The CEO of streaming company Quickflix Stephen Langsford has written an open letter to his Netflix counterpart Reed Hastings challenging the company to “come through the front door” to the Australian market and cut off access for an estimated 200,000 local subscribers.

In the open letter, sent today by Langsford, he accuses Netflix of encouraging “Australian consumers to inadvertently breach the copyright of the content owners”, and accuses them of “filching” revenues by allowing users with geo-blockers from Australia to access its content.

US service Netflix is understood to be eyeing an entry to Australia in 2015 with other services including the Nine and Fairfax joint venture StreamCo also set to start, but currently Australian consumers can access the service by using a virtual private network to mask their Australian IP address and gain access for around $9 per month.

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Quickflix has struggled for audiences and revenues as it looks to transfer from a movie rental service into a content streaming service, leading US TV giant HBO to sell its shares to Nine Entertainment Co for around $1m. One theory around that transaction says it could make it tougher for Netflix to enter the local market, where many premium rights deals are already in place.

In the letter Langsford adds: “Stop turning a blind eye to the VPN services acting as a gateway to your service. Be honest and face up to the issue of unauthorised access to your US service. Have the courage to limit your service only to the territories where you have legally obtained the rights to operate by abiding by the geo-filtering obligations required by your content license agreements. And do so immediately.”

Netflix surprised observers by investing substantial amounts of money to create its own unique content including House of Cards and Orange is the New Black, but might struggle in Australia to secure exclusive rights for other premium franchises with the landscape dominated by Foxtel and the local free-to-air networks.

Recently Foxtel slashed the price of its movie streaming service Presto service as it looks to secure more subscribers, and cut the cost of many of its subscription TV packages to increase market penetration

Shares in Quickflix are currently trading at 10c, giving it a market capitalisation of $15.23m.

Alex Hayes

Langsford’s letter:

Dear Mr Hastings,

If you want Netflix to compete in Australia come through the front door.

Instead you’re currently enjoying a free ride in Australia ignoring unauthorised “back door” access to your US service and thereby taking revenue away from local services which are investing to service the local market and endeavouring to provide choice and competition to consumers.

Netflix not only knowingly collects revenues from subscribers with unauthorised access to your US service, investing nothing in the Australian market nor paying for Australian rights to the content you make available, but also tacitly encourages Australian consumers to inadvertently breach the copyright of the content owners.

Unlike yourself, Quickflix has obtained all necessary Australian rights to the content on its platform, faithfully meets all necessary security requirements, including geo-filtering imposed by the content rights holders, and continues to reinvest in its service with the goal of offering the very best service in the market to its customers.

Quickflix is growing its streaming service and is by far the most accessible streaming service in the market with Australian customers having access through almost half a million registered devices including smart TVS, game consoles, mobiles and tablets. But if Netflix continues to filch revenues through allowing unauthorised access, Quickflix and other local services will not be as viable as they could be nor compete as vigorously as they could. Without strong local competition Australian audiences will suffer in the long run with fewer choices, less compelling offerings and higher prices.

So Mr Hastings, we challenge Netflix to play by the rules. It’s how we do it here in Australia.

Stop turning a blind eye to the VPN services acting as a gateway to your service. Be honest and face up to the issue of unauthorised access to your US service. Have the courage to limit your service only to the territories where you have legally obtained the rights to operate by abiding by the geo-filtering obligations required by your content license agreements. And do so immediately.

Quickflix is pro-consumer, pro-competition, and pro-Australia. Should you decide to enter Australia through the front door, Quickflix will be happy to compete with you, fairly and squarely.

Yours sincerely,

Stephen Langsford

Chief Executive Officer

Quickflix Limited