Foxtel to aggressively target SVOD market, expands HBO deal

Arvind Hickman
By Arvind Hickman | 6 September 2016

Foxtel is overhauling the pricing strategy its streaming video on demand player, Foxtel Play, to cater to the lower end of the market as it expands its agreement with production house HBO. New bundles will range between the $9 to $15 range.

The move, one of the most daring by the pay TV juggernaut in its 21-year history, is designed to help Foxtel compete with the likes of Netflix and Stan by providing a cheaper, more flexible product that appeals to viewers on a budget.

It also raises fresh doubts about the future of Presto, the SVOD player Foxtel part owns with Seven West Media that has struggled to keep up with its rivals.

Also announced at the Australian Subscription Television and Radio Association (ASTRA) conference on Tuesday:

  • Foxtel has entered a new long-term agreement with HBO that will see it broadcast five-times more hours of HBO content. It will launch in January 2017 and new arrangements will allow viewers to access the whole HBO library on-demand, indefinitely.
  • Foxtel is launching a kids' app that will allow popular children's shows to be consumed on the go.
  • There will be a host of pop-up channels in the coming months, including Binge and a Stars Wars channel in the run up to the Rogue One: A Star Wars Story.
  • Foxtel is producing six new Aussie productions, including a drama based on classing Australian novel The Picnic at Hangning Rock, part of a $125 million investment in local content.
  • Foxtel has almost ironed out all of the problems with its IQ set-top box and is working on the next iteration.

But undoubtedly the biggest announcement is a new pricing structure for Foxtel Play to go to market in December, allowing viewers to purchase month-by-month content bundles between the $9 to $15 range that SVOD rivals have used with great success.

Tonagh admitted that Foxtel's service hadn’t been good enough or flexible enough in the past as he revealed what Foxtel is calling “revolutionary” packages which allow more flexible, and lower price access to Foxtel's services. For the first time customers can bring their own device and access Foxtel over an IP delivered service Foxtel Play on a connected TV, tablet or mobile device. It means there's no need to install a set-top box or pay upfront and no minimum term fees.

He also revealed a new low cost device called a “puck” which will also offer IP delivered service but with the benefit of better search function and interface.

Tonagh welcomed the shift in consumer behaviour towards paying for content, echoing comments made by News Corp CEO Michael Miller at last week's NewsMediaWorks Future Forum event, but said there are number of “misconceptions” around the quality and volume of content offered by Netflix. He took the opportunity to outline how, and why, he believes Foxtel to be better. He highlighted that Foxtel has 99 of the top 100 movies from last year while its SVOD rivals combined have only 30.

“Historically there was a view that Australians won't pay for content. It was true for news, it was true for music and it was true for television. Well, not any more. Now many more are wiling to pay for the right television proposition and that can only be a good thing for Foxtel … The emergence of SVOD players creates great opportunities for us,” he told the room at the ASTRA conference.

“We thrive on competition and change. Twenty years ago we were the great disruptors and from that moment forward we've been at our best when we're challenging, especially in times of dramatic change. The competition between Foxtel and the recent SVOD entrants is much more nuanced than many would have you believe. We do compete in some respects but our services are fundamentally different in ways that make Foxtel unique.”

The move could potentially cannibalise some of Foxtel's customer base who are only interested in paying for one content bundle, such as drama or sport.

On offer will be a choice of two drama/entertainment bundles, one lifestyle, one documentary and one kids at the basic tier one price, with the option to add a tier two sports and/or movies tier on top.

The move has been driven by changing consumer patters that demand greater flexibility in viewing. Although sport and news are traditionally viewed live, up to 50% of drama viewing is time-shifted.

Also, the number of Australian households which pay for at least some content has risen to above 50% for the first time but most of this rise is due to the success of Netflix and new entrants.

Foxtel has made marginal percentage-point gains in the past year and is now viewed in 2.9 million Australian households.

Tonagh addressed the widespread issues with the iQ3 box when it rolled out, saying it has been rolling out new software which has fixed most of those problems. It is already developing the next-generation set top box which will help Foxtel run the whole gamut from low-cost entry to premium, high-end subscription service with all the bells and whistles.

The subscription TV boss says his new strategy for Foxtel returns to the “core DNA” of the company and that means a a commitment to customers, innovation and great content.

Part of that commitment is the new HBO deal which will give access to more current and past series (such as Game of Thrones, pictured) and more pop-up movie channels such as a Star Wars channel which follows the success of Harry Potter and The Fast and the Furious channels this year.

Foxtel's $125m investment in Australian productions marks seven times more than it invested just four years ago.

Tonagh also took the opportunity to throw a few digs at Optus for its recent EPL deals that have had a number of teething problems.

Mark Buckman was recently appointed as Foxtel's top marketer – he will be tasked with rolling out marketing and promotions for the new strategy and services.

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