Concerns have been raised about the Nine Networks streaming service which is set to take on Foxtel’s Presto service which charges $19.95 with contract lock-in and Fetch TV’s expanded service.
The Nine Network who are still putting major sporting events to air as 720p HD Vs Full HD at 1080p has revealed that costs for their new streaming service have blown out from $40M to $65M and it has still not been launched.
Now analysts are questioning the networks ability to deliver the service and make a profit.
Similar to Netflix the service will charge consumers $10 a month to get unlimited access to limited content however analysts at a recent briefing that Nine gave are questioning the Company’s ability to deliver after the media company revealed costs could blow out to $65 million, from $40m.
The operation will also have to compete with FetchTV who will shortly release a new low cost set top box at via a major retailer. Customers on the iiNet and Optus networks will only have to pay for content when they want to watch it with the broadband bundled into their broadband contract.
The Nine service will charge consumers for movies and TV programs with consumers having to pay their own broadband with analysts told yesterday that the operation requires a cash investment of between $50 and $65m to break even over three to four years Nine Entertainment said yesterday.
Previously the network said that they would need $40m to $50m to break even.
The Australian newspaper said that the increase has been driven by the cost of acquiring content from Hollywood studios and program makers they went on to claim that one analyst who attended the Nine investor day said the Australian SVOD market represented uncharted territory for the Nine, Seven and Ten networks, whose business models are based on the concept of free television. “Is there a propensity to pay?” the analyst said.
CIMB analyst Daniel Blair said he had “concerns regarding investment levels” and the risk of Nine cannibalising audiences on its primary channel and two multichannel Go! and GEM, but maintained his positive outlook for the business.
“The risk of free-to-air audience fragmentation remains,” Mr Blair said. “Overall this doesn’t materially risk our investment thesis.”
Nine chief operating officer Simon Kelly defended the cost rise and said the additional investment would give the service a better chance of success.
“We have decided to go out on day one with a more comprehensive line-up including more first-run and exclusive content to position ourselves as the best- value entertainment offering in the market,” Mr Kelly said. “We were planning to progressively build the library of content. We’ve made significant progress including locking in a number of major deals which gives us confidence in our launch line-up.”
