It's an interesting debate. I understand where you're coming from in regards to the 'larger' players having more bargaining power with suppliers (studios) for content however the argument is somewhat flawed if you look at the licensing model they use. Content is not 'purchased' in the sense that Netflix buys the TV shows and never pays again, rather they are licensed and, when streamed, these costs are accrued and paid to the relevant party that supplied content.
Thus the actual cost of 'holding' the content is next to nil if it is not being used. This is one of the main reasons physical record stores (and soon video) have fallen. A normal record store can house about 2000 CDs, you could consider this content to be the top 20% of popular merchandise at the time. Whilst these are technically the best sellers, generating the lion's share of revenue of all records, it is very difficult for that company to select exactly what will be a hit or not. Enter Apple iTunes who licensed all and sunder 'beyond' that 2000 disks, every single track you can imagine. All of a sudden, consumers have access to the other 80% of content and, simultaneously, Apple realises a profit on that content that a record store never could.
The issue for a streaming company then becomes mainly about developing the infrastructure to house the content and deliver it quickly (something QFX has invested heavily in) as well as investing in acquiring customers that can support that heavy fixed cost and give it bargaining power with suppliers. This makes QFX not very different from Netflix at all apart from brand recognition and cash position.
One of the best articles I've read on piracy is a piece on the issue from the perspective of the founder of a game software download service. He contends (and I agree), that people did not just wake up one day and decide to steal music, books, movies etc. What happened was that technology (and hackers) evolved to a point where they could easily deliver that content via Napster etc whilst traditional content providers sought to restrict consumers at every turn. It is a 'service' issue, not a theft issue. Services like Quickflix only need to offer a better service and people will happily swap. Why spend time finding the song you like, downloading it and potentially getting a virus and a poor quality version when you can stream a high quality version on demand from Spotify? It is a better service, therefore people pay. Quickflix is approaching this very intelligently and mimicking Netflix's model in regards to getting their service on every single device imaginable (TVs, Phones, PC, Consoles etc). Thus when a consumer buys the service, they can access it with complete ease. If we evaluate the choice alternatives with this in mind, a consumer given the choice should opt for Quickflix every time instead of using the a (potentially) newly introduced Netflix that doesn't yet have distribution deals or content deals in place. Better service wins here.
I'm not blind to the issues however. There is a strong risk that a player such as Hoyts or Netflix can come in and, with strong cash backing, sustain a loss while heavily promote their service as they gain content. Quickflix has proven it can't sustain that cash burn. Additionally, there is a risk that content suppliers will one day wake up (potentially involuntarily through regulatory change) and realise that the age of region locking content is over. At that point discrepancies in content between the Netflix USA and Aus services will be gone. That won't happen for a while however. As a side note, I have tested the Unblock Netflix service equivalent, I've got cable equivalent to NBN speed and it was still slow. Couple that with the fact I'm tech savvy, your everyday joe will have no clue how to set it up.
Am I excited though? Yep. I may lose money trying to pick winners with QFX but on the whole this is an exciting space. We can apply the same growth pattern and lessons from online books and Amazon. Video is the next evolution. It is behind largely due to the fact that internet speeds are not yet sufficient to facilitate the large scale download of content. This is, for me, the biggest thing Quickflix never mentions in their presentations. They may be targeting the 64% of households who do NOT have Foxtel, but what percentage of those have internet capable of streaming?
If you'd like an interesting read that gives a great macro perspective of this phenomenon I suggest reading Chris Anderson's theory of 'the long tail'.
QFX Price at posting:
5.2¢ Sentiment: None Disclosure: Held
