Streaming video on demand is set to fundamentally change the way TV and movies are viewed, but physical media aren’t going down without a fight. Paul Skelton looks at what this means for home automation.

Have you heard that Netflix has been launched in Australia and New Zealand, spelling the end of free-to-air television, pay TV and piracy?

At least, that’s what the mainstream media are reporting. However, the truth is a lot more complicated – as it so often is.

The launching of subscription video on demand (SVoD) services such as Netflix, Stan, Presto and Quickflix will undoubtedly alter the way people view television, globally. That’s not up for debate.

Already SVoD services are having an effect on conventional broadcasters in markets where the technology has had time to develop a foothold – eg: the US, Canada and the UK.

According to a report from market analyst Digital TV Research, pay TV revenue in North America peaked in 2013 at $A131.5 billion and will fall by $15.54 billion between 2014 and 2020.

Conversely, the number of subscriptions to SVoD services is increasing dramatically. The number of US subscribers to Netflix alone is tipped to surpass 66 million by 2020.

Locally, research released by Venture Consulting claims that about 250,000 Foxtel subscribers are likely to downgrade or cancel their service and move to a streaming provider.

More than a third of Foxtel’s subscribers (35%) said they were considering subscribing to an SVoD service in the following three months. And 34% of these have stated they will either cancel or downgrade their service upon subscribing to SVoD.

In particular, Netflix (32%) and Stan (28%) were the most appealing services to current Foxtel subscribers.

All of this paints a sad picture indeed for the future of pay TV in Australia. But, according to analyst Deloitte, SVoD services will account for just 3% of the global pay TV market this year.

“SVoD should not be considered solely as a competitor to pay TV but more as a complementary service,” a company spokesman says.

And what about physical media, like DVD and Blu-ray Disc? What will happen to that $1.5 billion industry?

Great things, it turns out, but more on that later.

THE ONLINE PROPOSITION

SVoD services in Australia have been a long time coming.

Now, local consumers are spoilt for choice – Netflix is here, Stan (a joint venture between Nine Entertainment Co and Fairfax Media) and Presto (from Seven West Media and Foxtel) have launched their services, and Quickflix continues to push its multi-platform solution.

Quickflix was founded in 2003 in Perth as an online DVD rental store. The company moved into content streaming in 2011 and appears on all Sony BRAVIA TVs, Xbox One and Sony PlayStation 4 consoles.

Quickflix chief executive Stephen Langsford says 2015 is going to be a very big year for streaming.

“The introduction of services from traditional media suppliers signifies that the future really is streaming. It will help to propel streaming into the minds of consumers.

“People are increasingly aware that there is an alternative to free-to-air and pay TV. Our role, ultimately, is to give consumers lots of choice when it comes to accessing their content.”

Stephen reports that in December 2014, for the first time, more Quickflix customers accessed the company’s streaming service than took out online DVD rentals.

“In 2014, we saw an 80% increase in the number of shows we streamed, and the number of devices that accessed Quickflix nearly doubled to pass half a million.”

Presto director Shaun James agrees that local audiences have demonstrated a strong appetite for SVoD services, despite the market being quite undeveloped.

“Consumers are changing the way they are accessing content,” he says.

“They are using multiple methods across multiple devices, and our company is dedicated to providing as many ways as possible for people to do that.

“Consumers’ appetite for content is at an all-time high, and they are seemingly very comfortable with accessing this content in a digital environment.”

However, do consumers now have too much choice?

“Australian consumers are very intelligent, especially when it comes to technology,” Shaun says.

“There’s been a massive penetration of mobile phones and a massive uptake of tablets in our market.

“Once people understand services such as Presto they will be very quick to adopt them.

“I think it’s going to be highly competitive in the short to medium term. Nobody is entering the market with a view to not succeeding. We absolutely believe we will succeed.

“We have made a long-term commitment to this business. This isn’t a short-term play for us.”

Given that people have lost interest in pay TV probably due to the price, having to register with up to four SVoD services doesn’t mitigate the cost problem.

“A number of competitive services are launching, which is a good thing for consumers, but certainly we view them as a companion offering rather than a replacement,” Shaun says.

“In the early days we’ll see a lot of sampling among audiences.”

Stephen says he too is not afraid of competition.

“The market is growing, and this new competition should benefit Quickflix.

“Indeed, the increased competition for Quickflix means we are focused on having a very competitive proposition, and that pushes us to accentuate our points of difference compared with other providers.

“I believe the market will be able to sustain multiple SVoD providers. I don’t feel as though one provider will necessarily cater for all the entertainment requirements of every consumer.

“$10 is about half the price of a single ticket at the cinema. We’re talking about $10 for the whole month, so we expect that Australia will see the same uptake as we have seen in the US, where many households opt for more than one service and are still in a better position than if they opted for pay TV.

“It really is ‘game on’.”

A BOLT FROM THE BLU

So, what does the move to streaming mean for resellers of physical media devices like DVD and Blu-ray players? Is it the end times?

“We are confident that the decline in physical media sales and rentals, and the increased competition in the SVoD category, is no coincidence,” a Netflix spokesman says.

“For the most part, streaming from Netflix on devices requires only a broadband internet connection and the quick and easy download of free software or apps. It’s just click and play.

