Nov 16 2016
Earlier this month, Foxtel announced that it will shut down the subscription video service Presto, focusing instead on an enhanced version of Foxtel Play. The updated service is expected to be priced from $10 a month, bringing it more in line with rivals Stan and Netflix. The move is anticipated to increase competition in the booming internet publishing and broadcasting industry. Foxtel will shut down Presto at the end of January 2017 after buying out Seven West Media’s stake in the joint venture.
The internet publishing and broadcasting industry has expanded rapidly over the past five years, with revenue expected to grow by an annualised 8.2% over the five years through 2016-17. Industry firms have benefited from solid growth in discretionary incomes, as well as strong growth in internet connections and broadband speeds. In particular, subscription video on demand (SVOD) service providers have flourished over the past two years, following the launch of Stan, Presto and Netflix in Australia. Relative to pay-TV broadcasters, SVOD services are generally cheaper and can be accessed anywhere and at any time, provided users have access to an internet connection with sufficient bandwidth. As a result, they offer consumers greater affordability and flexibility with regards to watching content.
The industry’s strong revenue gains continue to attract new entrants, including the potential Australian launch of Amazon’s streaming service Amazon Prime. Much like Netflix, Amazon Prime produces its own original content, including a new motor show with the former hosts of the popular BBC series Top Gear. Competition is also expected to be intensified as online platforms, such as YouTube, reduce barriers for content producers to exhibit their intellectual property and receive payment. YouTube generates revenue through its YouTube Red subscription service, which has increasingly made original programs and movies available for streaming over the past year.
In contrast with online content broadcasters, many pay-TV providers have struggled over the past five years due to their higher price points compared with SVOD services. Despite benefiting from increases in real household discretionary income and improved demand for advertising slots over the period, pay-TV broadcasters have been facing increasing competition from internet protocol TV service providers.
The future looks promising for internet publishers and broadcasters, with the industry forecast to expand by an annualised 9.3% over the five years through 2021-22, to $2.8 billion. In contrast, the pay television industry is expected to decline over the same period. The diverging fortunes of these industries can largely be attributed to the projected increase in uptake of SVOD services by Australian consumers over the next five years. To maintain their competitive edge, pay-TV broadcasters are expected to mirror the model of foreign-based SVOD service providers by producing more of their original content, following the success of Foxtel’s The Kettering Incident in July 2016.