Freudenstein: Future is not a ‘zero sum game’ between pay-TV and the streaming services

Richard-Freudenstein-The boss of Foxtel has dismissed concerns within the market that a massive surge in subscriptions for video streaming service Netflix will come at the expense of the pay-TV operator.

Speaking at the Australia Israel Chamber of Commerce, this afternoon, Richard Freudenstein told the audience: “many commentators approach the media market as if it were a zero sum game: Netflix wins, Foxtel loses.

“But as recent Roy Morgan research points out and as a report just published by Citi argues, that’s simply not the case. There will be significant growth for both Foxtel and SVOD services in the coming years.”

The Foxtel chief’s comments come after Mumbrella last week revealed that the pay-TV operator, amid claims of record subscriber growth, had quietly begun including users of streaming service Presto in its subscriber numbers.

Freudenstein today told the forum that he felt pay-TV and streaming video on demand (SVOD) were linked.

“I believe that in the future a vast majority of Australian homes will have either Foxtel or an SVOD service and many homes will have both,” he said.

“It’s a positive for Foxtel that more people have started to pay for television. By subscribing to an SVOD service they will come to see what they are missing out on, in both the range of content available and the convenience of watching where and when they want.

“One consequence of this will be that more people will take a look at Foxtel and see a service that has even better and more recent content.”

Freudenstein also argued that the lower margin SVOD service Presto, which is co-owned by Foxtel, Seven and Ten, was a means of challenging the likes of Netflix.

“(Presto) is one way to challenge disruptors is to take them on at exactly their own game,” he said.

“Presto, thanks to the program acquiring strength of Foxtel and Seven, has the best and most recent range of content of any of the SVOD services. We will continue to invest in Presto and are very confident that it will be a success story of the new world of media.”

He also argued that Foxtel was a premium service which SVOD players would struggle to challenge on the content front.

“Foxtel is a premium service, which naturally costs a bit more, whereas Netflix and Presto are add-ons either to free to air for people who don’t watch much TV or to subscription TV. Don’t forget that most Netflix users in the US still have a cable service,” he said.

“While Netflix produces a growing number of its own good quality shows, which it can afford based on its scale in the US, it will never be able to acquire the range of first run content that Foxtel can. It’s a simple matter of economics. At $15 per month, there is a limited amount of programming that any SVOD service can buy.

“Think about it, even if the speculation is correct about SVOD numbers in Australia and even if all those customers were paying, the total revenue for all SVOD services would be only around $150 million per year. That doesn’t provide much for programming investment compared to Foxtel’s (or free to air) programming budgets.”

Last week Foxtel claimed its total subscriber numbers grew to 2.847m as of June 2015, up from 2.667m a year ago but it declined to specify how many of these were cable/satellite subscribers rather than SVOD Presto subscribers.

A recent study by Citi suggested that Netflix was the clear market leader in SVOD with an Australian user base of 1.608m, with 910,000 paying users.

Nic Christensen 


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