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Assignment 1, Foxtel Analysis...

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Foxtel: what strategies has it used to compete with SVOD providers such as Netflix? The definition of what ‘watching TV’ really is has begun evolving rapidly in the most recent decades; no longer specifically indicating an act of consuming linear, free-to-air (FTA), broadcasted media (“TV today: free and paid, linear and on demand”, 2016). The influx of non linear viewing via ‘catch-up’ TV services online and subscription video on demand (SVOD) platforms such as Netflix and Stan have been changing the way Australian households can choose to consume content – and Foxtel has been losing it’s hold on subscribers as this occurs (“More Australians now have SVOD than Foxtel”, 2016). Because of this, Foxtel has had to adopt certain strategies to compete with SVOD providers such as developing their own catch-up and SVOD services, pricing adjustments, pushing sports coverage and premium content, as well as partnering with SVOD and Telstra to target certain demographics. Foxtel is Australia’s 24-year-old pay-tv cable service, founded in 1995 as a technological convergence between News Corporation (specifically 20th Century Fox Media) and Telstra; hence the compound name of Foxtel (Bayley, 2018) (Lee, 1997). Foxtel soon dominated the pay-tv market; with Australis Media becoming insolvent in 1998 and the redistribution of Galaxy’s (their satellite television network) customer base over to Foxtel doubling their subscriber count (Veljanovski, 1999) (Clarkson, 2016). From there, Foxtel boasted increasing subscriber counts year after year (“Subscriber numbers, total and by operator, 1999-2011”, 2011) (Knox, 2013). In 2012, Foxtel acquired Austar, which was previously regarded as a monopoly in rural and regional areas of Australia as the only cable network (Galbiati & Nizi, 2004) ("Foxtel and Austar set to merge after ACCC green light", 2012). The following year, Foxtel launches it’s first internet protocol television (IPTV) platform, Foxtel Play, to allow customers access to Foxtel content contract free, without the need of any cable or satellite connection (LeMay, 2013). Foxtel against SVOD providers Stan and Netflix arrived for consumption by the Australian market in 2015, and within a year SVOD services had accumulated more subscribers than Foxtel (“More Australians now have SVOD than Foxtel”, 2016) (Lobato, 2019). By late 2017, Netflix alone reached 2.8 million subscribers, matching Foxtel’s number for the first time – which reported falling subscription numbers that year (Hughes, 2019) ("Foxtel's subscriber numbers fall", 2017). More recent data from 2019 indicates that 10.2 million Australians are paying subscribers of SVOD providers, with 5.3 million of these subscribed to Netflix and 1.4 million to Stan (AMPD Insights, 2019). Despite Foxtel’s preemptive price slash at the end of 2014, a growing complaint from customers during these years was that Foxtel was comparatively expensive and unaffordable, their cheapest package being $25 against Netflix and Stan’s most basic option costing $10 (Goldsmith, 2015) (“FOXTEL”, n.d, a) (“FOXTEL”, n.d, b) (Sayer, 2017). Rebranding, and Foxtel Now The rapid growth of SVOD platforms in Australia did not go unnoticed by Foxtel, with the rebranding of Foxtel’s logo and image in 2017 also came the rebranding of Foxtel Play to Foxtel Now – Foxtel’s own SVOD inclusive service (Kelly, 2017). The CEO of Foxtel, Peter Tonagh, claimed that the rebranding of their logo from a burnt orange, capitalised, “very masculine, very shouty” typeface which was interpreted as “quite aggressive, quite arrogant, quite elitist” to an all lowercase, coral logo with rounded edges was aimed to convey “the key message being that Foxtel is for everyone” (Kelly, 2017). In conjunction with further, albeit temporary, price cuts to subscription costs allowing Foxtel Now’s new and improved starter service to sit at a competitive $10 from launch, the idea of

