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.

Unconventional Economist

Leith van Onselen is Chief Economist at the MB Fund and MB Super. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.

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Comments

  1. scottb1978MEMBER

    I signed up to Foxtel to watch the Chernobyl series…. thanks for reminding me to cancel again 😀

  2. I hear that the next version of Outlook will include a newsreader, like Outlook Express did back in the day.

    This will cook Netfix’s Goose.

  3. I rang foxtel last month to ask why we can’t screencast to different tv via foxtel go app ( someone else’s subscription )….

    you have to enable this option at a monthly fee of $15 for the screencast option….on top of the rip-off charges……that’s almost the cost of the top tier netflix total package…!!

    no wonder everyone is cutting their cables…

  4. On 30 Jun 2019:

    Tom Gleeson called TV ‘a dying industry’ at the Logies.

    “We don’t watch each other’s shows anymore,” he continued. “When you see each other at a party you don’t say, ‘I love your work’, because you don’t, because you haven’t seen it. You just say, ‘How good’s Chernobyl?'”

    https://www.smh.com.au/entertainment/tv-and-radio/tom-gleeson-called-tv-a-dying-industry-at-the-logies-was-he-right-20190705-p524ko.html

    Local content law forced Aussie TV channels to create shows. Not sure which shows were produced due to the law: Water Rats, Russell Coight’s All Aussie Adventures, Fat Pizza.

  5. Subscribers to Stan, Netflix, Hulu, Amazon Prime, Sling etc. like to pretend they’re good because they don’t want to shell out for proper cable. You run out of decent stuff to watch on Netflix after about a week. Plus the internet here is utter guff. True story.

  6. Foxtel will be fine. They deliver the last leg of my unreliable NBN to me, because Turnbull kowtowed to oniony Abbot, who slavishly followed Murdoch’s instructions to dismantle our Fibre To The Home rollout and preserve the value of his 1990’s asset at all costs. Sad we have now spent several billion more on a substandard NBN that would have been 10x faster now, with upgrade options of 1000x faster than what we get now on the maxed out Mixed Technology Mashup…