COMMENT: The IPTV content deal set to be signed between Samsung and Foxtel could have a silver lining for the Australian pay TV Company as new TV’s emerge that are capable of delivering content over a broadband network, have built in storage and 3D TV capabilities and are able to deliver full PVR functionality.
Currently Foxtel has to pay up front for their Foxtel iQ2 set top boxes which overall is a drag on the pay TV Company’s bottom line. It is a major capital cost with the iQ2 boxes limited to a 500GB drive.
Now with the emergence of new TV technology coupled with a new generation of software, Foxtel is in a position where it can eliminate the need for a HD set top box while giving consumers the option of what size drive consumers can attach to their TV.
Shortly Foxtel will be able to deliver content directly to a Samsung TV that has all the functionality that a current PVR has. Instead of a separate box the functionality will be built into an embedded chip set in the TV that can be upgraded as modifications are made to the PVR software.
Currently 60% of Foxtel’s 1.2 Million customers use an iQ2 HD set top box. If the need for this box is eliminated Foxtel will be in a position to lower their subscription costs by as much as 35% which will make their service highly attractive in a booming IP content market.
The relationship between Foxtel and Samsung also has an upside for Telstra who currently own 50% of Foxtel as it allows them to bundle broadband services with a Foxtel offering.
And because the installed base for TV’s is significantly higher than most other consumer electronic devices outside of mobile phones, Telstra is now cuddling up to TV companies in an effort to sell their services.
Initially the pitch is for BigPond Movies and an assortment of me too content which in a lot of cases is already available from other providers including Foxtel.
Recently senior executives from Foxtel were in Seoul the home base of Samsung looking at new IPTV services.
They are also investing heavily in a new generation of software that allows their services to be delivered over a broadband network to devices that include Smartphones, iPad’s and notebooks and PC’s.
Another big benefit for Foxtel will be if they can develop their service to deliver over an ADSL network in the short term as a national fibre broadband network is built out to over 90% of Australian homes.
Patrick Delany the executive director of content and product development at Foxtel admits that their current PVR offering is a capital drain and that a move to a new generation of content delivery will help Foxtel financially.
He said “Our investment in the iQ2 HD box has been extremely successful as it has dramatically reduced churn. Moving forward we are exploring new ways to deliver content including over an IP network and this could well mean the elimination of the need for a PVR” he said.
Analysts have told ChannelNews that Foxtel is today a very strong brand that is “very much” associated with the delivery of content. “This will make it hard for brands like FetchTV” to compete unless they are prepared to spend hundreds of millions investing in content and the building of their brand.
