Australia / Analyst Insights
Power Surge: Demand for SVOD Boosts Internet Broadcasting Revenue

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by Derrick Wu
Oct 26 2020

Australia’s Internet Publishing and Broadcasting industry has performed well over the past five years. Industry revenue is expected to grow at an annualised 12.8% over the five years through 2020-21, to $4.9 billion. Traditional industry leaders such as REA Group and SEEK have reported strong revenue growth from their advertising business models. However, this segment of the industry is becoming saturated and the deteriorating economic conditions caused by the COVID-19 pandemic are expected to negatively affect industry performance. Nevertheless, a rapid rise in demand for SVOD services such as Netflix, has supported industry revenue. These services represent a new product segment for industry operators.

A significant share of industry revenue is generated from classified digital advertisements previously provided by newspapers. Industry players typically provide:

  • An online market place that allows buyers and sellers to interact
  • Firms in niche markets with a digital space where consumers and businesses can seek information before investing in a product or service

For instance, real estate and motor vehicles represent high value purchases for consumers, and online classified advertisements for these items are dominated by REA Group and Carsales.com respectively, or SEEK, which dominates posting job advertisements by helping jobseekers search for employment opportunities. These market places generate a high volume of visits per month, meaning buyers are willing to pay higher fees for advertisement spaces as they can expect an even higher return on investment.

The classified digital advertisements segment of the industry is reaching market saturation. Rising demand for online advertising services has to led major industry players focusing on expanding their market share concentration over the past five years, subsequently limiting growth opportunities for smaller industry players. Furthermore, the COVID-19 pandemic is expected to negatively affect this segment’s revenue growth. For example, REA Group reported a revenue decline of 6.0% to $820 million in 2020, with net profit down 9.0% to $269 million. Residential listings on its realestate.com.au website decreased by 12.0% over the year due to the COVID-19 outbreak creating economic uncertainty and resulting in sellers withdrawing homes for sale or delaying selling. Similarly, SEEK reported job ads dropped by 65.0% in Australia and New Zealand during the pandemic, with the company recording a loss of $11.7 million in 2020.

Conversely, an increase in internet connectivity across Australia has made competing SVOD services, which represents a new product segment for the industry, available to more consumers. New data indicates that Australians have been adding new subscription TV services at an astonishing rate during the lockdown period since March 2020. The leading company in this segment is Netflix. Netflix Australia began generating revenue in 2015 and the company’s revenue is expected to total over $1 billion by 2021. The result represents a significant outperformance over the wider industry. Netflix’s global brand recognition and exclusive content have propelled the company to become the largest Australian SVOD provider in just 5 years. Furthermore, the 5G mobile network rollout is anticipated to make SVOD industry services even more accessible to consumers.

The internet publishing and broadcasting industry is projected to continue growing at an annualized 6.6% over the five years through 2025-26, to $6.7 billion. Despite the COVID-19 pandemic limiting the online advertising segment for industry operators, demand for SVOD services is forecast to be the key revenue driver as consumers continue to spend more time consuming film and TV content on the internet.

 

Industry reports mentioned in this release:

Internet Publishing and Broadcasting industry in Australia 
Carsales.com Limited 
SEEK Limited
REA Group