As we all know, the internet is disrupting business models around the world – not least in the online entertainment area, as events in New Zealand over the last few weeks have shown.
There’s been a lot of emotive commentary about the action a group of competing New Zealand companies are taking to clarify the legality of GlobalMode, a service designed to bypass geographic blocking. Russell has kindly allowed me to share my perspectives as the CEO of Lightbox, one of the companies seeking this clarification.
I fully understand that we live in a world where tech-savvy customers want freedom from commercial constraints which might limit their access to their favourite content.
But whether we like it or not, the reality of the content model today, put in place by content owners, is that premium video content is sold with geographic rights at very substantial prices. And often those geographic rights are a key part of the revenue model that allows that content to be made. It’s a similar principle that sees the NZRU dependent on selling rights to broadcast All Black tests exclusively and at a premium in order to help retain talent.
We also understand and appreciate that people want fast access to their favourite shows - we are big TV fans too. We are all moving rapidly to provide that access, and if you look at the services now available in New Zealand you can see there's a large and growing avenue for legitimate choice. There's not many popular shows you can't get in New Zealand any more, and many premium shows are delivered express within hours of airing in the US.
The NZ companies who are investing in this premium content to bring to the NZ market need to defend their commercial rights as they currently stand, otherwise they are wasting their money and will be less likely to invest in future content for NZ consumers.
Lightbox has spent $35 million already (let alone what our competitors have spent) in building a viable SVOD service in one of the most competitive marketplaces in the world. We remain convinced New Zealanders want a healthy and sustainable New Zealand market for online TV. We don’t think people want control over content concentrated in the hands of a few big US players (players who, I might add, contribute little or no tax to New Zealand).
We also understand that the way content rights for the most desirable shows are now sold may well change over time and perhaps end up being sold in global deals rather than geographic deals. Indeed bigger players like Netflix US have already signalled their intentions in this area. But right now these are the rules that content buyers have to work with – and we don’t make the rules.
As for content that is less attractive on a global basis, that’s another matter. For many smaller and local content creators, a global rights model is quite threatening as territorial rights are essential to fund development, so a breakdown of the current model could well put smaller, independent or local creative output at risk.
It is possible we may end up with a two-tier market – one for global premium content, one for regional content. If that is how things pan out, then the NZ SVOD market will inevitably adapt. But despite the certainty of many in the tech community, one thing I am sure of is that nobody really knows exactly how this is all going to evolve.
That is why these four competing companies want to clarify the questionable legality of GlobalMode. It’s a service specifically designed and promoted to provide access to content in other countries whilst we are working under the current geo-located rights models. We think that’s not on, particularly when we have paid for and are providing most of that same content legitimately in this market.
We have repeatedly said we are not concerned about how individual customers go about accessing content in the privacy of their own homes. That remains the case. VPNs and other services do have legitimate uses for individuals and it’s not for us to decide when use is legitimate and when it’s not.
Our concern is that NZ companies like Callplus, who have paid nothing for content, are actively promoting a commercial service which enables large numbers of customers to access content without needing any technical know-how, in direct competition with legitimate NZ services, and we believe knowingly and openly in breach of their content rights.
It’s a bit rich for Callplus and others to claim that they are the ones providing consumer choice and to characterise those who are actually investing in delivering more choice to New Zealand as ‘bullies’.
Let’s be clear, nobody is forcing these companies to sell a service of questionable legality. They have invested nothing in building a viable NZ SVOD market or obtaining rights to the best shows in the world for NZ consumers. Instead they are offering a service specifically designed to avoid regional rights constraints, put in place by content owners, in return for commercial gain.
Callplus, and its subsidiaries Slingshot, Orcon and Flip, say they strongly believe that access to the internet via Global Mode is completely legal. If that’s the case, now’s the time to clarify it. However this pans out, we will get more clarity on the legality of these services and the value of "exclusive" rights.
Again, we don’t make the rules, we are just trying to play by them. Some are arguing that we are chasing the wrong people and that we should be chasing those who sold us the NZ exclusive content rights in the first place. The "double-dipping" argument. I don’t believe it’s fair or reasonable for content sellers to be regarded as responsible for the active promotion by others of services that avoid the constraints of the geographic rights they have sold.
Some are arguing that the internet genie is already out of the bottle and that open and global access to content must prevail. The "Kim Dotcom" argument. If that is so (and if it is there may well be unintended consequences in terms of the impact on the NZ creative industry), then clarifying the legality of these services is a constructive next step and will help the businesses who are actually investing in NZ to make future decisions.
Some are arguing that we are old "dinosaur" media models that will inevitably be disrupted so it’s futile to try and hold back the tide. The "King Canute" argument. In fact, Lightbox is actually a new media model, one of the first real SVOD services brought to market in New Zealand, and one that is focused on disrupting traditional TV delivery models in our country. And we are putting our money where our mouth is by investing millions on content for New Zealanders.
I’ve also heard the line that this is "just like" parallel importing. It’s our understanding the laws allowing parallel importing are about importing physical objects not digital services, so are not applicable – but this is another reason why the rules need to be sorted.
Some argue as long as consumers are paying to watch content, either in the US, or here in NZ, what’s the problem? That’s fine for consumers, but it undermines the rights model that content creation is currently based on. Content buyers and distributors lose out, and the US based services benefit from the selling of content in markets they don’t have rights for.
I believe New Zealanders respect property rights and have a strong sense of fairness, and most prefer to access TV shows and movies legitimately – and also understand that's important so that the artists who create their favourite TV shows or movies and the people who invest in supporting those artists get the benefits they deserve.
The world of entertainment is changing rapidly. We are on board with that and that's why we've established our own internet-based services. We welcome fair competition from the likes of Netflix NZ and Neon, and indeed we all compete fiercely with one another.
But the four companies involved in this step share a common belief that protection of content rights in the new digital market is important for New Zealand businesses and, ultimately, the New Zealand consumers we serve. So that’s why we are trying to sort the rules.
Kym Niblock is the CEO of Lightbox, the subscriber video on demand service launched last year by Spark.
She will be discussing the "global mode" wrangle on Media Take this week, alongside NBR's Chris Keall. If you'd like to catch this evening's Media Take recording, come to the Victoria Street entrance of TVNZ at 5.30pm.