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Introduction? This essay will focus on Foxtel’s more recent Essay
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Nov 19th, 2019

Introduction? This essay will focus on Foxtel’s more recent Essay

Introduction:

? This essay will focus on Foxtel’s more recent ventures in terms offering new pay TV initiatives and their own SVOD service to rival with Netflix. It will also focus on how they position themselves despite being in the Australian market which has the “lowest pay TV penetration rate in the world” (Duke, 2018).

History:

? Television has evolved greatly over the years, starting with the “Network Era”, to the “Multichannel Transition Era”, and currently, the “Post-Network Era” (Given, 2016).

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? The starting point for TV was as a standalone set in each home bounded by a limited range of channels, making the viewing experience in each home somewhat similar (Uricchio, 2009).

? It was during the Multichannel Transition Era, in 1995, that Foxtel was established from a partnership between News Corporation and Telstra (Duke, 2018).

? After spending $600 million on a digital upgrade, they pioneered the offering of free-to-air channels on their pay TV set-top boxes. They were then able to charge premium prices for this unique service, with a $100 average revenue for each user (Duke, 2018).

Earning around $1 billion in profits (White & McIntyre, 2015).

? A huge driving force in its early days was catering mainly to family with children. That has since changed with other companies offering kids programs, no longer providing incentive for parents to pay for Foxtel (Roy Morgan Research, 2019).

? The long-standing idea of what TV was changed rapidly during the current era, with the transition from scheduled programming to personal viewing schedules with highly diverse content. People started consuming a vast array of content on multiple devices, from different television platforms and services. The introduction of Subscription Video on Demand (SVOD) platforms such as Stan and Netflix disrupted the space of online content consumption and threatened the companies that have monopolised the industry for decades (Scarlata, 2015). As a result, many believed that the television era was coming to an end (Given, 2016). However, the differing landscape does not necessarily mean it is ending, but rather, embracing its potential of becoming a “hybrid media form” (Bennett, Strange, Spigel, Turner, & Thomas, 2011). TV is altered due to changing technologies, industry competitors, and socio-cultural norms relating to consumption habits (Given, 2016). Companies such as Foxtel adapted and implemented strategies that differed greatly from their previous approach in order to retain their numbers.

Challenges:

? Convergence

o The convergence of digital media consumption stems from the ability to easily access various forms of content simultaneously (Deloitte, 2018)

o Fighting for screen time in this saturated medium means that media platforms have to position themselves as the main source for all digital entertainment needs.

o Forming an experience that breaks traditional boundaries of content consumption on specific platforms will aid both consumers and media platforms in dealing with convergence.

o Customers now have a predisposition in wanting to access streaming services internationally due to the portability and accessibility mobile phones provide (Given, 2016).

? Provide users with the ability to download content onto the application/devices to counter the fact that their services are not available worldwide.

o

? Customer retention and competition

o Netflix’ methods of obtaining global rights to air programs posed a threat to companies that were deeply rooted in their regional target markets (Given, 2016).

? The demand for the service was evident from the 340,000 households in Australia that were using Netflix via VPN servers prior to its launch in 2015 (CHOICE, 2014)

o Recent statistics from Roy Morgan Research (2019) stated that 14 million Australians consume content via pay or subscription TV services.

o Amongst all the competitors, Foxtel was the only company to see a decrease in their user count by 8.9%, dropping to just below 5 million. On the other hand, Netflix increased their subscribers by 25% to just over 11 million (Roy Morgan Research, 2019).

o Given (2016) contends that Foxtel may not be that detrimentally affected as this reflects the number of people who previously never paid but now do, as opposed to customers switching platforms.

o The growing numbers in this market, while good for business, also means that it is getting increasingly competitive. Future strategies should point towards targeting consumers with content they value and therefore justify the costs they pay.

? Keeping costs low bounded by regulations while maintaining revenue

o Foxtel’s premium price was criticized in light of Netflix’ affordable rates, with consumers calling out the monopolistic behaviour (Given, 2016).

o Their price discrepancy isn’t an isolated issue, as Australians pay up to twice the amount for identical services offered in similar countries. This is due to the regulations set by main copyright holders (House of Representatives Standing Committee on Infrastructure and Communications, 2013)

o Industry research by Goldman Sachs predicts Foxtel’s pay TV total subscriber count will go up to almost 4 million in the next 3 years, with around half of that amount split between pay TV subscribers and those using streaming services (Mason, 2018).

o In light of these new launches, Foxtel has reported a loss in revenue in 2018. This was mainly driven by a lower average revenue per customer due to their customers shifting between different platforms, drop in advertising revenue, as well as higher sports programming costs (Duke, 2018).

? Content regulation and Australian representation:

o Netflix Australia only has around 1.6% of local content in their catalog due to rights issues, more titles available in the US library but is inaccessible due to geoblocking (Lobato & Scarlata, 2018)

o Screen Producers Australia are pushing for new government regulations that would impose a minimum requirement for Australian content for streaming services (Lobato & Scarlata, 2018)

? If these services are viewed as traditional TV, the amount of local representation will ultimately fall short.

o While pay TV isn’t subject to the same content regulations as free-to-air channels, under the Broadcasting Services Act 1992, 10% of subscription TV providers’ total program budget has to be allocated towards producing new Australian drama shows (Screen Australia, 2019).

o Distributing Australian content locally or internationally is seen as vital to maintaining a sense of community and culture, while also supporting its television industry (Deloitte, 2018).

