Over the last few weeks the corporate “giants” of New Zealand media and telecommunications have been waging a war against newcomer Netflix, attacking them on the pretense of them not paying tax, and now attacking smaller providers that enable Global Mode for their customers. Here’s the thing though, the four companies involved are distinctly starting to look like the neighbourhood bully, and the lash back is under way, with a brewing public relations disaster likely to hurt their bottom line.
“Everybody thinks it’s going to be different for them, Janice said. The dinosaurs thought so too.” – Kathryn Davis
Over a year ago I questioned why it was that then Telecom, was looking at dumping $20m into Lightbox. It may no sense then and it still makes little sense today. Why? Because the market is absolutely saturated with services that are easily accessible. Vodafone, SKY, Telecom, and Media Works all have products and are up against the biggest fight of their life, Netflix.
The Netflix product is in my opinion, cheaper, far superior than the current other New Zealand offerings, is a global giant, and is creating their own content. The four New Zealand dinosaurs can’t compete so they are reverting to type to try and save a business model that is already pretty much broken.
First it was tax. Complaints that Netflix don’t pay enough. The dinosaurs howled and roared about how they were disadvantaged. But then someone pointed out that at least one of those dinosaur’s lines of business was based in Bermuda. We all know what Bermuda is famous for. This seemed to be the equivalent of rushing out of your house with a self-righteous attitude and discharging the shotgun into your foot.
That in itself has had the industry laughing at the dinosaurs. The first signs of a PR disaster were brewing.
Now, Telecom, Vodafond, Media Works, and SKY have launched legal action to stop global mode and in doing so have started the final throes of what will be an excellent PR disaster.
New Zealand hates lots of things. In particular, bullying overtones from large companies and price gouged. So when we even perceive that behaviour, we turn away in droves.
The dinosaurs are running the risk of isolating an entire tech-savvy generation of people from fifty down. That old school fat cat in a suit, a lawyer on each arm, telling you what you are going to pay and why, is a relic from the 1980’s. Social media over the last weekend has been rife with the lampooning of particularly Spark, with one of the funniest being the likening of Spark’s Logo to a certain part of the human anatomy.
What they don’t get is that it is too late. The horse has bolted. I asked a younger member of the family the other day what service they were using. His response was he was going to get free Television for at least the next four months given the number of providers and their free monthly trial.
I asked what he would do if he was locked out of overseas television streaming services by global mode being disabled.
“I’ll go back to downloading it” he said, “or use a VPN.”
This move by the dinosaurs could actually set the most heinous and greedy of modern corporate maneuvers, the copyright wars, back years and just when we got close to solving it through streaming services. Do the dinosaur strategic thinkers not consider the edges of the envelope? By denying access to services in an effort to sell their own, in my opinion, lesser product, they will drive a generation back to P2P and downloading movies. Hell. They don’t even need to download them, they can dodge that law by storing them in a Cloud service like Mega and streaming it directly.
The other effect, if the dinosaurs wins, is very long-reaching. Innovation is once again stalled. Why would you develop competing products and services in a market where the four great brontosaurs can trample all over you with their army of velociraptor lawyers?
The companies that have been targeted by the dinosaurs in this latest move are some of our best, brightest, and most innovative that have spent years building themselves from scratch and trying to survive a telecommunications regulatory framework that is not only ancient, but redundant.
The four now face a growing lash back as the perception is that they are taking away people’s basic right to choose and pay for what services they wish in a competitive market. They are making no noises about bettering their services, about creating unique content, about supporting New Zealand Film and Television makers, about selling that content to the world in the way that Netflix does (digital export), no, they are simply trying to muscle their way over the top of their competitors in order to ensure that their product is the only choice we have.
Imagine if booksellers did that. Imagine if they launched legal action to stop you having the ability to purchase overseas books, either in hard copy or digital format. Imagine if they managed to force you to only be able to buy books that were inside New Zealand from nominated retailers.
They would be laughed out of town.
What if they try and do it with Cloud services?
Worse, the attitude of the dinosaurs shows that they are not adapting to new business models and are fiercely, arrogantly, defending an old model that started to die out around 2000.
It must be a nightmare for government. On one hand we have a bunch of free market radicals in charge that believe that the market should be given complete reign over our affairs and services. In that case, Global Mode fulfills that ideology. It opens market access to New Zealand. I tell you another thing, if the TPP negotiations result in what it appears they will, then overseas markets could sue the New Zealand government for being seen to be closing access to digital markets.
The problem the government has, any government, is that they are into these companies with significant investment. ACC, Kiwisaver, and other multi-billion dollar government owned investment pools own a large part of Spark, in particular. Worse, Spark is a huge player on the New Zealand stock market. Oops. Perhaps it’s time to rethink some of those investment strategies?
The missed opportunity is the worst aspect. That the dinosaurs are prepared to fund their own services, the cost of lobbying, and lawyers, rather than realising that fact that if they want to survive they are going to have to focus on digital export, is a damned shame.
After all, how long is before we get a telephony provider in New Zealand delivering cheaper services from another country? It’s coming.
This is a fine mess that the dinosaurs have gotten themselves into and true to form, like those old super-tankers, it will take weeks to turnaround. That’s assuming that they can get over themselves and stop.
In the meantime, Media Works, Vodafone, Spark, and SKY are, in my opinion, seriously damaging their reputations. As an investor, I’d be worried. Because if their business models don’t change, and rapidly, then they are likely to become obsolete in a rising global market.