Foxtel who have been raking in millions for years by charging Australians a premium subscription fee for their services, which included free, free to air TV, is now up in arms after Communications Minister Malcolm Turnbull introduced proposed new reforms for the media industry.
Turnbull told Prime Minister Tony Abbott that he had found a broad consensus in the industry for the abolition of the “reach rule”, which stops the metropolitan free-to-air networks, Nine, Seven and Ten, merging with regional affiliates by limiting audience reach to 75 per cent.
He also said there was broad industry support to scrap the “two-out-of three rule”, which stops any one group owning more than two of a newspaper, commercial TV licence or radio licence in a major market.
Foxtel which is 50% owned by News Corporation and 50% by Telstra are also upset that they will not be allowed to snap up major sporting events such as AFL and NRL games and then charge Australians a “significant” fee” to watch their favourite teams play.
Turnbull also proposed changes that could result in Foxtel having to pay commercial free-to-air TV networks a fee to retransmit their signals. In the past Foxtel has got this service for free but still charged users up to $150 a month to get access to content bundled with the free, free to air network programs which are the most popular on the Foxtel network.
Foxtel chief executive Richard Freudenstein claims he should get the free to air TV stations for free claiming “Why should we be charged a fee which is passed on to our subscribers for something that everyone else gets for free?”
Under threat from Netflix Freudenstein told News Corporation journalists “Retransmission is good for the free-to-air networks because it helps their advertising revenue,” he said. “It gets their signal in front of more eyeballs in a better way.”
What he has not explained is why Foxtel is one of the most expensive pay TV networks in the world and why Foxtel failed to pass on pay cuts to his customers who pay the most for his premium services.
Free to air networks could rake in more than $100 million annually if they decide to charge Foxtel.
Mr Freudenstein said the FTA networks already earned income from Foxtel’s subscribers, enabling them to attract bigger audiences, which they could monetise with larger advertising revenues.
He said that Seven, Nine and Ten also ?occupy the front page on Foxtel’s electronic program guide, what he failed to mention was that it is the free to air TV programs that are the most popular on his network and without them consumers could invest in a combination of Netflix, free to air TV stations and a low cost sports package from Foxtel a move that could see Foxtel revenues fall.
According to Fairfax Media Turnbull’s recommendations have welcomed by a slew of media executives including WIN Corp owner Bruce Gordon and Greg Hywood, the chief executive of Fairfax Media, owner of The Age and the Sydney Morning Herald.
They claim that the proposed changes would prompt an industry reorganisation between television networks, radio stations and newspapers, enabling them to better compete with unregulated digital entrants such as Google and Netflix.
Freudenstein, said the anti-siphoning list should be renamed “the anti-Foxtel list” and said it would be “bad public policy” to make Foxtel customers pay for access to free-to-air TV.
Southern Cross chief executive Rhys Holleran welcomed the proposals, saying: “The reach rule belongs to the last century”.
Bruce Gordon, who is in a battle for control of metropolitan TV network Ten, said Mr Turnbull should be encouraged to pursue his proposals, saying the reach rule had “totally outlived its usage”.
“Pay television does not suffer any of the penalties that the poor guys that run free-to-air TV have,” he said. “We pay licence fees, we are restricted on the amount of overseas content we can run, we have to make a certain amount of Australian programming and children’s programming every year and send in reports showing we have complied with that.”
Foxtel who is also under threat from Netflix and Apple may lose thousands of customers if blood thirsty drama Game Of Thrones is streamed through Apple TV when the fifth season launches next month.
HBO is believed to be in talks with Apple to make Game Of Thrones available on Apple TV in Australia time for its anticipated April 13 launch.
Currently Foxtel owns the rights to screen Game of Thrones in Australia and also offers the series on Foxtel Play, which an app for tablets. However more than 300,000 people have chosen to bypass the fee Foxtel charge for access to the service by accessing overseas screenings of the show.
Even if the HBO subscription is only available in the US, it may not be enough to safe guard Foxtel.
The US giant streaming service Netflix was only available to US subscribers, but thousands of Australians bypassed the system by using a VPN (Virtual Private Network) which disguises what country viewers are streaming from.
