Binge and Kayo are Foxtel's last ditch effort to win a new generation after a difficult and troubled history with streaming
With the launch of Binge, in conjunction with sports platform Kayo, Foxtel finally has a strong streaming offering that can compete with the likes of Netflix and Stan.
Foxtel has spent much of the decade trying to fend off streaming challengers while not undermining its core subscription offering.
Let's look back on the previous efforts by the company to tackle streaming.
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In 2015, months after the launch of Netflix into the Australian market, then-Foxtel CEO Richard Freudenstein sounded off on the looming threat, telling the Australian Financial Review the threat to TV from the new challenger was 'overhyped'.
"There has been a lot of hype around [subscription video on demand] SVOD and clearly some big early numbers but over time people will realise there is a big difference between SVOD and a Foxtel service," he said.
"I am very comfortable with Foxtel's product and positioning," he continued. "We have far and away [the] best content. Netflix has no intention of having sport. We are investing in more Australian content, winning three Logies more than any other individual network, and we show more first run programmes across our platforms in a week than Netflix does in any year. There is absolutely room in Australia for both SVOD and Foxtel to grow."
Five years later, the landscape is remarkably different.
According to Roy Morgan, as of March there were 12.2 million Australians with access to Netflix, versus 4.85 million with Foxtel. Nine's offering Stan had 3.7 million, and even Disney Plus, which only entered the Australian market in November 2019, was coming up the rear – finding a base of 1.8 million viewers in just a few short months.
It is no surprise Foxtel had to turn to accommodate the prevailing winds. This weekend's announcement of Foxtel's new streaming service, Binge, represents two things: the company finally accepting that its expansive content library is its core strength, and the tacit admission the old-school set top box model is headed for the graveyard.
Early impressions of Binge are strong. It has an excellent stable of content, and like its sister service Kayo it is built from the ground up as a coherently imagined product of its own, and not just a limited offshoot of Foxtel's core subscription offering. The earlier model, while no doubt providing some kind of lifeline for an increasingly outmoded and outmanoeuvred business, had little to offer a newer generation of audience totally accustomed to the cheaper, easier model of services like Netflix and Stan.
It looks like Foxtel finally got its platform offering right. Binge and Kayo combined cost a consumer around $40 per month – slightly less if they're willing to sacrifice HD quality on Binge – and give access to a majority of Foxtel's sports, TV shows and movie content. It's a far better deal than a standard Foxtel subscription, which can balloon to double that figure with ease.
But it's been a long journey for the company to reach this point – with a huge amount of detours along the way.
The set top box is hard for Foxtel to let go
There are myriad reasons why Foxtel has been behind the streaming curve, but one stands above everything: the company had its hands tied by its reluctance to undermine its subscription TV product with a streaming offering – whether it be price-wise, or with content.
The mindset is understandable. For Foxtel, every set top box in a person's home is an asset. Firstly, it provides crucial and data analytics – not only on what audiences are consuming on Foxtel's channels, but also their pay-per-view and free-to-air habits. A 2018 Mumbrella interview with Foxtel's chief data analytics officer Jane Eastgate flagged the analytics capabilities enabled by boxes and other devices as a key part of its strategy to reduce churn. It would, in theory, allow the company to speak to each customer based on their broad viewing habits.
The set top box is also the bedrock of the company's premium product. Often tied in with other subscriptions, like Telstra phone and internet plans, the Foxtel box – including more technologically advanced iterations like the recent IQ3 and IQ4 – makes the Foxtel service much stickier than it would be otherwise. If you run out of things to watch on Disney Plus, for example, you can unsubscribe with a click of a button. Ditching an old-school Foxtel subscription requires a little more forethought, and often a disentanglement from a broader ecosystem.
This is why many of Foxtel's pre-Binge streaming products – like the often confusingly differentiated Foxtel Go, Foxtel Play, and Foxtel Now – act as extensions or reimagining of the set-top box experience, and tend to funnel customers towards the full premium product through the package and add-on system.
Foxtel was aware the disjointed relationship between these mutant offshoots of their set-top box product and the expectations of a modern, streaming-savvy audience. In February, CEO Patrick Delany said the basic $26 Foxtel Now subscription is "not a great experience".
Presto was the company's first big attempt at a modern SVOD platform
Foxtel has made numerous efforts to offer its channels and programs digitally, but its first effort at what we might call a modern streaming service was Presto, launched in 2014 in partnership with Seven West Media.
Like Stan, which was initially a joint endeavour between Nine and Fairfax, it was an attempt by two Australian media companies to band together and create a streaming product before Netflix, which was making significant waves in the United States and several other markets, officially exploded onto our shores.
Presto hit the market saddled with a classic Foxtel problem: it was far too expensive.
Its initial price, for a movie-only service with content pulled from the existing Foxtel Movies suite, was $19.99 per month, which is more expensive than a Netflix subscription in 2020 after several price hikes. This was eventually cut to $9.99 per month, with a $14.99 package (down from a less compelling $25 per month) introduced containing TV content from across Foxtel, the Seven Network, as well as – eventually – premium providers like HBO and Showtime.
