The past few years have been a boon for Australia’s subscription television industry.
In the two years to February 2020, the number of Australian households with subscription television surged by 2.4 million, according to Roy Morgan Research.
The one notable exception to this boom is Foxtel, which managed to lose 582,000 subscribers over these same two years – a period when every other service experienced strong growth.
The situation since February has obviously worsened for Foxtel. While its competitors are reporting booming subscription numbers as Australians are locked at home, Foxtel has been inundated with cancellation requests as live sporting events across the globe – including the popular AFL and NRL seasons – have been postponed.
Unlike its competitors, Foxtel is leveraged heavily into sports via its traditional broadcast and Kayo services. Accordingly, a major reason to subscribe to Foxtel was extinguished virtually overnight once the coronavirus lockdown commenced.
With Foxtel losing the subscription war, drowning in $2.3 billion of debt, and recently forced to cut 200 jobs as well as place a further 140 employees on furlough, it is desperately trying to reinvent itself.
Its latest salvo is to launch a new online subscription service named “Binge” in the next four to six weeks that will focus purely on drama content and will feature complete seasons of popular TV shows rather than weekly episodes:
“Our new service is going to deliver something quite unique to Australians who want outstanding entertainment with a fresh new user experience,” [CEO Patrick Delaney] said…
The price point of Binge will compete with the likes Stan, whose introductory offers start at between $10 and $14 a month…
Foxtel and other subscription services have received a huge ratings boost during the pandemic and Mr Delany believes the time will be beneficial for the new service which, like Kayo, will focus on subscribers who don’t already have Foxtel.
It is difficult to see how Binge could turn around Foxtel’s fortunes. Binge is essentially a stripped-down version of Foxtel Now, which already offers basic packages at $25 a month.
While there is good reason to believe that Binge will generate some growth in subscriber numbers, this will most likely come at the expense of the company’s profit margins. This is because existing subscribers to Foxtel Now will likely downgrade to Binge, causing Foxtel to cannibalise its subscriber base.
Ultimately, Foxtel’s fortunes will not be turned around until its senior management addresses its underlying barriers, namely:
- its expensive legacy cable television hardware;
- its expensive broadcast business;
- its reliance on (and saturation with) ads; and
- its uncompetitive pricing.
Foxtel’s high cost base has made it uncompetitive against its leaner streaming rivals. It must ‘cut the fat’ to compete.
