Netflix regrets signing unmetered deals with iiNet, Optus

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This was published 8 years ago

Netflix regrets signing unmetered deals with iiNet, Optus

By Max Mason
Updated

Netflix chief executive Reed Hastings has hit out against data caps used by Australian internet service providers and said the US-based company regrets the unmetered usage deals it signed with Optus and iiNet, and will avoid them in the future.

Leading up to its launch in March, Netflix signed a number of deals with local ISPs, including Optus and iiNet to allow Netflix usage to be unmetered, meaning the data used would not count towards a customer's limit.

Netflix says it plans to give capped broadband plans the boot in the future.

Netflix says it plans to give capped broadband plans the boot in the future.Credit: Getty Images

"In Australia, we recently sought to protect our new members from data caps by participating in ISP programs that, while common in Australia, effectively condone discrimination among video services - some capped, some not," Mr Hastings told shareholders.

"We should have avoided that and will avoid it going forward."

Mr Hastings conceded that most ISPs were raising or eliminating data caps.

"Data caps inhibit internet innovation and are bad for consumers," he told shareholders.

Optus has had fixed-line unlimited data plans since 2012, and in February cut the price from $115 per month to $90 per month.

"While Optus thinks unlimited data is the best option for anyone who wants to stream lots of entertainment content, we chose to un-meter Netflix content so that no matter how much data is included in their plan, all our broadband customers can watch as much Netflix as they want," an Optus spokesperson told Fairfax Media.

iiNet has a number of high data limit plans, including 600GB for $89.95 per month.

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A company spokesperson said Telstra recently started boosting the data allowances of its 2.5 million fixed broadband customers with generous top ups being added in proportion to their existing allowances.

iiNet said its relationship with Netflix was confidential and would not comment on the matter.

Netflix was pleased with its launch in Australia and long-term is aiming to be in around one-third of broadband connected households.

"We've added Australia and New Zealand. In all of these markets, the internet and internet television is catching on and we're leading competitors," Mr Hasting said.

"We're feeling very bullish in the long-term in all of these markets."

The US company also said it was open to creating original Australian content and was already buying local content to stream outside of this market.

"We don't come in and say 'now, or 12 month from now, we have to have six Australian originals'. We get pitches from folks and if they're made in Australia, or made in New Zealand or made anywhere else, the fact of the matter is they're good stories and that's why we pick them up," Netflix director of corporate communications Cliff Edwards said.

"We're very open and have always said we're very open to funding originals in Australia, New Zealand, or anywhere else."

The company's chief content officer Ted Sarandos said that original content was better for Netflix.

"The dollars invested in our original programming are more efficient in that every dollar spent, we get more bang for our buck in terms of hours viewed," Mr Sarandos said.

"Hours viewed leads to higher retention, more word of mouth and more brand halo. It's turned out not just to be an important strategic investment, but also an efficient one."

Mr Sarandos also commented on the use of virtual-private networks (VPNs) to access content which is geo-locked in some countries.

"It's one of the many things that we have discussions with studios on an ongoing basis. We do continue to work with them and the VPNs. But, to be honest, it's a bit of a whack-a-mole to get ahead of the different usage of VPNs," he said.

"In the piracy capitals of the world, Netflix is winning, we're pushing piracy down by getting access and the best way to make the VPN issue a complete non-issue is through global licensing that we're continuing to pursue with our partners."

The comments came following Netflix's first quarter financial results in the United States overnight.

Profit fell to $23.7 million in the first quarter of 2015, compared with $53.1 million in the prior corresponding period, but much of this was due to an accounting change and a strengthening US dollar.

The strong US dollar hurt Netflix's international earnings. In the first quarter, Netflix reported a loss of $65 million for its international operations.

Compared with the end of the first quarter of 2014, the US dollar has jumped 28.2 per cent against the euro and 12.4 per cent against the British pound.

"If you exclude that, then operating profit was actually above both what they guided to and what we expected," Pacific Crest Securities senior analyst Andy Hargreaves said.

"To get the kinds of numbers that they put up that had to have had progress in most of markets, US included."

Netflix grew its subscriber base by more than 4 million in the first quarter to 62.3 million. The streaming business now has more than 20 million international subscribers and more than 40 million US subscribers.

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