Get ready for pay TV fight over sport
PUBLISHED: 11 hours 20 MINUTES AGO | UPDATE: 6 hours 18 MINUTES AGO PUBLISHED: 25 Jun 2012 PRINT EDITION: 25 Jun 2012
The battle for control of James Packers Consolidated Media Holdings will capture all the attention this week but the potential for seismic shifts in Australias pay television and broadband markets does not depend entirely on the future of Foxtel.
Optus is planning its own initiatives with MeTV, which operates on the FetchTV platform, and offers entry-level prices as low as $10 a month. It recently signalled its intent when it launched Australias first mobile-led bundle, which offers generous amounts of free fixed-line broadband, without the need for a landline.
Fetch doesnt have access to the jewel in Foxtels crown premium sport but that doesnt mean it wont in the not too distant future. At 30 per cent of households, Australia has the lowest subscription television penetration rate in the developed world. Thats at odds with the voracious consumption of every other form of entertainment. And Foxtels average revenue per user (ARPU) of $100 a month is one of the worlds highest.
One way for Foxtel to generate growth without sacrificing ARPU is to bundle additional services into subscriptions, the most obvious being broadband. This strategy has proven wildly successful elsewhere, notably Britain, where BSkyB (40 per cent owned by News Corp) has usurped the incumbent telco BT Group to become dominant in broadband.
If News chief Kim Williams and Foxtel boss Richard Freudenstein were able to replicate BSkyBs success with Foxtel, it could make $2 billion look like a steal, but such a move would require a level of unprecedented concessions from Telstra. Contrary to conventional wisdom, Foxtel is not blocked from selling broadband by its 50 per cent shareholder, although it can be assumed the telco charges Foxtel the kind of prices to run broadband over its cable network that make it difficult to do so cheaply.
This could change if News Ltds $2 billion bid for ConsMedia is successful, making News and Telstra joint venture partners in Foxtel and giving News complete ownership of Fox Sports, which could be a powerful bargaining chip in dealing with the telco. Sport is going to be more important as super fast speeds become the norm under the national broadband network and 4G mobile.
BSkyBs success was based on its exclusive rights to English Premier League matches. Its dominance of broadband prompted the British regulator, OFcom, to force it to open up its Sky Sports 1 and 2 channels to wholesale access. That did not reduce the value of those sporting rights either. Barely a fortnight ago, the EPL rights were renewed for a record £3 billion ($4.6 billion), up a staggering £1.25 billion from the previous deal.
Australian Competition and Consumer Commission chairman Rod Sims made it clear he has deep concerns about the concentration of sports rights when he (begrudgingly) approved Foxtels takeover of Austar. It is only a matter of time before the issue resurfaces.