this was to appeal to a wider audience, creating a relatable and accessible outlook on the product and brand from every-day Australians (Knox 2017) (Kelly 2017). In the past, Foxtel was initially reliant on the physical installation of cable, satellites and set top boxes, but the introduction of Foxtel Play hurdled that obstacle of inconvenience and provided contract-free IPTV services. However, with the continued growth of SVOD platforms and Foxtel’s own fall in subscribers, it needed to “develop some kind of competitive foothold ” with the benefits SVOD offers (“More Australians now have SVOD than Foxtel”, 2020). Rather than simply adding more ondemand content to Foxtel Play, the rebranding of Foxtel Play to Foxtel Now was Foxtel’s way of letting the public know it was something new, something that had what other SVOD platforms had with the addition of premium, linear television channels and live sports coverage as well (Kelly, 2017). In conjunction with the app Foxtel Go, this rebranding modelled after the any time, anywhere service SVOD platforms like Netflix and Stan were already providing – which seems to indicate that “the provider’s mindset is moving away from its cable-television subscription model and towards SVOD” (Williams, 2018) (Knox 2017). In 2019 Chief Financial Officer of Newscorp, Susan Panuccio, confirmed the expectations of Foxtel’s SVOD services to be “a big revenue driver”, confident that future subscriber losses could be averted (Duke, 2019). Kayo Sports and Foxtel Sports In addition to Foxtel Now, Foxtel has implemented a second, separate SVOD service through their subsidiary, Streamotion, specifically for sports coverage under the name Kayo in 2018 ("Kayo Sports Help", 2018). By integrating over 50 sports into the app, it was able to provide a large amount of international sports to customers who had previously either only had access to FTA sports coverage or “been forced to spend big dollars to watch them via individual apps” (Dudley-Nicholson, 2018). According to chief executive, Julian Ogrin, the vision was to create “that ‘Netflix of sport’ idea” to fill a gap in the market, as “when you look around the world, it really doesn’t exist” (Dudley-Nicholson, 2018). Priced at $25 a month, Kayo was set to further milk Foxtel’s “ace up it’s sleeves” – sports, intending to take advantage of a market that Netflix, Stan and other SVOD platforms have not yet been able to (Sayer, 2017). In early 2019, Robert Thompson, the chief executive at News Corp, stated that the "investment in streaming [is] starting to pay off", as subscribers had risen 80% from Janurary 2018 (Duke, 2019). By late 2019, Foxtel announced: “The depth and breadth of Kayo’s sports are driving one of the most engaged audiences of any streaming service with customers watching (on average) seven sports and streaming nearly six hours each week, with 58 per cent of their viewing on the big screen” ("Kayo celebrates one year", 2019). Sports is one of the largest gatherers in terms of ratings throughout history, and regarded as “crucial in attracting subscribers to pay ‘packages’” (Rowe 1996, 576) (Bennet 2016). OzTam data shows that sport has held it’s ground in the top rated programs in Australia for more than 15 years (Bennet 2016). Foxtel has ensured the inclusion of many sports channels and plenty of exclusive live sports coverage in their packages, outside of Kayo, and has worked to secure a joint broadcast deal along side channel 7 to obtain exclusive cricket rights (Meese, 2019) (Middleton, 2018). Currently, Foxtel is “the only Aussie streaming service with the rights to live coverage of AFL, NRL, NBA, NFL, Super Rugby, European football and much more” (Sayer, 2017). Continuing to ensure that Foxtel holds a grip on major sports and persists to provide a plethora of sports entertainment in subscription packages whilst simultaneously offering up Kayo’s strictly sports SVOD services allows them to be accessible to diverse markets of people. Families who want sports, but also movie channels and kids content can still easily add a sports package onto their Foxtel subscription, allowing them to purchase content from a single service that is relevant for the entire household – either through cable, or IPTV (Foxtel Now) with SVOD services. Conversely, single professional who already utilises competing SVOD services may be interested in subscribing to Kayo’s sports specific service, since

