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How Telstra Plans To Make You Pay For Movies, TV Shows & Sport

By David Richards | Monday | 13/05/2013

Telstra wants you to pay for your TV content with the carrier set to exert pressure on free to air networks to the extent that networks such as Nine, Ten and Seven will not be in a position to pay for premium TV rights.

The carrier, through their 50% shareholding in Foxtel, has already dealt a blow against the ABC with the snaring of content from the BBC in the UK which will only be available on Foxtel - for a price. 

Now the carrier is looking to expand their T-Box service ahead of the roll out of the National Broadband Network. Partnering Telstra in their push to make consumers pay for content is the Murdoch owned News Limited which now owns the other half of Foxtel that delivers one of the most expensive IPTV services in the world despite having limited access to first run movie content or foreign language content which is proving popular in multicultural Australia. 

News Ltd also own 100% of Fox Sports.

During the past week the carrier's spin doctors have leaked strategic IPTV stories to News Limited journalists in an effort to influence the market.

Telstra wants to get a million T-Boxes into Australian homes with the telco giant set to discount the boxes out in an effort to get penetration. They have also cuddled up to TV manufacturers such as Samsung, LG and Panasonic as well as several smaller TV brands who are now installing Telstra content applications onto TVs. Consumers who use these applications will be forced to pay for content.

In June Foxtel will roll out their Foxtel Go service with TV manufacturers such as Samsung. The service, which delivers content to portable devices such as smartphones and tablets, is just another way that consumers will be asked to pay for content.

Analysts claim that "it is clear" that Telstra wants to be a major media player employing their own journalists while also forcing consumers to a paid TV model.

Their existing IPTV business already generates $2 billion in annual revenue.

Group managing director of Telstra's media portfolio Rick Ellis claims he is set to launch a major marketing initiative in an effort to force Australians to pay for premium content up front as opposed to the traditional model where content goes to air on free to air TV networks wrapped around advertising. 

His plan is based on what he refers to as Telstra "pay-light" strategy where consumers are led to believe that they will get access very cheaply to over 300 channels of content. 

But when it comes to premium content such as sport and movies consumers will be forced to pay premium fees with Telstra and News Ltd. controlling the broadband network that is essential in the delivery of the content. 

Currently Telstra has 500,000 T-Boxes installed. These, along with their Foxtel boxes, place the carrier in a strong position to negotiate with Hollywood Studios for first run movies despite the fact that only 300,00 are actively being used.
A major stumbling block for the national carrier could be the fact that both Samsung and LG have established their own distribution networks with both Korean manufacturers now talking to Hollywood movie studios about the delivery of first run movies to millions of LG and Samsung devices now in use around the world.

Another big threat to Telstra is Fetch TV which already has several ISPs (including Optus) signed up to their content network. SmartHouse believes that several other ISPs such as TPG will go with the Fetch TV service. 

A key element of the Fetch TV relationship with ISPs is a provision in their contract that they will not facilitate other content providers such as US company Netflix, which have been looking to move into the Australian market. Mid 2013 Fetch TV will launch a new set top box that will be sold by national consumer electronics retailers.

In the six months to December 31, TV revenue at Telstra's Digital Media division increased by 0.9 per cent to $333m, driven primarily by IPTV content. Telstra's cable revenue also rose by 5.2 per cent to $61m due to higher Foxtel revenue.

Telstra wants to be the one-stop-shop for all its customers' communications needs; this is extremely complicated for JB Hi Fi which, while being a key Telstra partner for the sale of T-Boxes and devices, is now moving to sell digital access to movies, music and books via the JB hi Fi Now service.

TV shows such as HBO's popular Game of Thrones as well as access to big sporting events could end up costing consumers thousands of dollars a year if they fall into the hands of Foxtel and Telstra, claim analysts.

"As far as content goes we are looking to Foxtel to effectively secure the rights to the content that we want to bundle up and take to market. First with the T-Box and second into the multi-screen environment -- as opposed to going out there and doing it ourselves," Mr Ellis told the Australian newspaper.

"That's Foxtel's strength, and we own half of them, so it makes sense for us to look to Foxtel to do that. It's an alliance, if you like."

Telstra is also looking to cut content agreements with the free-to-air television networks. These are organisations that already have brand loyalty with consumers. Telstra wants this brand loyalty to flow to them - a move that the networks are set to fight.

"To be clear, we are not out there to compete against the free-to-air networks as such," said Mr Ellis, who last week was running around advertising agencies talking up his IPTV services. 

What he failed to communicate was the fact that when Foxtel was launched they said that they would be "advertising free". Now they compete with the free to air TV networks for advertising. 

Now Ellis is looking to strip advertising away from free to air networks while also stripping away their content deals with Hollywood studios ahead of the roll out of the National Broadband Network.  

Claiming that they are out there to "respond to a market demand that is unfilled," Telstra executives are now claiming that they can offer the networks advantages outside of their core television business to help them expand into IPTV more "rapidly".

A senior network executive said, "The free to air TV networks are well aware that Telstra and Foxtel along with News Ltd. are trying to make a giant land grab ahead of the roll out of the National Broadband network. If they believe the networks are going to lie down and roll over under the auspices of a partnership they are sadly mistaken."

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