Global digital, mobile and OTT news impacting the Nordic market
– And vice versa
Nordic tv market set to heat up as Netflix confirms regional plans
Competition for content delivery to the Nordic home screens is set to heat up as video streaming company Netflix enters Sweden, Norway, Denmark and Finland before the end of 2012. The announcement came only two months after Sweden’s market-leading cable tv operator Com Hem entered an exclusive agreement with yet another major US TV content player, Tivo, on delivering video-on-demand, pay-per-view and over-the-top content to its Swedish subscribers.
Specifically in Sweden, beyond P2P services and challenger local or regional content streaming platforms such as ViaPlay or Headweb, one of the major hurdles Netflix may be facing is the existing telecom and TV operators’ strong position. In particular, cable and telecom operators have succeeded in locking in many subscribers in single bill triple-play subscriptions bundling broadband, telephony and TV, adding paid-for DVR functions and film rentals to the mix. Getting subscribers to pay for that extra content service, the service price itself, and the content mix will be important factors for Netflix’s success. Without being more specific, Netflix promises Nordic subscribers a low monthly fee and “a wide array of Hollywood, local and global TV shows and movies”. Indicatively, Netflix is currently charging streaming subscribers around 8 USD in international markets. Despite these challenges, the Nordic region is an ideal place to launch a service like Netflix: fixed and mobile broadband penetration is high, there is a widespread acceptance for streaming, and multi-screen viewing is on the rise. Another important actor for a global company to succeed in the region is its ability to communicate and be reached by its customers, in their local language. The fact that Netflix has already set up a Nordic blog and a local language company web page, local Facebook pages in all four Nordic markets, as well as local customer service accounts on Twitter, is a positive move, if not a sign that the launch could be closer than anticipated.
At the end of 2011, Netflix stated it would not expand into additional markets – other than its stated plans for the UK and Ireland – until it reached its goal of global profitability. The international expansion seems to be accelerating instead. So are subscriber uptake and revenue. In the quarter ended 30 June 2012, Netflix had 3 million paid streaming subscribers in its international business, up from 1.4 million subscribers as of 31 December 2011. This can be compared with 22.6 million domestic paid streaming subscribers at the end of June, up from 20.1 million at the end of 2011.
But Netflix’s international streaming business has not only been contributing with new subscribers and revenue, it has also had a negative impact on the company’s profitability. To be fair, any expansion comes at a price. For the quarter ended 30 June 2012, the international business generated a loss of USD89.4 million, while domestic streaming customers generated a net income of USD83.1 million. To put numbers in perspective, the total loss generated by the international business under full-year 2011 was USD103.1 million, while Netflix’s domestic business turned a profit of USD226.1 million. During the quarter ended June 2012, international revenue was USD64.9 million and domestic revenue USD532.7 million.
Netflix generated USD3.2 billion in total revenue under full-year 2011. Its streaming service is available in the US, Canada, a number of countries in Latin America and the Caribbean, the UK and Ireland.
Nordic data protection agencies looking into the legality of Facebook’s face recognition
The Nordic data protection agencies, under the lead of Norwegian agency Datatilsynet, have decided to look into the legality of some of Facebook’s newest functions. The agencies and Facebook are to meet this fall to discuss the matter; a misunderstanding according to Facebook’s spokesperson in the region. The storage of chat conversations, tracking of search words, as well as Facebook’s new face recognition and picture tagging are three such functions, which could be in reach of regional data protection and personal data regulation. The Norwegian data protection agency published a case study last summer based on questions about privacy, which the agency had sent to Facebook. Here you can download the Datatilsynet’s questions and Facebook’s answers, in english.
Last week, Datatilsynet ordered Google to pay NOK250,000 for not complying with a request by the agency in April to delete all payload data gathered in connection with Google Street View project.
“Google does not have any legal basis according to the Personal Data Act to collect such data, consent has not been granted by the registered parties, the information has been stored beyond what was necessary and the information has been not deleted in accordance with the request from the Data Protection Authority”, states the agency, pointing out it had taken into account the fact that it was Google itself that reported the gathering of data in the first place.
App.net: When did charging for a service become a questionable business model?
App.net, which ambition is to bring to the market an ad-free, user and developer-driven alternative to established social streams such as Twitter, succeeded in its first market test, exceeding its targeted USD500,000 in fundraising by over USD300,000, and getting backing from over 12,000 people – among which many developers. As of yesterday, App.Net’s alpha had 4,000 users, with over 7,000 access requests waiting to be processed. The number of apps being developed has also increased rapidly in the past two weeks. Interestingly, web apps dominate that activity, with 22 apps in development against 12 mobile native apps. At this point in time, the alpha looks pretty much like a scaled down version of Twitter and the founders are asking users to give it time to develop into a complete service. “Just a reminder that alpha.app.net is just that: an early prototype. It was launched as a test and to provide a proof of concept for our fundraising campaign. It is not yet an operational service, and we ask that you please be mindful of that and be respectful of one another”, writes App.net in a letter to alpha users.
In our view, the price tag of USD50 may be a bit high to appeal to the masses, unless the service differentiates itself further from existing platforms. It may however be a reasonable level for existing Twitter users wanting to enjoy an ad-free stream. It is however much too early to tell weather App.Net can fly. It has in any case already demonstrated it can walk, by hitting its funding target.
What interested us most about App.net is actually the negative reviews its proposed business model managed to get. In the Swedish media and Twitterverse, App.net has received little attention if any, and much of it has been critical to the very idea of launching a fee-based web-based service. The same goes for US and international media coverage. Truth be told, coverage got slightly more positive as the likelihood of App.Net’s reaching its fundraising target increased. Looking only a few years back, the very idea of a free ad-based service was perceived as doomed. So was the idea of offering global services to a differentiated user-base instead of differentiated services locally. Point one: the idea of charging for a web-based service has become a big business no-no. The second interesting point in the discussions surrounding the creation of App.Net was how its founders’ ambition to create an alternative to established social networks, in particular Twitter and Facebook, got questionned. Not challenging established players means the end of innovation as a driving force. When did not trying become an option? Facebook and Twitter themselves would never have become that big if they had not explored their idea and brought about a high degree of disruption.
Have a great weekend!