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Quickflix is bleeding customers to Netflix

Kevin Spacey as Frank Underwood in House of Cards, which will be available on Netflix Australia / Supplied

Local media streaming player Quickflix has been losing 5000 customers a month since Netflix launched in Australia in late March.

The Australian online streaming and DVD library company says paying customers declined by 13% to 107,969 in the June quarter, a loss of 15,584. Revenue was down 15% to $4.2 million.

CEO Stephen Langsford says the loss of business was because of an unprecedented level of free trial promotions by competitors, including Netflix.

“Pent-up demand for Netflix generated through media and other publicity ahead of its launch resulted in a spate of customers churning in April and May and a challenging quarter overall,” says Langsford.

However, most of those churning customers did not represent Quickflix’s longer serving customer base, he says.

Netflix has seen substantial growth since launch. June subscriptions are up by 151,000 homes to 559,000, giving the US media streaming giant an estimated 1.42 million viewers, according to Roy Morgan Research.

The market also has new players including Stan, a $100 million Fairfax Media and Nine Entertainment joint venture

This chart shows the damage to Quicklfix:

“The company has strategies in place for re-engaging with them in the future,” says Langsford.

The downward momentum in the loss of paying subscribers slowed towards the end of the quarter.

The paying subscriber churn rate averaged 11.3% over the quarter. It peaked at 12.9% in April, shortly after the launch of Netflix, before easing to 9.1% in June.

“The company expects it will take some time for the market to settle down and for consumers to determine which service, or services are ultimately right for them. In this period churn across all the providers is likely to be very high,” he says.

Quickflix has been restructuring its business to concentrate on its DVD subscription business and premium video on demand.

It’s done a deal with Foxtel to distribute Presto. This allowed Quickflix to gradually drop its general all-you-can-eat streaming content, replaced by Presto’s offering.

This will reduce costs for Quickflix, especially its spend on content licensing, and Presto will gain a new market of viewers who are still to move from DVDs to streaming.

Quickflix is in a treading halt on the ASX, pending an announcement which industry sources says is most likely a takeover offer.

* Disclosure: The publisher of Business Insider, Allure Media, is 100% owned by Fairfax Media.

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