“Netflix’s adaptive bit rate streaming means that even on a lesser internet connection, Netflix can still stream in high-quality – variable depending on your connection.

“If you can watch a Youtube video, you can watch Netflix, and the experience will be better.”

However, Stephen Langsford says reports of the death of physical media are exaggerated.

“I think it’s still a viable market. Physical media may have seen its peak, but it’s still fundamentally the way that people access content.

“For some, they will be very happy to insist on DVD and Blu-ray formats.

“DVDs and physical media will still be around in five years. Where the crossover point is, I’m not too sure.”

Samsung senior marketing manager Dan Schinasi, who is chairman of the Blu-ray Disc Association (BDA), says physical media still constitute a viable market.

Dan says the BDA is working on a new Standard that will re-establish Blu-ray’s place in the market.

“Unlike streaming, Blu-ray is a mature market. Lots of devices support it and content is available on the platform.

“That said, the BDA is actively trying to improve upon the performance and feature set of today’s Blu-ray discs.”

The new Standard, officially to be called UltraHD Blu-ray, is expected to be completed in the third quarter of 2015.

“UltraHD Blu-ray will be totally new. The disc might be the same physical size, but it has a much higher capacity. It’s also not backwards compatible, which means the release of new players and a new disc type.”

At the time of going to print, only a handful of features of the new Standard had been confirmed.

“First and foremost is higher resolution,” Dan says.

“This is mandatory for all new players to support. Current Blu-ray is full HD, but with the new UltraHD, players must support 4K. And we don’t mean theatrical 4K – we mean 3,840 by 2,160.

“Another mandatory feature is wide-gamut colour, which means you will have a much wider range of colours than you can theoretically support with today’s Blu-ray discs. The spec that is supported is BT.2020, or REC.2020.

“The new players will also support high colour bit depth. Right now, Blu-ray is limited to 8-bit but the new format will support 10-bit. This is very important, because as you get into high brightness, you generally get an unwanted attribute called colour banding. This will be minimised by moving to the higher bit depth.

“Higher brightness is another very important attribute that must be supported by players. It’s called high dynamic range, or HDR.

“This essentially uses higher contrast levels to emphasise things like an explosion or a momentary burst of brightness in a movie. A higher dynamic range will be able to more realistically reproduce that. Although it sounds a bit mundane, when you see it demonstrated it is very compelling and a lot more realistic.”

Dan says the new Standard has been in development for several years.

“We couldn’t really introduce it when we wanted to last year, when 4K TVs were entering the market, because some of the underlying technologies weren’t ready.

“The technical spec for HDR, for example, was still being worked out.

“We want this Standard to last many, many years. When you’re taking a bold step – essentially starting over – you don’t want to do that too often.

“All the technologies have now come into alignment, so it’s the right timing.”

Of course, the BDA is acutely aware of the pressure put on physical media by 4K streaming from SVoD providers.

“I believe streaming services will co-exist with physical media, and UltraHD Blu-ray will be complementary,” Dan says.

“Because our platform is a self-contained ecosystem, you’re guaranteed a consistent playback experience. Some streaming services can transfer 4K at 15Mbps, which in some circumstances can be maintained, but we’re guaranteeing 100Mbps consistently.

“We’re going well above and beyond what some of these streaming services offer today. A streaming 4K service doesn’t have wide-gamut colour or 10-bit colour, or HDR.

“We also support a high frame rate, which requires a tremendous amount of bandwidth. Blu-ray is currently 24fps, and some studios are experimenting with 48fps. With TV, you can ideally get 60fps, which is extremely difficult to stream. Most 4K streaming services offer 30fps, so you’re not getting fluid motion.”

As for matching the mobility of streaming services, Dan says the BDA is exploring a new technology called Digital Bridge, which creates additional extensions for portability. Very little is known about it yet, but more information is expected later this year.

In the meantime, Panasonic has developed the first Blu-ray prototype player supporting the technology expected in the next-generation UltraHD Blu-ray Standard.

This prototype integrates video processing and optical disc drive technologies that Panasonic has refined over many years, making it capable of reproducing 3,840 x 2,160 pixels, HDR, BT.2020 and the high-efficiency video compression technology, HEVC.

Panasonic Australia managing director Paul Reid says that as consumer demand grows for the crisp, true-to-life quality of UltraHD, there will be an opportunity for physical media players and streaming services.

“With a Blu-ray player, users aren’t restrained by bandwidth limitations or concerned by the restrictions of data caps in order to enjoy 4K content. Playback is instantaneous and quality is assured.”

The Consumer Electronics Association (CEA) has released a study suggesting that 33% of consumers will buy a 4K TV in the next three years, and 44% are likely to buy a ‘smart’ or internet-enabled TV, a function commonly available with 4K UHD televisions.

When considering what will inspire their next television purchase, 27% ranked 4K UHD capability as the second most important feature, followed by picture quality at 24%.

“The demand for greater picture quality is on the rise – we are seeing particular potential for 4K Blu-ray in the movies and gaming space,” Paul says.

“Content in 4K will become available faster than many think, and Blu-ray technology is advancing to meet these needs.”