access to sports is not offered through major SVOD platforms such as Netflix and will likely be cheaper than the accumulative total of watching pay-per-view games. Furthermore, sports continue to be a great opportunity for advertising, not only for Foxtel during advertising breaks, but also for advertisers in the form of sponsorship (Bennet 2016). Content With Foxtel’s pricing being largely viewed as expensive, or at least more expensive than many available SVOD services, a huge focus is being cast on the idea of “premium” content (“More Australians now have SVOD than Foxtel”, 2016). Outside of sports, one of Foxtel’s biggest drawcards is its access to huge titles like HBO’s Game of Thrones and The Wire (Williams, 2018). Recently, Foxtel has also been incorporating more “local originals, including Wentworth, Open Slather, Australia’s Next Top Model, The Real Housewives of Melbourne, A Place to Call Home, The Kettering Incident and Secret City” to compete with countless original content Netflix and Stan have been releasing (Williams, 2018). Foxtel’s CEO affirmed their “most core strength is around content” and thinks they “have over many years [built] up a position where [they] have enviable level of content”. A potential issue with this, however, is that the subscription packages are often bundled with a variety of channels that users may not even want or watch (Meese, 2016). Access to kids programming, such as Cartoon Network, is only available as a premium addition in the complete bundle subscription to every single Foxtel channel – meaning families or even young adults who are interested in watching the iconic cartoon series these channels have to offer are forced to pay a minimum of $104 every month ("Foxtel Now: Get a 10-day free trial of TV streaming", n.d.). Telstra and Netflix Bundling Since 2003, Telstra has been offering internet and landline deals with Foxtel cable included (Williams, 2002). Currently, there are three data options on the Telstra website which can be bundled with Foxtel Now, granting the complete package for 3 months at no cost ("Internet + Foxtel Now", 2020). There are also two additional deals combining the same Foxtel Now benefits with Telstra TV – which also allows streaming of Netflix and Stan, as well as Foxtel and Kayo, without the need of a Smart TV ("Telstra TV + Foxtel Now", 2020). Bundling of these services with the added benefits of 3 months free is not only aimed to entice Telstra’s customers to try Foxtel Now, but to also create a streamlined service (specifically with Telstra TV) that allows access to multiple SVOD services which usually cannot be accessed on the big screen without a Smart TV, or connecting a device to the television via HDMI – Both things older Australians may struggle with (Masige, 2019). The standard iq4 or iq3 set top box that Foxtel offers also grants access to Netflix from the home screen, allowing those who have a subscription to sign in and obtain access to both services ("Netflix through Foxtel - Support", n.d.). There are also certain bundle deals on Foxtel’s website that include a Netflix subscription alongside Foxtel’s own for those who do not already have one (“Foxtel Plus & Netflix Bundle”, 2019). An announcement in mid 2019 that stated Netflix would have a dedicated button on the new Foxtel remote controllers, making it even easier to access without having to sift through other applications and “seamlessly feed the older demographic” (Masige, 2019). Foxtel’s other challenges It is worth briefly mentioning that the increased competition due to the introduction of SVOD has not been and will not be the only challenge Foxtel faces. With more and more diverse SVOD, IPTV, and Rewind TV platforms becoming available, audience fragmentation (or disaggregation) is increasing. Not only does this create issues in gathering audience numbers, but it is also creating a “breakdown of large mass audiences of mass media [that] is having a ‘double whammy’ effect on the dominant commercial media business model: advertising.” (Macnamara, 2010). Foxtel, unlike SVOD providers

Netflix and Stan, collects advertising revenue from their many linear viewing channels, providing a portion of their income each year (Knox, 2020). Foxtel faces a risk of losing advertising revenue to online platforms, which are quickly becoming more and more popular for their successes in targeted advertising. An ongoing challenge that Foxtel has been dealing with is, of course, Anti-siphoning regulations. However, it seems Foxtel’s huge catalogue of sports that already falls legally within these regulations have proven to be very effective, particularly with the recent success in the cricket broadcast deal, making this a lesser concern in the current situation. How successful will Foxtel be? Tonagh believes that Foxtel’s strength lies “in offering live sport and linear programming, including premium content sourced through its deal with HBO. However, as more Australians choose to access content on demand, Foxtel will need to find creative ways to straddle both markets—which appeal to quite different people, with different budgets, tastes and habits” (“More Australians now have SVOD than Foxtel”, 2016). It is clear that SVOD platforms are posing as major competition for Foxtel, forcing them to implement the aforementioned strategies in order to stay within the market and Australian homes. Only time can tell how well this will hold them up in comparison, but Foxtel’s strong suit in sports and entrance into the SVOD market (both with Kayo and Foxtel Now) itself seem to be the most advantageous cards it has to play.

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