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Netflix v. Foxtel: A battle for Australian subscription dollars

by Sandi Keane | Oct 24, 2018 | Business

The battle for your eyeballs and subscription dollars is on. Invest in your entertainment wisely, says Anthony Eales, and you’ll be the kingmaker in the content subscription wars.

NETFLIX INVADED the shores of Foxtel’s home turf long before they would eventually launch in March 2015. It had been estimated that 200,000 Australians were accessing Netflix through VPN, proxy and other means since it launched its instant streaming service pre-2010.

Foxtel had big plans to compete with Netflix with it’s eventual failed joint venture with Channel 7, Presto. But its clunky sign up method where it required users to sign up to a movies package or a TV package or combining the two for a far more expensive alternative to Netflix seemed to be doomed from the start. With its clunky technology underpinning Presto, Foxtel and Seven could be forgiven to be thought to have brought a knife to Netflix’s gun fight. Presto didn’t even launch an Apple TV app and was missing in action on many smart TVs and game consoles. It shuttered a couple of years after its birth.

Channel 9 and Fairfax Media pre-emptively launched their own streaming service, Stan, with a fairly big budget advertising campaign featuring Australian comedian & acting export Rebel Wilson in January on Australia Day. Content output deals were done with CBS subsidiary & US pay television network Showtime as well as AMC to clinch every episode of Breaking Bad as well as future episodes of the new to be launched successor to Breaking BadBetter Call Saul. Stan. has also released award winning (in Australia at least) original programming such as Romper Stomper (the TV series), No Activity(AU) & Wolf Creek (the TV series). I also enjoyed when they did a Netflix and released six Australian stand up comedy specials.

Also with the Fairfax/Channel 9 merger Stan is being mentioned as a prized asset for the company going forward. Will be interesting to see if the merged entity decides to invest in Stan in a big way or let it keep going along as it is. Unfortunately for the future of Stan, I don’t know how well financially placed this new entity will be to invest in much of anything. I wrote about the merger and its effect on the Australian media landscape. You can read that here.

Australia’s Internet lags behind many developed economies and with the Coalition government’s decision to hobble and perhaps even decimate our ability to have a world class telecommunications infrastructure with a Fibre to the Home National Broadband Network you could say Netflix, Stan and other future streaming service upstarts had a battle on their hands against Foxtel. Past Prime Minister Kevin Rudd has even joined the dots and has said that the Coalition government ruined the NBN with inferior hundred-year-old plus copper technology to protect their cheerleader Rupert Murdoch’s pay TV monopoly Foxtel from the onslaught of streaming services and more, that the inevitable gigabit+ Internet most of the Australian population would have access to would enable.

Kevin Rudd tells it like it is:

It’s quite an interesting development that Foxtel are touting their new 4K enabled set top boxes, the Foxtel iQ4 and its Foxtel 4K channel as the only true way to know you are getting 4K content in Australia. If all Australians were able to access the speeds that would be enabled by fibre Internet than perhaps this wouldn’t be such a selling point.

The Australian Financial Review reported in August that Netflix now had an estimated 3.9 million subscribers while the number of Australians living in a household with Netflix approaches 10 million and Stan had 1 million subscribers. Foxtel, meanwhile, has around 2.8 million subscribers and has been hovering around that mark give or take user churn and new signups according to The Age.

Foxtel is a big spender in live sports content rights and this year struck a joint broadcasting deal with Channel Seven worth $1.182 billion. Add to that billion dollar deals in past years to broadcast sports from AFL & NRL (two of the biggest and some would say Foxtel in Australia’s bread and sporting butter) to tennis, boxing, motorsport and more.

ATO data dump: naming and shaming the nation’s biggest tax cheats

It’s clear that Foxtel needs to recoup the costs of its investments. And with Netflix (and Stan) biting at their heels and making Foxtel’s other packages including Kids, Drama, Movies and Documentaries less attractive, Foxtel’s sports rights deals seem all the more important. Expect to see the price of the sports package go up. And with Foxtel refusing to budge on not charging for HD content the costs just seem to get more extravagant by the day.

