Opinion

Foxtel killer? Will Fetch TV’s low-priced entry devices be a game-changer on IPTV penetration?

Last week Fetch TV launched a cheaper IPTV device in competition with Telstra. Does this mean Australia is approaching a tipping point in consumer awareness and penetration when it comes to internet enabled television?

On Wednesday evening, Fetch TV held a small media event at Ivy in Sydney to announce a number of key product and distribution deals.

Nic-Christensen-234x151-234x151-234x151In many ways the Optus, iiNet and Dodo-aligned IPTV platform Fetch TV has flown somewhat below the radar, especially when you compare it with rivals Telstra and Foxtel, but one of its announcements, the launch of its $149 Mini device, is actually part of a major shift in the TV landscape.

Fetch TV is hoping it's mini can help it get to the 1m subscriber mark.

Fetch TV is hoping its Mini device can help it get to the 1m subscriber mark

The Fetch TV Mini, just like its rival the Telstra TV Roku2 device, is an attempt by the major telcos to capture control of the HDMI1 port of the household television and in the long-term gives these players a key seat in controlling the platform and what streaming products consumers have access to going forward.

With a price-point of just $150 each both the Telstra and Fetch TV products are aimed clearly at the mass market that isn’t already signed up to pay-TV player Foxtel.

Telstra's product already has 75,000 subscribers.

Telstra’s product boasts 75,000 subscribers

That’s a huge local market that, if executed correctly, will put them at the centre of a key part of the media ecosystem.

In Australia’s 9m households Foxtel is currently claiming around 2.8m subscribers (factor in a couple of hundred thousand low margin SVOD Presto subscribers who the pay-TV operator insists on bundling in, then 2.5m-2.6m is probably closer to the mark) and it’s clear that the market opportunity for the telcos is actually in the other 6.5m households.

While Australians might be falling more in love with streaming services such as Netflix and with catch up/on demand television, it has been interesting to note the industry has struggled to drive up the number of internet connected televisions in Australia.

NetflixFormer Nine sales director Peter Wiltshire underlined the problem last year when, speaking at the annual Commercial Radio Australia conference, he told the room: “The statistics on that right now are that right now 10% of homes have a smart TV and are connected to the internet.”

Peter-Wiltshire

Wiltshire: The number of connected smart TVs is the challenge in IPTV.

“I would give you my right arm that of those TVs that are connected to the internet only one-10th are using internet services on those screens.”

The Multiscreen Report, released a couple of weeks ago, shows that while it’s not quite one in 10 there remains a consumer awareness problem both in terms of the existence of internet enabled TV, which opens up a world of on-demand viewing and catch-up TV, but also in how to connect those TVs to the internet.

According to the report, as of the end of March 2016, 35% of Australian homes had internet capable TVs; however, of those just 64% had bothered to go to the trouble of enabling their TV for the web – thus leaving more than a third with expensive terrestrial TV sets.

As an overall percentage it means that currently just 22% of homes across the Australian population have internet-enabled TVs, but of course that figure itself does tell us how many of them then actually use IPTV services regularly.

Perhaps the most obvious case study of the challenge in changing this equation is Freeview Plus which launched with gusto back in 2014 but in its first year failed to meet its stated goal of achieving 10% penetration.Freeview PlusLike Telstra TV and Fetch TV FreeviewPlus takes control of the operating software of the HDMI port of the TV and uses hybrid broadcast broadband TV technology to offer the range of free-to-air catch-up TV services.

Part of its failure to gain immediate traction with the public was blamed by many in the industry on two factors: one getting the technology across all the major TV manufacturers and the other was the initial advertising campaign – which was heavy on the TV network’s big talents but failed to sell the utility of the free on demand viewing.

CarrieBickmore_PeterHellier-300x200

Peter Helliar and Carrie Bickmore star in the first Freeview Plus ad

Compare that with the new campaign ‘Meet the Freemans’ created by Jungle, which explains in a series of ads why consumers should care about IPTV, and in particular FreeviewPlus.

FreeviewPlus was initially reluctant to reveal its user numbers but earlier this year it confirmed it had hit the 580,000 homes.

