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King CanuteCallPlus backed down. From September it will stop providing Global Mode. The service allows customers to hide their whereabouts. That way they can buy low-cost streaming video services direct from the US, UK or elsewhere.

In return the big media companies halted legal action against CallPlus.

Among other things they claimed Global Mode breached the Copyright Act and the Fair Trading Act.

That won’t be tested in court. We’ll never know if Global Mode was legal or not. That’s a pity because it leaves important questions unanswered.

Plenty has been written elsewhere (and by me) on what is a rearguard action against new digital distribution models.

This was always going to end badly for the big media companies, even if they won the Global Mode action.

That’s in part because Global Mode was a local version of something consumers can buy elsewhere.

While the King Canute media companies have stopped a wave, they haven’t stopped the tide.

There’s something else.

Globle Mode looked legitimate

Regardless of the untested legal arguments, Global Mode looked like a legitimate way of bypassing content geo-blocking. Consumers who used it felt they were doing the right thing. They were buying media.

It has taken the media business decades to convince consumers they should pay for media and not use shady operations like Pirate Bay.

And for a while they were.

Overnight, the big media companies have closed that channel. Consumers addicted to the latest shows, to entertainment not available from officially sanctioned New Zealand distributors have nowhere else to turn.

Some will lose interest. Others will head back to illegal channels.

That is not a victory for media companies.

Netflix, Quickflix, Lightbox, Neon NZ Streaming TVAfter years of waiting New Zealanders are now spoilt for choice with streaming TV. Netflix, Quickflix, Lightbox and Neon each offer a decent local catalogues at reasonable prices.

There’s a thin line between choice and fragmentation. The most popular shows are scattered among the four services.

Customers are left with difficult choices. The good news is that buying subscriptions to more than one service is unlikely to break the bank in most homes.

Streaming TV market will change

Don’t assume the market will stay this way. History suggests the online TV industry will consolidate to become dominated by a handful of global giants.

To understand how that will work look at what happened to online music distribution.

In the early days many countries had their own online CD and MP3 stores. These disappeared as a handful of global brands took control.

iTunes, Amazon, Spotify

Apple’s iTunes and Amazon cater for music buyers. While all-you-can-eat services like Spotify will stream music for a subscription.

While there are notable differences between say, the iTunes NZ catalogue and the US one, the underlying service is global.

Legacy territorial rights are the main reason iTunes national catalogues have yet to consolidate into one single global list.

We can reasonably assume streaming TV and movie rights will follow a similar path.

Most likely we’ll end up with a handful of services with global economies of scale.

One service is not enough

For now, if you restrict choice to only what is officially offered in New Zealand, most viewers will need to subscribe to more than one service to get all their favourite shows.

That’s why many users still plan to get around geo-blocking and buy Netflix direct from the USA. The American Netflix service offers a far greater range of programmes than the authorised New Zealand version.

The backdoor route to a bigger Netflix catalogue will eventually close.

Global Mode

That could be down to local rights holders. Say the action started by Sky TV, Spark, TVNZ and Mediaworks succeeds in stopping CallPlus’ Global Mode service. Their next step would be to tighten the screws on all VPN and DNS rerouting products used to get around geo-blocking.

Or it could be stopped by action at the other end of the chain. As already mentioned Netflix and other giants may negotiate global content deals with studios.

Another possibility is that Netflix bends to the studios demands and cracks down on non-US customers accessing the service by VPN and proxy services.

That’s a matter for the studios and the distributors to sort out. It depends on which side holds the most power in these relationships.

A question of geography

The studios will only continue to carve up the world into discreet geographic units with each country having its own set of rights if they think that’s doable and likely to be more profitable. It probably isn’t.

The administration cost of maintaining multiple national boundaries is high. When was anything involving lawyers ever cheap? Getting one signature for global online distribution solves a lot of problems.

What does this mean for local streaming providers like Lightbox, Neon and Quickflix? They may have a future if they can capture key niches.

Sky TV shows the way here. It continues to own the bulk of the sports programming that matters most to New Zealanders. Coliseum Sports Media has other rights and partners with Lightbox.

Fly under the global radar

There are other forms of programming that matter to local viewers but are unlikely to appeal to global distributors.

This leaves the local streaming TV players with interesting strategic options. They could partner with existing broadcasters like TVNZ or Mediaworks to build portfolios of local material or they could partner directly with producers and local studios. This means commissioning new shows aimed at New Zealand audiences.

Local players don’t have deep enough pockets to compete with global scale media companies but they can outperform them locally if they do a better job of delivering the programming New Zealanders want.

Netflix tablet

Netflix will launch in New Zealand in March. A press release from the online video service say it will soon begin operation in New Zealand and Australia.

From day one New Zealand viewers will be able to watch Netflix video on suitably equipped smart TVs, tablets, smartphones, computers and set-top boxes.

Although here was no specific price information in the press release, the company promises to offer “original series, movies, documentaries, stand-up comedy specials and TV shows for a low monthly price”.