As a Foxtel subscriber myself, I have recently been surveyed about future possible Foxtel packages and it seems there are bundles on the way including Foxtel Black where you get Netflix included in your package as well as a dedicated VIP customer service line, as well as every channel package. All for the amazingly cheap price of $139 a month. Bargain! Meanwhile you can get a regular Netflix subscription (with HD included) for $13.99 a month. When you are paying $139 a month for an everything included Foxtel subscription and Netflix is the cheapest (and some would say better value) part of that bundle, something is wrong with your value proposition.

Meanwhile, according to the survey I was sent out, Foxtel are brainstorming raising the prices of the basic Entertainment + Sports + HD/4K package. The little secret about Foxtel is that you can bargain with them for a better deal by threatening to cancel and getting put through to their customer retention department. It’s what I do myself and recommend you do too if you are a Foxtel subscriber. I’ve noticed over the past year the discounted price offers are getting worse. Of course I may not be the negotiator I used to be. But it seems this way on the Whirlpool Forums’ Foxtel Bargaining thread where people spitball strategies to get the best deal out of their Foxtel.

And with Netflix’s content budget for 2018 being $8 billion USD it’s a wonder Stan can compete let alone Foxtel. I don’t know when that number is going to plateau but each year that number goes up is bad news for Foxtel’s non-sports offerings. With Apple and Disney planning their own streaming TV offerings to presumably go worldwide, at some point one would imagine being an English-speaking country that Australia would be in their sights. Apple’s content budget so far by the way: $1 billion USD. And it’s only a matter of time before Foxtel is skint enough not to be able to afford that expensive HBO content output deal and suddenly we are getting our future Game of Thrones mega hit through an Australian HBO Now equivalent that is direct to consumers over the Internet. And unlike Presto and Foxtel, you can bet HBO Now, Apple and Disney will have Apple TV apps as well as being on every other imaginable platform.

Foxtel’s answer to Netflix and Stan so far — FoxFlicks, where you get one new movie a day in addition to about 1,000 other movies (a lot which you’ve probably already seen) to stream only on their iQ3 & iQ4 smart set top boxes. And all it is seems to be is playlists of movies. This can be handy when Margaret Pomeranz or movie historian Bill Collins curate, otherwise I don’t really see the appeal. So smart in fact they haven’t discovered how to include Netflix or Stan on them as an app. Lest they hasten their own premature end when they discover through their analytics that people are using the alternative streaming services more than their own.

FoxFlicks: Like Netflix but not really

Their other answer is a rebrand of their legacy premium drama channel, Showcase, as FOX Showcase and access to a bounty of full on-demand full seasons of TV shows, some with every episode. You can access these on demand through the iQ3 or iQ4 as well as Foxtel Now and Foxtel Go, their online offering. But the price is $20 a month on top of $29 a month for the basic Entertainment package + $10 for HD. It quickly adds up. And with the debacle of the pricing changes for Foxtel Now recently, you wonder if Foxtel even wants to compete with their more nimble streaming opponents.

The other recent competitor to launch into Australia is Amazon with it’s Prime Video service. It launched in December of 2016 to coincide with the launch of the car enthusiast series The Grand Tour and although the selection was quite nimble at first, it has improved since. I’d expect Amazon to beef it up even more as their Amazon Prime general subscription generates more take-up in Australia. Amazon has a big budget for its Prime streaming service in the US as well, $5 billion USD for 2018 in fact. And a lot of that content carries over into Australia. A quirk about Amazon though is it mustn’t think Australia generates enough subscription dollars to justify releasing Amazon Original Films here. The Amazon Original Films get released theatrically worldwide in a lot of instances but there must be too much of a financial incentive to release them in Transactional Video On Demand services like iTunes or Google Play Movies. Amazon’s Fire TV suite of products also isn’t very mature in Australia just yet with the very rudimentary and basic Fire TV Stick Basic Edition the only option they have on the Amazon Store in Australia.

