Foxtel Set To Use Telstra TV To Expand Demand For Presto + Foxtel Play As Fairfax Object To Ten Share Purchase.
The move comes as Fairfax Media lobbies the Australian Government to stop the acquisition by Foxtel of 15% of the Ten Network claiming that the investment will result in control of the broadcaster by Foxtel and News Corporation a 50% shareholder in Foxtel and through that, control of bidding for premium sports content in Australia, it is understood.
Foxtel chief executive Richard Freudenstein who is under pressure from a surging Netflix told the News Corporation owned newspaper The Australian that he was considering making Foxtel Play – an IPTV product that delivers television by internet protocol down a broadband line into homes – available to Australian consumers as a dedicated app on Telstra TV, a lower-priced ?platform set to launch next month.
“Telstra TV will literally be selling subscription video on ?demand (SVOD) services and I think that is a real opportunity for Presto but I think over time there is potentially an opportunity to have Foxtel Play on the player,” Mr Freudenstein told The ?Australian.
The move is significant because it marks a change in direction from Foxtel’s traditional focus on its more profitable cable and satellite subscription business as it targets the two-thirds of the Australian market that doesn’t hold a subscription-TV package.
More than 1.3 Million Australians are believed to have already trialled the new Netflix service which was launched in late March 2015.
Freudenstein claims that in Europe, British satellite broadcaster Sky now has six ?million subscribers to its on-?demand player Sky Go, suggesting Foxtel Play has plenty of upside potential in the local ?market as more consumers move towards ser?vices with no lock-in contracts.
While Foxtel’s satellite and cable subscriptions have grown in the past 12 months amid cheaper pricing and new channels, the business is facing more competition from pure-play streaming services such as Netflix and Stan. Stan is a joint venture between the Nine Network and Fairfax Media.
Currently Fairfax Media is lobbying to nobble Foxtel’s attempts to get access to more content and sports programs via the Ten Network.
In a detailed submission lodged with the Australian Competition and Consumer Commission last week Fairfax is believed to argue that News and its pay television joint venture will both have a very strong incentive to only partner with Ten on joint bids for premium sports content because News and Foxtel will have the ability to control Ten and a financial interest in its success due to Foxtel’s $77 million investment.
The concerns of Fairfax, which owns The Australian Financial Review and Business Day, are echoed by Nine Entertainment Co, which has lodged its own submission arguing that the transaction should be opposed by the ACCC on competition grounds.
The Australian which has become a PR machine for Foxtel claims that new products and services were helping Foxtel move into a new growth phase as the company aggressively embraced a changing media landscape, Mr Freudenstein noted.
Foxtel claims that subscriber numbers came in at 2.6 million in the half-year ended December 31, an ?increase of 118,000 on the ?previous corresponding period, while the percentage of customers to leave the service decreased 1 per cent.
This is set to change dramatically when Foxtel and Telstra next report their results.
Freudenstein said that Presto would aggressively pursue more exclusive first- run Australian rights to high quality programs after getting a big subscriber lift on the back of recent drama series Aquarius, starring David Duchovny.
“We did very well with ?Aquarius. Exclusive first-run shows make a big difference. Now the economics of SVOD mean you can’t do too many of those, and Netflix won’t do too many of those and Stan won’t do too many at all,” Mr Freud?enstein said
Freudenstein told Fairfax Media he remains convinced the deal will be allowed – despite ACCC chairman Rod Sims warning the Murdoch family that all of their local media interests, including Lachlan Murdoch’s 8.5 per cent stake in Ten, will be taken into account in his decision.
“We are in the middle of an ACCC process but I am very confident that the transaction will proceed,” Mr Freudenstein said.
Foxtel’s own detailed submission is believed to note among other things that it is continuing to deal with multiple broadcasters, pointing to deals such as its streaming venture with Seven West Media, Presto (which Ten will have an option to acquire 10 per cent of).
Foxtel and Ten’s rivals argue that a winning sports rights team of Foxtel and Ten could game the anti-siphoning list, which dictates that premium sports must be first offered to free-to-air networks before pay TV.
Pay TV sources argue, however, that the AFL and NRL would insist that their key games are still shown on free-to-air.
Ten Network Holdings has said that the proposed arrangements “do not give rise to, or contemplate, any exclusive arrangement with Foxtel for the acquisition of any content, including sports”.