CEO of the free-to-air TV body Liz Ross revealed to Mumbrella this week that since February it had experienced further uplift and expects to pass the 20% milestone in the next six months and that the company will be doubling down on the Freemans’ strategy.

Ross: We predict HbbTV will hit 20% by the end of 2016.

Ross: We predict HbbTV will hit 20% by the end of 2016.

“The Meet the Freemans campaign has been extremely successful on all campaign measures,” said Ross. “What really counts is the positive effect the campaign has achieved in driving usage and new users to FreeviewPlus. We are already working on the next episodes of the Meet the Freemans campaign.

“FreeviewPlus device penetration is on track to reach 20% by the end of the year and we are currently seeing a very high connection rate of TV’s – over 80%.”

If Freeview is experiencing a higher-than-average connection rate it would appear to be a sign that consumers are beginning to understand the IPTV technology and see value in it.

A similar story could be made for the Malaysian-owned Fetch TV, which after years of struggling with a subscriber base below 100,000, broke the 200,000 mark in 2015 and this year is claiming to have reached 400,000 – a rapid growth trajectory to say the least.

Screen Shot 2016-06-17 at 2.41.10 pmSuch results have led to an ambitious goal for the company, communicated by CEO Scott Lorson who – on the back of ongoing marketing campaigns from its telco partners which are bundling the service – predicts Fetch will reach 600,000 subscribers by year’s end and is aiming to breach 1m households in the next few years.

Lorson: aiming for 1m subscribers in the next few years.

Lorson: Aiming to reach 1m subscribers with Fetch TV

“We are definitely experiencing ‘hockey stick’ growth,” said Lorson. “We continue to fly past milestones – having passed the 400,000 subscribers mark, and are now on track to hit 600,000 by the end of the year.

“We won’t be satisfied until we reach the one million mark, which we believe is imminently achievable in the medium term.”

On the other side of the equation, Telstra TV revealed to the market back in February that in its first four months of operation it had signed up 75,000, also an impressive growth trajectory.

The Telstra TV numbers in particular will be interesting to watch because of the telco’s commercial relationship with pay-TV operator Foxtel.

Up until last year Telstra’s sales of the T-box had been one of the major drivers behind Foxtel’s subscriber growth but now the telco has made the unusual strategic decision to try to directly compete with a company it owns 50% of.

Of course if the speculation is true and Foxtel ends up being floated then this would give Telstra an easy way to sell out while retaining a significant growth position in the media landscape through the Telstra TV product.

What is also fascinating about the models of both Telstra and Fetch is how they appear intent on capturing the ‘pay-TV lite’ audience that perhaps isn’t willing the shill out the $80-$100 a Foxtel subscription might cost per month, but will pay $30-$50 in order to get a streaming service or two, like Netflix or Stan, plus some children’s programming or foreign language channels.

On Wednesday night, Fetch TV showed how its model is built on four elements: time-shifting; subscriptions; transactions, plus companion viewing built around free-to-air television.

IMG_3589It’s an interesting model and one that will likely appeal to a clear segment of the market, especially when it is bundled in a telco triple-play offered by Optus, iiNet or Dodo who will provide one bill for landline, internet and television.

Screen Shot 2016-06-17 at 2.51.00 pmIn terms of Telstra TV, currently its product doesn’t allow linear TV viewing within the device, meaning the product is likely to be used more on secondary TVs or as an alternative viewing platform when consumers don’t want to watch free-to-air.

But you can expect that Telstra TV will be quick to match the ‘dominate HDMI1’ strategy of Fetch TV when its Mini product launches at the end of June.

As Mumbrella editor Alex Hayes noted last year, there are risks that Telstra TV, with its NRL and AFL sports packs, might begin eating into the marketshare of Foxtel, especially if consumers do the sums and ask if they can still get their key sports franchises and save $50 every month.

It’s fair to say that the coming 12 months are likely to see dramatic growth in the Australian IPTV space.

Streaming competitive landscape

The competitive landscape in streaming.

While Netflix and the rest of the streaming video on demand (SVOD) players first stirred what is a fundamental change in the TV market, if current growth trajectories of Telstra, Fetch and FreeviewPlus continue then the television world is about to become even more fragmented as IPTV penetration quickly passes the 25% and races toward the 50% mark.

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