? Survey found that access to local content was pertinent in almost two thirds of their respondents.

o They have also signed a deal which will allow subscribers to access Netflix via their iQ set-top boxes (Morphet, 2019)

o Ties in with consumer survey which states that most people would appreciate the ability to access the content they want all on one platform (Deloitte, 2018).

o They are also joining forces to fund and produce more Australian content. Foxtel is likely to gain exclusive rights to air these shows in Australia, while Netflix will provide a global platform for these shows to be consumed.

o Even so, these services may continue to have small percentages of Australian content and are unable to fulfill the same needs as broadcast TV.

? Given the difficulty to obtain rights, content deregulation and steep local productions costs (Lobato & Scarlata, 2018).

o One way to counter this could be through more accurately addressing audience preferences

? A quarter of SVOD subscribers don’t value the service’s program recommendations, highlighting the inaccuracy of the algorithms in place (Deloitte, 2018).

? Revising the algorithms can create a more personalized experience, leading to more customers as they are shown programs they actually want to watch.

? Screen multiplicity could actually encourage original content consumption and increase its production revenue (Scarlata, 2015).

o Companies in this age have to adapt to their role of becoming the “producer and distributer” (Jenner, 2014)

o

Strategies to compete against Netflix:

? Pay TV: More competitive pricing, new service and merging with Netflix

o Introduction of Netflix and 300k VPN users prior to Aus launch

o In the realm of pay TV, when Netflix first arrived in Australia, Foxtel halved their starter pack prices. This managed to increase their subscriber count by 7% (Screen Australia, 2019).

o Despite the cord-cutting epidemic where pay TV consumers seem to be declining, the reality is that Foxtel’s pay TV penetration rates have remained consistent at 30%, and their annual subscription numbers have fallen by just 1% despite the introduction of SVOD (Turner, 2017).

o Pay TV also holds its place as the “most valued media content subscription” for almost all age groups, with sport being the key factor for retaining customers (Deloitte, 2018).

o SVOD succeeded largely due to the control users have over the content they watch and the lack of advertisements which TV could not compete against. Between 2014 and 2015, the total hours Australians spent watching TV fell three and a half hours (Given, 2016).

o Half of Australia’s internet users and two thirds of Australia’s pay TV subscribers also pay for at least one SVOD service (Turner, 2017). These two services are able to co-exist and don’t necessarily have to be independent of each other in today’s age of audience fragmentation and media convergence.

? Introducing a similar SVOD service with some added benefits

o Foxtel is taking advantage of audience fragmentation (White & McIntyre, 2015)

o Foxtel initially responded by offering Foxtel Play before Netflix’s launch, but faced challenges due to high subscription costs and lack of content (J. M. Duke Jennifer, 2018). It was followed by Presto which was discontinued in 2017 due to low subscriber count (Battersby, 2017).

o They then rebranded and introduced Foxtel Now as a step towards increasing their penetration rate which has stayed stagnant for years. By removing more than $200 of extra charges for the installation fee and iQ set-top box previously required by their pay TV alternative, they had a contract-free streaming service. Netflix is priced from $10-18 per month, while Foxtel Now starts at $25 per month. However, Foxtel’s service operates on the basis of channel packs, meaning that for additional content, the user would have to pay an additional sum every month. This hikes up the price to $104 per month for all additional packs, making it less attractive compared to Netflix’ pricing strategies (Choros, 2019a).

o Alongside low subscription costs, Netflix is commercial free and available throughout most countries. Although, Foxtel airs content Netflix is not planning to venture into, namely, news and sports. Once VPN access was terminated, many customers lost access to the content that was usually immediately available on the US platform (Given, 2016). In this case, Netflix has a seemingly narrow set of genres compared to its competitor.

o This acts as a drawcard for Foxtel Now as they are able to provide users with access to more first run shows. For instance, they air more than 50 different local and international sports programs such as AFL, NFL and Super Rugby (Foxtel, 2019). They also bought the rights to air popular shows such as Game of Thrones, which is included in their starter pack (Choros, 2019b). This makes it the only service that offers access to top sports and HBO programs in Australia (Choice, 2018). This poses a huge advantage coupled with their Live TV offering, allowing audiences to watch programs at the same time they are aired in the US or for watching sports events live. These strategies have positioned them away from being the traditional SVOD provider and could provide incentive for consumers who value these advantages to pay more for the service.

o Foxtel also announced a new SVOD service set to launch in late 2019, titled “Project Jupiter”. Learning from their previous launches, there will be more planning and thought put into this launch to ensure service runs smoothly and nothing is overlooked (Mason, 2019). Moving forward, they should aim to appeal to customers in terms of having the most unique content, while also sustaining their premium pay TV subscribers.

Conclusion:

? In conclusion, convergence saw the structural shift of media in how it is consumed, regulated and categorised, challenging long-established norms (Scarlata, 2015)

? All in all, the television sector in Australia will not end with services like Netflix or Foxtel Now, yet it no longer maps perfectly onto its traditional definition either (Wolff, 2015).

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