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A $26 basic subscription at Foxtel is ‘not a great experience’: CEO Patrick Delany

Foxtel’s churn is coming from low-value customers the company “shouldn’t have chased” because they were paying just $26 for a basic subscription that “is not a great experience” anyway, according to CEO Patrick Delany.

He added that the company’s sports streaming service, Kayo, has a churn rate that is “way below” what was anticipated, praising the platform as “the most successful media business to have been launched in the last 25 years, including Foxtel, if it’s owned by Australians”.

“Netflix is pretty good,” he said, speaking at yesterday’s Future of TV Advertising conference in Sydney. “But to have 400,000 paying customers for sports alone at a premium price of 25 bucks with no tricks, no bells, no whistles, is one hell of an achievement. It is a big business already.

Delany, speaking at the conference, demanded digital platforms take responsibility for content that breaches copyright

“This is not a journey for the faint of heart because probably the next question is going to be, ‘Is that what the Foxtel problem is with churn?’ A lot of people asked me, and I read all the articles. And I gotta say this, that the churn parameters of Kayo are way below what we thought it was going to do, partly because, or a lot because, of the strategy.

“The strategy is that Foxtel only goes to 30% of Australians. That’s all we’re able to monetise, [when we’re paying] a huge amount of fixed-costs rights, whether it’s in sports or non-sport. So how do you get the rest of the country to see this and pay?”

Kayo is the way to do that, Delany contended, giving Foxtel the breathing room it needs to be a premium content experience, rather than cannibalising its subscriber base.

“Customers we are losing at Foxtel are the low-value ones that in the last five years, we probably shouldn’t have chased. $26 basic [subscriptions] at Foxtel is not a great experience,” he continued.

“Especially because you don’t have an iQ4 [Foxtel’s 4K streaming box launched in 2018]. And I can tell you from a capital standpoint, income standpoint, it’s not an experience either. So we have put our prices up and and our packages up to 50 bucks now. You get an iQ4, you get all of our streaming capability and basics, so a lot’s changed.”

One such change was last year’s launch of a Netflix integration. Users can access the streaming giant’s content through the Foxtel interface, in what Delany dubbed a “revolution”.

“Welcome to the new Foxtel experience,” he said at the time of its reveal.

Delany: ‘Welcome to the new Foxtel experience’

People were surprised at the partnership, Delany admitted yesterday.

“I think it was a shock to most people we did Netflix,” he said.

“It shouldn’t have been; we should have done it five years ago.”

The chief executive doesn’t have a view on whether ads should be introduced by streaming services – “It’s sort of like asking someone in the middle of a race, in the middle of all of the turbulence, to now commentate on it” – and wouldn’t be drawn on the ongoing broadcast rights saga with Rugby Australia, saying only: “We don’t comment on rights bids, especially when someone is running a live process … We also had an exclusive six-week one-on-one negotiating period. So Rugby Australia and Foxtel know where each other stand.”

The partnership broke down earlier this month when Fox Sports’ – which has had the rights since 1996 – bid was rejected by Rugby Australia.

But Delany did issue an impassioned challenge for the likes of Google, Facebook and Twitter to be held responsible for material – including pirated content – posted on their platforms.

“I go back, right back, and say, how come if Foxtel puts something up it’s my problem if copyright’s not cleared, yet for the new platforms, it’s my problem to have to go and take it down,” Delany asked.

“It shouldn’t be that way around. If you are running a platform, it’s you that has the obligation. It’s you that should be monitoring and pulling it down before you are being asked. And I think that’s where we need to move.

“You look at the reality TV that we’re talking about today, the dramas that Foxtel puts out. The sport we put on is completely combustible within an hour or two hours. It’s not like a movie that can have a life forever. If that goes up on YouTube, or Twitter or wherever, then on the last episode of The Masked Singer, and it’s illegal and we’re not monetising, that’s it, it’s gone after that live broadcast. A three-hour game of AFL was the longest we’ve got. NRL is 90 minutes. We’ve got boxing matches, we have whole lives of Australian athletes hang on 10 seconds.

“So it should not be our problem. It’s got to be the platform’s problem. And that’s where we need to move the debate to. Let’s get serious about this, let’s get serious about protecting the Australian creative people, protecting revenues, protecting advertisers, and, God forbid, actually protecting Australian businesses.”

Last year, media outlets were found to be liable for their readers’ Facebook comments in the first round of a landmark defamation case that shoved digital platforms’ responsibility, or alleged lack thereof, into the spotlight. Media companies denounced the decision, including News Corp, which called it “ridiculous”.

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