Free to air television networks are holding urgent talks with Hollywood studios after revelations a New Zealand internet service is offering easy internet access to shows they have paid for.
Both Television New Zealand and TV3 have acknowledged concerns about the service from Slingshot which will allow access to internet services such as Netflix and Hulu in the US and to the BBC's iPlayer.
MediaWorks head of television Paul Maher said that New Zealanders accessing US servers without paying NZ rights potentially had significant issues for traditional TV networks which have paid dearly for rights.
While it had been accepted that some people accessed US services like Netflix, the Slingshot service appeared to be more open, said Maher.
TVNZ was more cautious saying the Slingshot service was an interesting development, and it would be speaking to its Hollywood studio partners. TVNZ has played dearly - often for exclusive or first right of refusal New Zealand rights from US studios such as Disney and Warner Bros.
The Slingshot proposal for comparatively easy backdoor access to content potentially undermines the launch of Telecom's new Lightbox Subscription Video On Demand (SVOD)service.
Telecom has paid for New Zealand Subscription Video on Demand rights programming which including some exclusive rights not available to competing SVOD services.
Telecom sources indicated that the issues over slingshot related in part to the lack of progress in developing regulations for pay TV to take account of convergence between telcos and television services. This lack of progress in defining these rights was likely to cause more problems in the future, said a company insider.
Slingshot opens up Netflix to Kiwis
However Sky TV chief executive John Fellet - who is planning to develop an SVOD service later this year - was less concerned and said the Slingshot service would soon be undermined by new competitors, anyway.
Fellet doubts if US subscription video company Netflix will be enthusiastic about Slingshot marketing back door access to its US service.
The new service shuts Hollywood studios out of revenue, undermines people who buy New Zealand rights and create tension between the studios and most notably with the high profile internet TV company Netflix.
Netflix has built an impressive brand and picked up a big share of the US internet TV market and embarked on a global expansion.
Fellet says the new service is part of a wider shakedown over Australasian rights to internet television and the market is changing rapidly. He said the BBC had issues with back door access to its programming as well, since that could affect demand for content such as that seen on UKTV - which is sold to "linear pay TV services" such as Sky.
The international television programming market works on the basis of buying territorial rights and exclusive or non-exclusive rights for territories
Fellet said Netflix was almost certainly setting up shop in Australia and New Zealand possibly sooner rather than later.
"I don't think they would be keen on paying for New Zealand rights only to see them undermined by people accessing the US." Fellet said.
It is no secret that people have been accessing Netflix by giving a US address but Slingshot has indicated it would be better if Netflix were to set up shop here. That would allow customers to link directly through Slingshot and avoid the issues overriding issues over freeloading on New Zealand rights.
The Australian Financial Review has dismissed prospects of Netflix setting up shop across the Tasman which would make it easier to start up in this country. But Variety Magazine yesterday tipped Netflix would be in Australia in 2015.
At the moment Quikflix, Ezyflix and planned newcomers such as the new Sky subscription video on demand service and Telecom's Lightbox were buying New Zealand SVOD rights and being subject to the additional costs such as classification.
Sceptics argue Sky wants to promote the idea it no longer dominates the programming market and it does not dominate the SVOD rights the same way as it has traditional "linear" pay TV.
For consumers the new service will be an added bonus in a market for subscription video on demand which is heating up after years when it was held back by Sky TV's pre-eminence in obtaining rights through its close contact with studios.