Content and eyeballs prove a match-winner

Content, customisation, mobility and flexibility, around a broadcast core, is the way I see the present and even more the future Foxtel, laid out by CEO Patrick Delany and his executive team in astonishingly revealing detail in their strategy day Thursday.

When he got the job in 2018 at a Foxtel that was majority-owned and controlled by News Corp, publisher of this paper, but with a very significant minority partner in Telstra, whether he was the right man – person – or not for the job, he could well have been in exactly the wrong place at the wrong time.

For all the bells and whistles that had been added along the way, Foxtel was still essentially a 20th century – pre-smart phone and even more critically presmart TV – traditional PayTV offering of the sort that had been around in the US since the 1950s, and only arrived down under in the 1990s, thanks to the ‘persuasive’ power of the Free-to-Air Networks and principally one Kerry Packer.

That is to say, it pumped out a multiple of the product available on FTA-TV, the subscriber picked amongst what was offered. It was more than FTA-TV offered, and the critical element was all AFL and NRL, but it was still producer not viewerdriven. But it was capital and content – eyeball-gathering premium sport – expensive. And for various reasons, including that delayed history, it hit a ceiling around 30 per cent of the eyeballs.

That’s, crucially, a ceiling before the internet, broadband, streaming video and devices. And in 2018 when Delany arrived – actually, moved up from Fox Sports – it was starting on the downslope of those eyeballs.

Obviously, the future, the only future, was streaming. But a future that kept broadcast eyeballs and maximised them into the streaming future. And a future in which Foxtel was starting behind – most obviously behind Netflix, but also Stan, sitting inside the Nine FTA-TV network.

In one big sense the timing could not have been better: Foxtel meet smart phone and TV and just-intime NBN. And then along came Covid and locked 26 million Australians in their homes for three months – six if you were lucky enough to be one of 6.6 million Victorians.

The core of everything is context, and the content that is the core differentiation for Foxtel, and which got it into the game and is central to the future is of course the premium sport and especially AFL and NRL – across its broadcast platform and Kayo streaming.

It’s the critical synergy and is only sustainable – certainly, as streaming revenues rise from near zero – off the broadcast subscriber revenues.

In the 2020-21 year these revenues fell, but only from $2.29bn to $2.11bn

Revenue from ‘everything else’ – streaming subscribers and advertising – leapt 28 per cent from $514m to $657m, lifting from 18 per cent to 24 per cent of the total. Bluntly, that’s not nearly enough to sustain the content. So, it’s still at least as important to keep the broadcast eyeballs as to find new ones in the crowded streaming market place.

Two big things stood out in the Foxtel numbers.

Some 58 per cent of its broadcast subscribers have stayed for eight or more years. A further 29 per cent have been there for between three and eight years. That’s near 90 per cent together.

Similarly, 89 per cent of its broadcast subscribers are on packages of $50 or more a month. And with low churn rates – at the top end below 10 per cent. So, content is the foundation and that foundation is built on the broadcast subscriber revenues. It’s also the basis for growing out customisation – the viewer chooses – into the crowded streaming market.

Critical is mobility in consumption – smart phones; but also flexibility – smart TVs. Who really wants to watch a Grand Final on a phone.