan.”
* Allure Media, publisher of Business Insider, is owned by Fairfax Media.
Business Insider Emails & Alerts
Site highlights each day to your inbox.