Amazon CEO Jeff Bezos

YouTube as well as its YouTube Premium product (formerly YouTube Red) capture much of the youth. I’m not sure the numbers of YouTube Premium subscribers in Australia but I think it would be safe to say YouTube (the ad-supported app and website) would be one of the most popular video streaming sites in Australia. I personally subscribe to YouTube Premium to remove the ads on their apps. I haven’t really checked out many of their exclusive shows, but I’m 32 and don’t think they are really aimed at me. More younger it skews I’d say.

Now it would be remiss of me to mention the dominance of Netflix and it’s place in the cultural zeitgeist. They now have 137 million subscribers worldwide. And they equalled HBO at the recent Emmy Awards for the number of awards won on the night. Whenever a show goes big on Netflix, you can see a correlation in the number of followers the stars of the show get on social media channels as they rise to massive proportions. They are in the vernacular of youths everywhere with the “Netflix ’n’ chill” activities they inspire. And Netflix fans will know of the 5pm AEST / 6pm ADST drops of their new shows on Fridays as well as new stand-up comedy Tuesdays. They produce high quality videos shareable on social media and with your friends about what’s coming to Netflix that month. Personally, I’m a big fan and was one of those early adopters accessing Netflix via VPN and smart DNS changers before Netflix cracked down. I couldn’t be bothered to do it anymore with the amount of content on the Australian region of Netflix. And I especially love that all of Netflix’s Originals make it out here as well as worldwide at the exact same moment they do in their host country.

The Netflix effect on Instagram followers. Credit: CNBC

The prevalence of Netflix, Stan & Amazon Prime Video would have had a positive effect on the problems that Foxtel has always been trying to stamp out — that is digital piracy.

Gabe Newell, of Valve and the gaming platform Steam once said the following:

“In general, we think there is a fundamental misconception about piracy. Piracy is almost always a service problem and not a pricing problem. For example, if a pirate offers a product anywhere in the world, 24 x 7, purchasable from the convenience of your personal computer, and the legal provider says the product is region-locked, will come to your country 3 months after the U.S. release, and can only be purchased at a brick and mortar store, then the pirate’s service is more valuable. Most DRM solutions diminish the value of the product by either directly restricting a customers use or by creating uncertainty.”

Common sense

This is what Netflix, Stan and Amazon Prime Video as well as future streaming services help to solve. And the same can be said about music streaming services like Spotify and Apple Music. I wrote about how there are different ways the movie industry could do this by introducing day and date releasing with the cinema release date. But a lot of the hype around films that would usually be destined for the cinema being released at home for a premium on the day and date they are released at the movies has died down.

Meanwhile Foxtel (and Australian free-to-air TV networks for that matter) are inconsistent and only screen TV shows the same day they air in the US if they are huge shows like Game of Thrones or The Walking Dead. With content rights deals negotiations and more to be worked out for these deals to happen, it’s harder than it seems for Australian entertainment companies to screen content in a timely manner. But they are up against tech companies that have an edge and have been using it for years to concrete an advantage that makes the old Aussie media companies look like dinosaurs.

I am hugely interested to see how these big media battles play out worldwide as well as in Australia. The battle for your eyeballs and subscription dollars is on. Invest in your entertainment wisely and know you are the kingmaker in the content subscription wars.

Disclosure: I own a small parcel of Netflix shares mainly because I’m a big believer in them. Also I subscribe to Netflix, Foxtel, Stan. & Amazon Prime.


Anthony Eales

Anthony Eales is a media, news and tech enthusiast from country Victoria in Australia.

The above article is republished with permission. You can find more articles from Anthony here.

You can also follow him on Twitter @ants000.

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MW's former editor, Sandi was also editor at Independent Australia.
Sandi has conducted corporate investigations, principally into the CSG and media sectors. Sandi holds a Masters degree in Journalism from the University of Melbourne.

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