SVOD overtakes Foxtel as pay TV spreads to 50% of households

Arvind Hickman
By Arvind Hickman | 9 September 2016

The number of people that access subscription video on demand (SVOD) has overtaken Foxtel’s linear subscribers for the first time as more than half of Australian households now pay for TV content in one form, Roy Morgan research has found.

About 9.8 million Australians aged 14 and over (about 50% of the population) now have access to at least one form of subscription television, with SVODs nearly doubling the number of pay TV households in less than two years.

The study revealed that 5,595,000 Australians have access to an SVOD, with the majority on Netflix and Stan, but also including Presto, Foxtel Play and the recently launched YouTube Red. This was nearly 300,000 more people than have access to Foxtel's linear channels, 5,309,000.

The other subscription TV delivery category, internet protocol TV, has also had steady growth to 629,000, largely on the back of Fetch TV beefing up its content offering, including the English Premier League on Optus Sport.

The rapid growth of Netflix and Stan are credited for the milestone, but it also highlights changing viewer patterns with a growing number of people willing to pay for greater flexibility and viewing choices. Binge watching is also becoming more common with an ever-growing range of high quality box office TV series from the US, UK and, increasingly, Australia.

A halo effect

ASTRA chief executive Andrew Maiden recently told AdNews the rise of SVOD, and in particular Netflix, has helped normalise the idea you should pay for content on the box. He says the SVODs success is creating a halo effect for the whole subscription TV industry, which also includes Foxtel and internet TV companies like Fetch TV.

“All the evidence from other places where this has happened, such as Western Europe and North America, is that SVOD adds to the subscription market rather than leads to substitution,” Maiden explains.

“That's been the case in Australia so we actually welcome the arrival of these new players such as Netflix and Stan because they are getting more Australians into the habit of paying for television content.

"We're now at a point in Australian history where a majority of homes pay for television content of one kind or another. They've driven penetration of the category since their arrival 18 months ago."

Unprecedented growth

Subscription TV household penetration has reached 50% of Australian households, a remarkable rise from 27.6% in pre-SVOD 2014.

Netflix reached 1 million households in only its first year in Australia while Stan has built its customer base to 1.2 million paid subscribers in 18 months.

This is still well below Foxtel's reach of 2.9 million households but has been achieved in a fraction of the 25 years taken by the News Corp and Telstra joint venture.

Foxtel is still growing its subscriber base, but at a much slower pace of 100,000 per quarter. Its entry-level satellite and cable packages are pitched more towards household budgets whereas SVODs, often priced between $10-$15 per month, are aimed at individuals who want flexibility at a low price.

This week Foxtel announced it would be slashing the price of its own SVOD, Foxtel Play, to compete with Netflix and Stan. It has also expanded its content licensing agreement with HBO, an important move that will open up all of HBO's library and provide all-year access to shows that are currently restricted to certain periods.

Foxtel chief executive Peter Tonagh told AdNews Foxtel’s linear TV and SVOD services could co-exist harmoniously, particularly as satellite and cable technology remains the best content delivery option for live TV, particularly mass-market sports.

Australian made

It is widely recognised across the TV industry that high quality local productions will be vital for Australian TV companies to compete against global media giants.

Stan realises it needs more than the US content it  Showtime and  is banking on original Australian productions, with four new shows in the early development phase following on from successful first seasons of comedy No Activity and thriller Wolf Creek, which are both returning for second seasons.

These include Merchants of Misery, a satirical drama about celebrity agents and gossip magazines and the Matt Okine inspired comedy The Other Guy. There is also All Thumbs, a series about three outcasts looking for love, and Chaperones, which stars comedy trio Aunty Donna.

Providing greater flexibility, choice and unique content will be paramount for Foxtel, Stan and other Australian TV networks to win in an increasingly crowded and consumer-controlled market.

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