Subscription video on demand (SVOD) service Netflix now has nearly 5 million viewers, with competitors Stan and Presto well behind.

Just over a year since launching, the US streaming giant now has 1,878,000 households subscribing to its service, including paid, free trials and special offers from third parties, according to Roy Morgan Research.

Netflix vs Stan and presto Jun 2016

Source: Roy Morgan Research

 

By comparison, Stan has 891,000 viewers (332,000 subscriptions) while Presto has 353,000 viewers and 142,000 subscriptions. What makes the comparison starker is that 92% of Netflix subscriptions are paid and 7% free, compared to Stan with 78% paid and 21% free and Stan with 64% paid subscriptions and 35% free.

Netflix paid subscriptions

Source: Roy Morgan Research

 

Stan is a joint venture between free TV broadcaster Nine Entertainment Co Holdings Ltd (ASX: NEC) and publisher Fairfax Media Limited (ASX: FXJ). Presto is a joint venture between another free-to-air media company Seven West Media Limited (ASX: SWM) and Pay-TV operator Foxtel. Both Presto and Stan have the issue of converting more free viewers to paying customers.

According to Roy Morgan, many subscribers also add a second SVOD service, with 75% of Stan subscribers also having Netflix. Part of the appeal of the SVOD services is that unlike Pay TV (Foxtel), there are no lock-in contracts. The other big driver is cost. For virtually the same price as adding Foxtel’s movies package (usually $25 a month), households can subscribe to both Netflix and another SVOD service – and have the advantage of no contracts.

The impact of Netflix and to a lesser extent, Presto and Stan, is also visible on the free-to-air broadcasters, Seven, Nine and Ten Network Holdings Ltd (ASX: TEN). As much as the three commercial networks like to crow about their ‘growing market share’, the fact remains that their total audience is shrinking as more and more consumers switch off from commercial TV, or watch much less of it.

Foolish takeaway

Theirs is room for more than one SVOD service in Australia, as the high percentage of dual Stan/Netflix subscribers show. The problems for free-to-air and pay TV operators are only just beginning.

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.