Australian video market outlook\ Netflix’s US subscriber churn\ Macquarie to purchase AirTrunk\ Vocus’ concerns on NBN

 

 



In this week’s edition, we look at the Australian video entertainment market outlook, Netflix’s subscriber churn in the US, Macquarie Group’s agreement to buy majority stake in AirTrunk, and Vocus’ concerns regarding NBN’s business broadband.

CHART OF THE WEEK

Netflix marketing spend ($m)



Source: COMPANY ACCOUNTS, ENDERS ANALYSIS

Video entertainment market outlook

Video revenues by platform (A$m)



Source: VENTURE INSIGHTS, COMPANY

The rise of streaming has changed the way video content is consumed, and while viewers today have significantly more choice when it comes to content, we do not expect an increase in household spending on video. In fact, we predict that household spending on video will gradually decline, which is mainly driven by the revenue deflation from traditional to digital platforms. By 2023, the video entertainment market is expected to remain broadly flat at -0.1 CAGR. The flat outlook reflects the decline in Physical Media and Pay TV, largely offset by the growth in SVOD services. The launch of multiple new SVOD platforms will increase the competitive pressures on traditional platforms and accelerate the shift away from linear viewing. For a more detailed look at the Video Entertainment Market in Australia, click through to read out report.

Click to read report

Netflix’s US subscriber churn

Netflix US YoY subscriber (paid and free) growth, by quarter



Source: COMPANY ACCOUNTS, ENDERS ANALYSIS

In the US, Netflix’s subscriber growth has slowed. Unlike other, more nascent markets where high growth is still largely driven by the rapid acceptance of internet television—which combines with Netflix’s advantage of being the most established along with carriage deals on pay-TV platforms, Netflix’s US business has now formed into a proposition that is less influenced by the trends that burned brightly at the birth of the sector. As such, although it must be noted that there are phenomena, such as cord-cutting that are not as present elsewhere, there are fundamental lessons in the way that Netflix operates its US business and how the market responds. Seasonality, increased churn and the rising challenge of converting free trials to paid subscriptions are just some of the issues that Netflix continues to face in all its markets, as in turn, does its competition. For a more detailed look at the analysis of the relationship between Netflix’s churn, subscriber additions, marketing spend and content release schedule, click through to read a report from our UK research partner, Ender Analysis.

Click to read report

AirTrunk to be bought by Macquarie Infrastructure & Real Assets

Supply volume by player (%)



Source: VENTURE INSIGHTS, COMPANY ANNUAL REPORTS, PRESS RELEASES, INDUSTRY INTERVIEWS

Macquarie Group has reached an agreement to buy a majority stake in AirTrunk valuing the data centre at around A$3 billion according to some media sources. This comes less than two months after AirTrunk’s announcement of a major expansion of 110+ MW in Sydney. AirTrunk is currently owned by investors including its CEO Robin Khuda, Goldman Sachs’ special situations arm and TPG Sixth Street Partners. Robin Khuda is likely to keep his minority stake in AirTrunk after this sale. AirTrunk had rapidly expanded their capacity in Australia and overseas in recent years, leading to the highest growth in revenues among major players in Australia in the data centre space. According to Venture Insights’ forecasts, AirTrunk’s revenue is projected to grow to A$454 million and supply volume to 297 MW by 2026 in Australia. For a more detailed outlook on the current state and the future of the data centre and submarine cable industry in Australia, click through to read our report.

Click to read report

Vocus continues to raise concerns regarding NBN’s business broadband

As reported in Comms Day, whilst NBN has introduced measures to enhance competitive neutrality of its service providers in the enterprise market, Vocus does not think these were sufficient and has continued to raise concerns regarding NBN’s fibre overbuild and direct engagement with retail customers. It is clear that NBN’s entry in business broadband and the rise of SD-WAN is changing the dynamics of the enterprise market. Venture Insights expects this will enable smaller players to enter the market (such as Commscentre’s Australia Post win) and that this model will become increasingly appealing to multi-site enterprises. This in turn highlights (i) our previous concerns for existing enterprise telecommunications providers such as Telstra and Optus to hold market share – since the model creates opportunities for other RSPs and MSPs to build their business offers and (ii) the opportunities for businesses to benefit from increased competition. We will be covering this topic further as part of our planned series of company updates.