Cost and value aside, it had an even bigger Achilles heel: Game of Thrones.
HBO, the US network behind the show, had a policy that Game of Thrones would not appear on any SVOD network anywhere in the world, meaning Thrones heads would have little choice but to sign up for Foxtel.
Image: Supplied
It might be hard to recall after the mediocrity of the final season obliterated the show from culture, but "Game of Thrones" was the biggest thing happening in the middle of the decade. But Presto's hands were tied.
Not only did Presto lack the one big-ticket show people turned to Foxtel for, it didn't have much else going for it. In retrospect, having the David Duchovny vehicle "Aquarius" as its big exclusive launch title doesn't look particularly exciting. It wasn't very exciting in 2015 either.
Despite beginning on relatively equal footing, Stan quickly eclipsed Presto with its stronger, more consistent library and better streaming technology. By June 2016, Stan reached 891,000 Australians, whereas Presto only reached 353,000.
Presto was canned in early 2016. Perhaps it's little surprise it came alongside an announcement that the next season of "Game of Thrones" could be viewed for as little as $15 a month, as part of a revamped and cheaper Foxtel Play.
Foxtel Play and Foxtel operated as streaming offshoots of the core subscription platform
Since 2013, Foxtel has offered a service offering both video on demand content and channel streaming without the need for a set top box. Foxtel Play – later rebranded Foxtel Now – acted as a midpoint between an old-school Foxtel subscription and the simplicity of something like Netflix.
“This is a perfect new way for those people who have not yet experienced Foxtel to enjoy our popular content at flexible price points offering value to suit varying budgets and needs," said then-CEO Richard Freudenstein at Play's launch in 2013. But, he was at pains to say even in the big announcement, the subscription, set top box-based model was still the "cornerstone of our business".
This marriage to the old school way of doing things hamstrung Play and Now from the get go. It was never a true streaming platform in the mode of something like Netflix – it was merely a streaming veneer pasted over the top of an ageing model.
Nowhere is that clearer than the pricing structure. In its current iteration, Foxtel Now starts at $25 per month for a basics package, which includes more than 25 channels and major drawcards like the HBO catalogue. Want any more than that? You'll have to pile on extra packages. Attaching every package, including sports and movies, puts you at a substantial $104 per month.
For perspective, you could get Netflix, Stan, Amazon Prime, Disney Plus, plus a handful of minor other streaming services like MUBI or Hayu, for less than that. (Or, of course, Binge and Kayo.)
If you elect not to pay for any extra packages, your Foxtel Now experience is a frustrating one. Every time you log on, you're presented with an array of content you don't actually have access to unless you fork out for an extra package. It's the polar opposite of the Netflix experience, where everything you see onscreen is available for streaming right now.
Foxtel teams up with Netflix
Foxtel's last effort to make its traditional product appealing to the streaming generation came in July of this year. It announced it would integrate Netflix into Foxtel.
It was a stopgap solution, allowing Foxtel subscribers to seamlessly view Netflix content through the Foxtel interface – an admission that for many viewers the source of their content is less interesting than the ability to easily access it. Roy Morgan CEO Michele Levine said in a statement it could be a way to slow churn on the Foxtel platform.
“Enabling the 5 million Australians with household access to Foxtel to view the streaming service through their Foxtel IQ box is a solid defensive measure to help prevent existing Foxtel subscribers ditching the service to move to cheaper alternatives and provides an extra incentive for new users to sign up for Foxtel,” she said in a statement.
This simple concession to the tides of the time came with something of a mea culpa from Delany. “I think it was a shock to most people we did Netflix,” he said at the Future of TV Advertising conference in Sydney in February. “It shouldn’t have been; we should have done it five years ago.”
The move acknowledged the reality of the estimated 3.14 million Australians who have access to both Netflix and Foxtel.
The future
In 2018, Foxtel announced it had established a wholly owned subsidiary, Streamotion, which would manage a new sports streaming platform, Kayo Sports – the "Netflix of sport", as CEO Patrick Delaney said.
It was an effort to target younger, sports-mad consumers who, unlike older generations of Australians, were likely never going to fork out for an expensive Foxtel subscription. In its very execution, it required accepting there was a new breed of customer who would never bother buying into Foxtel's old model.
Kayo was a wild success, laying down the groundwork for the announcement of Binge – which hopes to do the same for Foxtel's drama, reality and documentary content that Kayo did for sport. Business Insider Australia understands that earlier in 2020, the company had more paying sports subscribers (putting together Kayo and Foxtel subscribers) than it ever had before.
Of course, this was before the coronavirus pandemic took a sledgehammer to live sport across the world. But, in creating a platform with flexibility, like Kayo, Foxtel has created a circumstance in which users who ditched their subscription can reactivate it with ease once sports seasons begin again.
Whether or not Binge will actually succeed in the face of the Netflix titan and the numerous other streaming services available in Australia is an open question.
It has the benefit of a strong content library – especially after managing to keep the HBO deal from flying to Stan – and an interface and customer journey which actually works.
It may have taken them more than half a decade to get their affairs in order. But Foxtel finally has a streaming product which fits comfortably in the world of 2020 – and could set them up for success after a long and winding road.
