Netflix tie-up won’t save Foxtel

Today, TV giants Foxtel and Netflix are set to announce a partnership that will enable Foxtel subscribers to stream Netflix through their IQ box. The move is seen as a defensive measure for Foxtel to prevent existing subscribers from dumping the service for cheaper alternatives by making the IQ box the hub for online streaming. From Roy Morgan Research:

New research from Roy Morgan shows 13.355 million Australians now have access to either Netflix or Foxtel via a household subscription to either service equivalent to nearly two-thirds (64.4%) of all Australians aged 14+.

Analysing the two services separately shows 11.5 million Australians now have a household subscription to Netflix whereas around 5 million have a household subscription to Foxtel and 3 million have access to both Netflix and Foxtel.

Of the 13.355 million subscribers to either service a majority of over two-fifths (62.6%) only have access to Netflix equalling a market of 8.4 million Australians. A further 23%, or 3 million, have access to both Netflix and Foxtel and the remaining 14.4%, or nearly 2 million, only have access to Foxtel…

Michele Levine, CEO, Roy Morgan, says:

“Foxtel and Netflix are undoubtedly the two giants of Australian Subscription TV and the plan for Foxtel to provide Netflix through the Foxtel IQ box set to be announced tomorrow carries significant opportunities for both services.

“Enabling the 5 million Australians with household access to Foxtel to view the streaming service through their Foxtel IQ box is a solid defensive measure to help prevent existing Foxtel subscribers ditching the service to move to cheaper alternatives and provides an extra incentive for new users to sign up for Foxtel.

“The proliferation of cheap streaming video services led by Netflix in recent years has provided the biggest challenge yet to Foxtel’s traditional business model and there are more cashed up competitors on the way. Nearly 3 million Australians already watch the Australian-owned Stan and services including Amazon Prime Video and YouTube Premium are growing quickly.

“The more Foxtel can be regarded as the ‘gateway’ to video content from the likes of Netflix, and perhaps other rival services in future, the more access Foxtel will gain to detailed user data metrics that will help them tailor their services, and advertising, to individual viewing preferences and the more valuable their service will in turn be to advertisers looking for an audience”.

This move is unlikely to save Foxtel, which will continue to lose market share to streaming services like Netflix and Stan.

These services are widely available via most smart TVs, gaming consoles, Google Chromecast, etc, so it matters little that it will also be available on Foxtel’s IQ box.

Netflix recently passed Disney as the largest media company in the world. It has a global reach of some 120 million subscribers, very deep pockets, lots of first party content that is unavailable elsewhere and appeals to a variety of tastes.

Netflix’s cost base and price point is also far lower. Netflix is unburdened by legacy hardware like set top boxes attached to traditional cable. This keeps its costs lower and enables Netflix to offer Australian subscriptions for around $10. This is well below Foxtel’s cheapest offering and, arguably, provides deeper content.

Netflix’s technology is also superior. Its App works seamlessly on most devices, allows content to be downloaded offline, time stamps progress, and rarely crashes. By comparison, Foxtel is clunky, regularly crashes, and cannot download content for offline viewing.

With barriers to entry smashed, the best Foxtel can hope for is to stem the loss of subscribers through its sports offering. But ultimately, it cannot beat the internet.