Slingshot General Manager Taryn Hamilton sent a press release saying “it’s great”. InternetNZ is “thrilled” in its press release and CEO Jordan Carter seems excited:

https://twitter.com/jordantcarter/status/534842014961909760

Owen Williams forgot to turn off his caps lock key:

https://twitter.com/ow/status/534832131659161600

Rohan McMahon from Crown Fibre Holdings has already got his job application in:

At the NBR Chris Keall has an interesting perspective. He starts by writing:

…it could blunt the appeal of Sky TV’s pending Netflix-style service Neon, Spark’s recently launched Lightbox — which has the ambitious target of 70,000 subscribers by June next year — and the more established Quickflix, which operates on both sides of the Tasman.

However, as Keall and lots of other people on Twitter point out, Sky has locked-in a lot of popular video content rights for New Zealand. That means local customers won’t get access to as much content as they find on the US service. Many New Zealanders buy US Netflix services using VPNs and other tricks to bypass geo-blocking.

Until now Netflix has happily turned a blind eye to New Zealander consumers buying its services this way. Keall wonders out loud if the streaming giant will make access to its US service harder once it lands here. He says that would make life easier for Lightbox, Neon and Quickflix.

Fibre likely winner

Chorus, Enable, NorthPower and Ultrafast Fibre will be cock-a-hoop about the Netflix announcement. So will the ISPs aiming to sell fibre. Video streaming, especially high quality video-streaming is the nearest thing to a killer app for people selling fibre broadband services.

The latest figures from Crown Fibre Holdings show a little over 10 percent of the people in fibre network areas now buy UFB services. That’s still small, but momentum is building. Netflix, even just the publicity about the service, will create even more interest in fibre.

The fibre uptake number is important to Chorus and the local fibre companies. They earn money as people sign-up, the greater the up-take percentage, the faster they can recover money from building networks.

Sky TV handed Slingshot a huge publicity win when it banned the ISP from advertising on the pay television service.

The message here is clear: We’re frightened of Slingshot, we’re frightened of competition and we know our monopoly rent-seeking is threatened.

Slingshot GM Taryn Hamilton says the move smacks of protectionism and censorship.

“It’s a sad day when our TV stations start to ban ads because they feel threatened by one of their advertisers and the products they are offering. In this case Sky is using its position to obstruct Slingshot because they feel intimidated by Global Mode.

“And the thing is, Global Mode only exists because Kiwis want access to quality streaming video at a good price. When and if local companies manage to finally crack that, then there will be no need for the service. But, until that time, people will use services like Global Mode so that they can see decent TV without having to get a second mortgage.”

To Sky’s credit, it admitted to Tom Pullar-Strecker of Stuff the reasons for its ban: Sky TV bans Slingshot advertisements.

How is the UFB network coming along, and will fibre broadband transform New Zealand? Can it resolve the tyranny of distance and leapfrog us back into the global rich list? What are people doing with it anyway?

This was the question posed by Hayden Glass for the May Moxie Session – an informal discussion group exploring internet issues. I was a speaker along with Rosalie Nelson from Chorus and Crown FIbre’s Rohan MacMahon.

The government’s fibre investment won’t pay off until large numbers of businesses and consumers sign for UFB services.

There are clear efficiency and productivity reasons for businesses to sign. We can assume most will get around to it before too long.

There are few obvious compelling reasons for most consumers to sign. Enthusiasts and gamers will want fast broadband, but for the mass of people, the draw card would be access to sport and entertainment. That’s something that can’t happen until Sky TV’s monopoly-like grip on TV is broken.

This is unlikely to happen without government intervention. The problem I see is that the fibre network exists in a policy vacuum, it doesn’t link to government broadcasting policy, business strategy, to health or to education. I called for the government to join up the policy silos, possibly by appointing a broadband supremo – someone who in US politics would be called the broadband Tsar.

English football shows the way

Last week Coliseum Sports Media blew a hole through my argument. Instead of government intervention, a private business chipped the first hole in Sky’s monopoly. The company picked up the rights to English football (or soccer if you like). CSM will sell subscriptions – a year’s worth of English football – 380 games in total – for the price of a one-month subscription to Sky.

It’s a deal made for UFB.

Of course English football is a relatively minor sport in New Zealand. It ranks behind rugby, rugby league, cricket and netball, possibly behind motor sports. Sky has all those tied up – at least for the next two years. But we’re talking about the long-term here, the UFB project is still six years from completion.

It’s not just about sport. Although Sky has the movie studios tied up, it’s grip isn’t that tight. Every week a few more New Zealanders find ways to get around geo-blocking on media content so they can buy TV and films from Netflix or iTunes. At some point the movie studios will find it easier to cut international deals with digital distributors than to build a patchwork quilt of regional TV stations.

The question was will UFB transform New Zealand?  I’m more confident it will. Households will sign to fibre broadband for sport and entertainment content – most of which will mean sending more money overseas – but they’ll stay for a raft of other services which will boost the economy and cut the cost of providing education, healthcare and other dealings with government.