$13 billion is a lot of money.
That’s the market value of the initial public offerings (IPO) tipped to launch on the Aussie stock market in the next twelve months.
It’s not quite the heady days of 2007 when the figure hit over $60 billion, but it’s up on the year before.
The biggest IPO of them all is set to be Nine Entertainment at $3 billion, the biggest float since 2010.
For our purposes in today’s Money Weekend, we will not delve into the merits or otherwise of buying what the insiders are promoting.
But we are interested in the major selling point of Nine’s float – after all, it’s a continuation of a major trend…
A Big Trend to Follow
That trend is ‘video on demand‘ delivered over the internet to different devices. Right now it’s the fastest growing media market. And companies are on the move to tap into it.
Take this from The Australian this week:
‘A key component of the prospectus ahead of a float on the Australian Securities Exchange will be a plan to launch an online subscription video service, The Australian understands.
‘Nine is expected to make an announcement about a Netflix-style offering as soon as the government prepares to fast-track the rollout of the National Broadband Network, which will provide the necessary bandwidth to support a streaming service for programs and movies.‘
Netflix is an American company with over 30 million users worldwide. It has a 30% market share of US households. Its main business is streaming media like movies and TV programs over the internet. Users can decide what and when they want to watch something without the restriction of a set schedule.
As you can see, Nine wants to copy the model. It’s one of the few areas in its business plan that offers investors a compelling carrot of growth.
But Nine isn’t the only one that wants in on the action. Foxtel announced its own streaming service this week, called Presto. This will give users who take up a subscription on demand access to all 7 of Foxtel’s movie channels.
A snippet from the press release catches the main idea: ‘Presto’s launch, slated for later this year, aligns perfectly with the increasing appetite for movie content delivered over the internet across different devices.‘
Foxtel’s hoping this can help lift its current market share of just under 30% of Aussie households.
It doesn’t end there. The Media column in The Australian also argues Seven West Media has made a ‘Netflix-style service front and centre as the most important new weapon in the company’s arsenal.‘
Jeez, with everyone wanting to copy Netflix, it’s a wonder Netflix doesn’t set up here itself!
Maybe they will. Of course, there is also already existing small cap company Quickflix [ASX: QFX]. In fact, Quickflix is more of a direct comparison to Netflix because they both built their original customer base on DVD rentals through the post.
Quickflix has since spent its available resources on trying to capture the early market share in this ‘video on demand’ space, without yet turning a profit.
But there’s big money up for grabs for whoever captures the dominant position in this market…
Winners and Losers
Of course, it’s the free to air channels that will suffer as this market develops, because their share of audience numbers will decline.
Quickflix made an interesting point on that in its last analyst presentation. According to the company, currently US studios auction most of their content to the highest bidder from free to air and cable TV channels. As their market share declines, so does their buying power.
That could increasingly open up streaming services as a viable alternative to release new material. It will also spur the US studios to prevent internet piracy and act to prevent (from players like Quickflix’s perspective) billions in lost revenue and a competitive disadvantage.
Kris Sayce, over at Australian Small Cap Investigator, has been following this trend since the beginning of last year. We asked him for his take on these new market developments this week:
‘The shift towards what I call ‘Pull TV’ – where the consumer decides where, when, how and what they watch – is inevitable. It’s already happening in a big way in the US. So far the Aussie market has been slow to move, but that’s changing. I can already go online and watch live video streams of US and UK sporting events and US and UK commercial TV channels. But the big move will be when streaming content providers such as Quickflix and Netflix become direct competition for network TV. That move isn’t far off. The next 12 months could be the key period when the Aussie market finally catches up with the rest of the world.‘
Callum Newman+
Editor, Money Weekend
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