Foxtel considers no contract option after driving ‘enormous growth’ in first quarter

The panel (l-r): Tim Burrowes, Mumbrella (moderator); Tristan Masters, Standard Media Index; Dan Sinfield, Carat; Ed Smith, Foxtel; Felicity Emmett, ANZ

The panel (l-r): Tim Burrowes, Mumbrella (moderator); Tristan Masters, Standard Media Index; Dan Sinfield, Carat; Ed Smith, Foxtel; Felicity Emmett, ANZ

Foxtel’s marketing boss Ed Smith has said the subscription television company may implement no contract options to encourage customers nervous of making a long-term commitment to the platform.

During Mumbrella’s Spends & Trends breakfast in Sydney, Smith was asked how the forthcoming Federal Budget might affect him as a marketer. He said: “Rather than thinking what I want to see in the budget, it’s a case of after seeing the budget, I’m thinking about what we do as a result – and how do we close out the quarter strongly?”

After hearing a relatively downbeat presentation from ANZ’s co-head of Australian Economics Felicity Emmett, Smith said: “I’m thinking about a no contract period where people who are nervous to sign up to a 12 month or 24 month plan come on board with confidence.”

“I might go back and push the green button on that after looking at your data. I think there’s a whole lot of people sitting there thinking ‘I don’t want to commit to a 12 month plan for my household’ – there’s a lot of anxiety there.”

foxtellogoLast year Foxtel reduced its prices ahead of the launch of new streaming services including Netflix locally, which do not require customers to take fixed-term contracts. Smith said the strategy had driven “more growth in the first three months of this year than we’ve done in the last three years”.

The panel was also asked about the impact of the weakening Australian dollar on doing business. Smith said it had increased the cost of international contracts for content and the manufacturing of set-top boxes, which are both usually priced in US dollars. “The money we repatriate to the US for News Corp, which owns half of Foxtel, is smaller, and with the ad revenue side of things there’s less growth than we expected there,” he added.

During the discussion Smith, who spends close to $100m on media every year, challenged media including newspapers and cinema to be more competitive on advertising ratecards to earn their places on the schedule.

“We have very powerful econometric tools at Foxtel and spend a lot of time on what media works and what contributes the most,” he said. “The good news is all media works, the bad news is not all of it’s priced right for us, so I think there’s some opportunity for some media vendors to look at their volume and their yield.

“There’s an oversupply of media, and when I look at CPMs [cost per thousand impressions] across the board I reckon there’s a volume opportunity for newspapers. It’s not been a very competitive set with News and Fairfax – but when you go to the UK you open up the newspaper and they’re full of all the categories, and there’s a reason for that – newspapers really really work, they just got a little bit expensive here.”

NetflixOn the issue of whether international companies should be asked to pay taxes such as GST in Australia, panelist Dan Sinfield, MD of media agency Carat Sydney, said it must be managed so as not to stifle innovation. Currently companies such as Google, Microsoft and Netflix are exempt from paying many local taxes from the Australian market because they book the revenues abroad.

Sinfield said: “It’s a contentious issue across the globe – the economy needs to grow and the government needs to reap some tax rewards from that. But there’s a different perspective on it that this has come out from the global economy the internet has facilitated where a guy can set up a taxi company without owning a fleet of taxis, and I’d hate to see that kind of innovation stifled.

“There’s probably a hybrid model where they pay tax realistically where they are based and where they are operating, but I really wouldn’t want to see the advantages of these companies changed and the benefits to consumers as well.”

Netflix, which does not pay GST, costs consumers a dollar less than locally based rivals Stan, and Foxtel’s product Presto. Asked whether this would ultimately affect consumer decisions of which service to use, Smith conceded “probably not”.

But he added: “Why would you have two local businesses with 10 per cent GST and the exact same service not having to pay it? Ten per cent doesn’t seem like much, but you’re fundamentally making it tougher for local businesses who already have a very small market to compete on a global scale. We’ve got to fix it, it’s not hard to fix.”

Alex Hayes

Spends and Trends comes to Melbourne this Friday with speakers including Fiat/Chrysler marketer Mark McCraith and PHD’s national CEO Mark Coad. Click the banner below to get more details and book your ticket.

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