A Different Direction For Foxtel

Significant investments in next-generation services and internet functionality made by Australian pay-TV operator Foxtel will help bring in new customers while shoring up loyalty but will have less of an impact on Arpu (average revenue per user) growth, anticipates company CEO, Kim Williams.

“We still have a lot of customer growth ahead of us but the outlook will be much more contained in terms of ARPU growth, given that we have harvested most of the more attractive fruit over the last few years, and that we will be going into other segments of the market,” Williams says.

“While I am confident we will sustain good Arpu, I don’t think we’ll see the kind of 6-7% compound increases in Arpu that we have seen over the last six years.”

Foxtel is expected to end its current financial year in June with US$75 monthly Arpu, following a challenging six months in the latter part of 2009 and soft start to 2010.

Growth was limited by a concerted marketing push from Freeview, a new digital multi-channel service backed by Australia’s free-to-air networks, as well as ongoing consumer apprehension following the global financial crisis, though Williams reports a noticeable improvement in recent months.

The upcoming launch of a new online platform meanwhile, FetchTV, which has inked deals with companies such as Discovery, Disney and Fox to provide both on-demand and channel-based services, provides a glimpse of a future competitive landscape created by widespread access to high-speed broadband.

It’s difficult to gauge the threat posed by potential rivals before they enter the market, Williams says, with little idea of the scope of content, services and customer experience on offer.  At the same time, government plans to wire up Australian homes with high-speed broadband will give Foxtel a chance to reach out to people that have eschewed its traditional pay-TV product.

“Consumer-oriented businesses such as Foxtel must see all consumer services as opportunities for us to deliver to parts of the market we have yet to tap, to compose products that are relevant and appropriately targeted at certain market segments, either by age or income or geography,” he explains. 

More mobile, more broadband
Williams anticipates a surge in more broadband and mobility-based products in the future, in line with a range of initiatives to help people consume content on the device of their choice. Successful business models in a digital world must be able to adapt to changes in technology and consumer appetites, he believes, a view that has informed his roadmap for Foxtel’s future development.

“It is part of a relentless evolution in the landscape of consumers and their relationships with programming.”

Foxtel subscribers will also see some “remarkable” new services over the course of this year, including content delivered through broadband ports installed in the company’s latest PVR, to be activated later this year. Williams declines to provide more detail ahead of launch.

Foxtel’s future prosperity, however, will also hinge upon exclusive content rights that it can secure, increasingly online as well as for pay-TV. Williams estimates that around 30% of content on Foxtel today is non-exclusive, as channel providers strike deals with free-to-air platforms, a proportion he is keen to see go down.

“Inevitably, negotiations will focus on issues that differentiate one from others. Clearly, when you’re paying substantial money for services, you don’t want that money to be then recycled in a sales process for it to appear against you from some free service,” he says.

“That’s illogical. That means the character of many negotiations over time will evolve, and develop different personality frameworks as we go forward.”