Why Telstra TV will eat Foxtel

Alex HayesWhile Telstra insists the idea behind its new Telstra TV service is to grow the pay-TV market Alex Hayes argues it will actually have the opposite effect.

When Telstra announced it was launching a service earlier this year questions were raised as to whether it would cannibalise Foxtel’s pay-TV service. After seeing it last night I can’t help but feel it will. 

The product itself is essentially a rival to Apple TV, bringing together a bunch of apps (15 at this stage) including its own pay per view Big Pond movies, subscription video streaming services Foxtel and Netflix and TV catch up services 9Jumpin, Plus7 and SBS On Demand. Stan, TenPlay and ABC iView should all be making their way onto the platform by the end of the year.

And in previews at the Telstra Customer Insight Centre it looked very slick and worked efficiently, while the box itself is also fairly aesthetically pleasing.

The new Telstra TV player

The new Telstra TV player

The idea behind it is to give consumers easier access to more internet-based content – with Telstra choosing tech provider Roku’s device as the platform, wisely electing not to try and compete in the global technology arms race. You may have noticed this week Telstra has been pushing the power of its network in a new ad campaign from The Monkeys.

I asked Joe Pollard, group managing director for media and marketing, what the purpose of the box was and she told me: “We’re trying to use it to help grow the pay-TV market, and we would love to have a Foxtel and Telstra TV broadband device in every house in Australia that’s a Telstra customer.”

As Pollard points out “we own half of Foxtel so we’re wanting the whole eco-system of pay-TV to be healthy”.

And it’s easy to see why it’s attractive for Telstra to dive into this space. While the device launches with 15 apps there are opportunities for brands to create their own apps and pay for them to go onto the device, with Pollard suggesting Telstra was taking a clip from the ads shown on the catch up TV services under their commercial terms.

Joe Pollard

Joe Pollard

“Each of the commercial deals are individual to themselves so there’s a combination of device revenue, subscription revenue and ad revenue,” she said, adding: “Our role as a platform provider is to build scale quickly as the more scale you have the more ad revenue you can charge and the happier our content partners will be.

Pollard wouldn’t be drawn on how many units they are hoping to shift, but it is understood the figure of 400,000 boxes in the first year is on their radar. They will retail for $109 – despite the same Roku 2 hardware being available elsewhere for $95. Asked why there is a price discrepancy Pollard was committal saying “it was more the price point we decided to put it into the market at”.

However, Telstra TV is only available to Telstra customers – if you don’t have Telstra broadband at home you can’t use it with Pollard explaining the idea was for the product to be part of the drive to “differentiate experiences as a Telstra broadband customer”.

The problem is I can’t see anything that attractive the Telstra TV box does that I can’t do through my smart TV already – either directly or through the $49 Chromecast stick I bought earlier this year. And as we’ve seen with HbbTV enabling Freeview Plus consumers don’t seem all that keen to buy into devices which tie them to certain platforms.

telstra tv launch ecosystem

Telstra’s content ecosystem

BigPond Movies may be a draw for some, while it will also carry the telco’s AFL and NRL apps which give access to match content 12-hours after they have been played. I don’t think any of that is going to be enough to encourage 400,000 homeowners to shell out for it. Especially if they are already using other devices to get their streaming content, or aren’t all that bothered by it.

Telstra has ditched the T-Box, which carries Foxtel channels, for this product, but at this point it doesn’t give access to the Foxtel Play or Go apps. So where are they expecting the growth in pay-TV to come from if people aren’t getting exposure to the biggest platform?

telstra tv launch mantras“Bandwidth is the new oxygen”, Pollard said during the presentation to a room full of media execs including Seven West Media CEO Tim Worner, Nine’s newly minted chief revenue officer Peter Wiltshire, and the FFA’s David Gallop, amongst many others.

And of course she is right – the rising popularity of SVOD players in Australia has already been credited with driving down piracy with viewers showing they are willing to pay $10 per month for a range of on-demand content.

What’s not been proven is that these services will act as some sort of gateway drug for the harder ‘premium’ stuff Foxtel offers – and I don’t see that making more content more easily accessible for people for free or limited amounts of money will encourage them to sign up. And while Foxtel is unable to get hold of most of the real premium sporting inventory in Australia thanks to anti-siphoning it will struggle to get much more market penetration.

Foxtel if anything is more threatened by these services than benefitting from them. While it reported a big rise in subscribers in its last results it was not clear whether they were for the pay-TV services or its own streaming offering, the much lower yield Presto.

I’m a longstanding Foxtel customer, but in the last few months I’ve found myself seriously considering my own subscription to the service given the limited amount of time I have in the day to actually watch TV, and the amount there is available on the catch up and streaming services.

Die-hard telly addicts may argue a lot of what’s on Netflix/Stan/Presto is old content, but the vast majority of people aren’t that die hard. They don’t mind watching a five-year-old series if it’s good.

The only way I can see Telstra TV increasing the reach of Foxtel is if it comes up with its own premium subscription service along the lines of its Play product and pushes that onto the player. Then having more premium content and a no lock in contract offering sitting alongside the other streaming services would look very attractive for customers, and could actually help Foxtel break the glass ceiling.

  • Alex Hayes is editor of Mumbrella

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