Rather than surrender to an Aussie streaming rival, Quickflix is expanding into China.
People were quick to write-off Australia's pioneer streaming video service when it revealed an acquisition was on the cards, but Quickflix isn't selling out to the likes of Netflix, Presto or Stan. Instead Quickflix is acquiring a Chinese movie studio to gain a foothold in the world's biggest market.
It's only a Memorandum of Understanding, more details will be available by the end of the month, but for now Quickflix is only saying that it's acquiring a
"Shanghai-based company [which] produces original Chinese language film and TV, participates in co-production in China and international markets and has a slate of future production including a co-production with a US studio".
While four streaming services squabble over a tiny market of 25 million people, it makes sense for Quickflix to chase the one billion potential customers sitting on our doorstep.
Along with access to China, the profitable Chinese company helps improve Quickflix's financial outlook. What Quickflix brings to the party is its mature streaming platform and app ecosystem, something which it has invested considerable time and money in over the years.
It's one of Quickflix's most valuable assets, along with its subscriber list.
Meanwhile it's business as usual for Quickflix's Australian service, much to the disappointment of those who have had it under death watch since the arrival of Netflix.
I think Quickflix has been hard done by this year, with the media often ignoring its existence when discussing the streaming war between foreign raider Netflix and local contenders Presto and Stan (co-owned by Fairfax Media).
If one of these rivals was to acquire Quickflix for its customer base then I'd say Stan is the obvious candidate.
Netflix doesn't have a history of growth through acquisition – it acquires content, not companies. When you look at its success in Australia, Netflix doesn't really need to acquire Quickflix – if
Quickflix went under tomorrow Netflix would pick up the bulk of its customers without spending a cent, if for no other reason than Netflix's support for so many home entertainment devices.
Foxtel-backed Presto recently struck a content sharing deal with Quickflix, but that deal fell through yesterday. At the time it seemed like a good deal, allowing Quickflix to outsource the hassles of haggling with Hollywood to a company with more clout, while allowing Presto to reach more devices.
Presto might see the value in acquiring Quickflix for its customer base, but it's not that simple. Stan's parent company StreamCo has a handy insurance policy – it acquired a small slice of Quickflix from HBO.
If Quickflix is sold or liquidated then StreamCo is entitled to a $10 million payout – several times Quickflix's total value.
Quickflix's "reseller" arrangement with Presto seemed designed to bypass Stan's insurance policy, but now the Quickflix/Presto content deal is off the table.
So if any Australian service was to acquire Quickflix for its customer base it would be Stan. Quickflix is still losing money and customers in
Australia, but if the Chinese deal secures Quickflix's future then Stan actually looks like the weakest player in a country which doesn't seem big enough to sustain four subscription streaming services in the long-term.
Foreign takeovers could still be on the cards, as Hulu and Amazon will eventually turn their attention to Australia.
Amazon already has a massive customer base in Australia, so you'd think Hulu would be more interested in buying a local streaming service for its subscriber list.
That said, Hulu is a little gun-shy after pulling out of Japan last year and seems keen to focus on the US for now (Netflix is launching in Japan in September).
Australia's streaming wars are far from over, who do you think will be the winners and losers?