Foxtel is banking on delivering around 100,000 new customers in an effort to break even on their recent $600 Million dollar AFL deal, claims the company’s CEO Kim Williams, who also admitted that Foxtel had held talks with movie rental company Quickflix.Foxtel recently secured live broadcast and the IPTV rights to the AFL with the IPTV rights being provisioned to Telstra who own 50percent of Foxtel.
Currently the subscription TV company is struggling to hold onto the customers they currently have.
Speaking at the annual ASTRA Conference recently, Williams said that Foxtel was currently witnessing a 12.7 percent churn rate and that signing up new customers of late had been “dreary” over the past 18 months. He has also admitted that “It is very hard to find customers at the moment”.
When asked about the possibility of US company Netflix coming to Australia, Williams admitted that the US company had extensive on-demand services.
When asked about Netflix’s pricing model, which is based on the company delivering a monthly subscription for sub $12.95, Williams said: “I don’t think they had the depth and flexibility in the way in which it’s priced and presented by Netflix in the US. We see on-demand programming as being quite fundamental to the future of consumer expectation and satisfaction and therefore we have been developing a range of on-demand products for a long time that meet that need.
Williams said that he had doubts about whether Netflix would actually come to Australia.
“I don’t know if Netflix will arrive here. There’s already a domestic business here that is looking in that space, Quickflix. We’ve had a number of discussions with them over the years and have a very cordial relationship. I’m very confident that in the on-demand space, Foxtel will continue to be the major provider of services to the Australian community”.
When Robert Gottliebsen of Business Spectator asked Williams: “Kerry Stokes and David Leckie, why on earth would they pay all that money when you’re going to give the total games live? It seems to be a very high-risk deal for Channel Seven”.
Williams responded saying: “I’ve spoken to both of them, as you would expect, and I think that they’ve gone into this with their eyes open. I think that they can see a real differentiation between a terrestrial audience and its advertiser-based presentations and our proposition, which clearly is something for which people have to pay. I do think the differentiation is very clear in that we are very much about TV worth paying for as compared with the free product.
When it was put to Williams that the deal represents a subversion of anti-siphoning rules, Williams said “No, it’s not a subversion of the anti-siphoning rules and any suggestion that it is, I think, is unfair.”
Williams said that there was no less offering on free TV with this deal than existed beforehand.
“Nothing has been taken away from a free-to-air audience. What is being offered is a different way of being able to view the football and clearly that requires that people pay in terms of subscribing to our service. But there’s no way that it could ever be described as in any way undermining the anti-siphoning rules.
When asked about the $600 Million Foxtel has forked out for their AFL package Williams said: “Clearly this is an investment in growth. This is not an investment in aiming to capture greater revenues from existing customers. It will be part of our standard sports pack. It is an investment in growing the actual customer base, and the sources for that growth will come from Victoria, South Australia and Western Australia”.
When asked about the willingness of consumers to invest in a Foxtel subscription based on the AFL deal, Williams said “There is a marked reluctance on the part of Australians presently to do anything other than save”.
He added: “I have spoken to many colleagues in the retail community, in like products – in telephony for example, and in the games world – and across the board people indicate that life is unusually harsh at present, given that there seems to be a generally profoundly subdued rate of consumption for most things, and a real bargain hunter mentality in terms of the atmosphere that’s governing all consumption. Now, I’m sure that there are many various and, in some areas, quite complex reasons for that. But I think fundamentally, it comes back to issues relating to confidence. And in terms of personal outlook and in an environment like that, Australians tend to be pretty conservative. Many of the banks with which we deal have indicated that they’ve never seen such huge surges in the increases in saving”.
KW: “We are. It’s much harder to acquire customers presently. The irony is that with the customers we have, we’ve never performed better. Our retention rates are at record highs over the last five years, so we have our lowest rate of churn that we’ve experienced in the last five years. With customers we have, they are comfortable and confident in the product and they’re consuming more of it.”
To read this interview in full go to Business Spectator.
