When Communications Minister Malcolm Turnbull announced in July last year the government wanted internet service providers to stop their customers downloading copyrighted TV shows, films, and music, he turned to our Kiwi neighbours for inspiration:

“We’re looking at something like this, this is the type of thing, and let me give you an example of what they do in New Zealand for example. It’s probably the best comparison. In New Zealand where an ISP is advised by the rights owners that an IP address, which is the number you’re allocated to your computer at the time you’re using it, has downloaded a movie, an illegal movie, the ISP is required to send a notice to the account holder and after they’ve sent three notices in respect of different violations then it’s up to the rights holder then if they want to take the customer to court and, you know, seek to recover some damages.”

In the year since, film studios and other copyright holders worked with internet service providers to develop a similar three-strikes code, which was lodged with the Australian Communications and Media Authority in April. One week ago, a deadline passed that had been set by the two industries to have the code up and running. Why has the code not taken off so far? The answer can be found in its template: the New Zealand code.

The NZ scheme first went into effect in 2012, and there was an initial flurry of cases heard by the Copyright Tribunal, mainly brought by the recording industry association in New Zealand once users reached their third notices. In 2013, there were 18 decisions made by the tribunal. In 2014, this dropped to just four, and so far in 2015, there has only been one decision, and it didn’t go the way of the rights holders.

The decline is not because Kiwis have stopped downloading, although that is one factor. It is simply too expensive for copyright holders to chase pirates. It costs rights holders NZ$25 every time they send a notice. By the time the third notice has been sent, the rights holder is already down NZ$75 without even considering the costs of bringing the case to the tribunal.

In the most recent case in February, Recorded Music NZ (formerly Recording Industry Association of New Zealand or RIANZ) sought damages to the amount of $1605 for one user sharing three songs — a Lana Del Ray song, an Amy Winehouse song, and a Clean Bandit song. The user said that a family member, not the owner of the account, was responsible for the infringement, and Recorded Music NZ agreed to drop the case if the customer removed all file-sharing software and downloaded music, and paid for the company’s costs for filing the application — estimated at $355.70.

The tribunal, however, found that Recorded Music NZ hadn’t sent out notices in the proper format outlined in the legislation, and threw out the entire case, at the cost of the rights holder.

The scheme, in addition to being costly for rights holders, is very limiting. The New Zealand government last week passed an indefinite extension exempting mobile phone companies from the three-strikes scheme. Mobile companies like Vodafone are already exempt from the scheme in Australia.

The failure of the New Zealand model, in the eyes of the film studios and music companies, must not be replicated in Australia, and they are fighting to limit the costs they would have to pay for the first 200,000 notices to be sent out under the scheme in Australia. ISPs are telling rights holders that the cost per notice sent out to customers would be around $27, while rights holders are suggesting it could be as low as $6. A report commissioned by the parties is understood to side closer to the figure cited by ISPs. Foxtel director of corporate affairs Bruce Meagher told a recent industry briefing on the code that a high cost incurred by rights holders would make the scheme unworkable in Australia.

“We want it to be effective, we want it to be efficient. We don’t want it to be burdensome, if we can possibly avoid that in any way,” he said.

“Our view is however the costs are apportioned, they have to be based on at least some assumption of the operations of an efficient ISP. We don’t think it is reasonable that the costs would be based on lowest-common-denominator, least efficient ISP. If the cost is set too high, the scheme won’t work. And there’s evidence of that in New Zealand, where the government stepped in and mandated a $25 per notice and almost no one has used the scheme.”

Meagher says rights holders have agreed to pay money into a pool upfront to give certainty to the ISPs, but the exact figure remains a point of contention.

For the moment, the government hasn’t indicated whether it will seek to break the deadlock and bring on its own mandatory code, as had been threatened last year when the industry-led code was first touted.

But in the meantime, the market itself seems to be curbing piracy. On Friday, consumer advocate group Choice released the findings of a survey of 1010 people it had conducted on the state of piracy in Australia since the arrival of streaming video service Netflix in March. In comparison to the organisation’s last survey in November 2014, it found that the number of people who regularly download pirated content dropped from 23% to 17%. The percentage of those who downloaded infrequently also dropped, from 33% to 30%. This comes after the government’s own survey found that the notice scheme would deter fewer than one in five people from downloading pirated content.

A total of 33% of people reported downloading much less often since subscribing to streaming services, and there was a jump in subscriptions to virtual private network services since the government’s announced crackdown on piracy, up to 820,000 Australian households from 680,000 in November last year.

On the government’s other, as yet unused, law allowing rights holders to get a court order to block piracy sites like The Pirate Bay, respondents who regularly pirate said that they would either search for another site when landing on a blocked page, or use other methods, such as a VPN, to circumvent the block.

Foxtel looks set to be the first to use the new law, planning a landmark court case in the next month or so. Village Roadshow is also promising to launch its own case in the coming months.