Australia Pay TV Market Update Q4 2017

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Publication date: 09 Mar 2018 Author: David Scott Associate Director – Research and Analysis, Service Providers & Platforms

Australia pay TV market update Q4 2017

Brought to you by Informa Tech Australia pay TV market update Q4 2017 1

. Online video and new streaming services are changing the dynamics of the Australian pay TV industry . Total pay TV subscribers in Australia remained at just under 3.6 million at the end of 2017 . Fetch TV continues to build its subscriber base through its ‘skinny’ content packages

IHS Markit has updated its Australian pay TV data in light of the latest guidance on the performance of market leader Foxtel provided by major shareholder News Corp Australia. Pay TV providers continue to show resilience but growth has plateaued, a sentiment echoed in the Q4 2017 filings by News Corp, which indicate a downward revision in its future outlook for the business. As such, IHS Markit has adjusted its forecasts on the Australian pay TV market accordingly, which now illustrate contrasting fortunes for the two main players – Foxtel’s subscriber base is going down, while Fetch TV’s is on the up.

Our analysis

Online video and new streaming services are changing the dynamics of the pay TV industry in Australia, as consumers continue to embrace the availability of Internet-connected devices to watch more programming online and on-demand. In addition, Australia’s free-to-air (FTA) digital terrestrial television (DTT) broadcasters continue to enhance their offerings with new services and original programming. Therefore, digital video and FTA TV services have rendered traditional pay TV video subscriptions less appealing quicker than previously anticipated, as more people embrace these alternate forms of content consumption. Having said this, IHS Markit believes that Australian pay TV providers are still well positioned to compete and will do so as long as they continue to offer compelling content such as Foxtel’s exclusive live coverage of major sports. Sport is a central pillar in Foxtel’s business and a key differentiator in the market – the operator holds the exclusive rights to live basketball, cricket, cycling, football, netball, racing, surfing and tennis, among other sports. Foxtel’s sports rights portfolio is set to be bolstered further following the expected completion of the operator with News Corp’s sports broadcaster Fox Sports Australia. News Corp currently owns 50% of Foxtel, with Australian incumbent telco Telstra owning the other half. Following the finalised merger, News Corp’s share will increase to a controlling 65% stake, while Telstra will hold the remaining 35% stake. The merger received regulatory approval from the Australian Competition and Consumer Commission (ACCC) in December 2017 and is expected to be completed in the first half of 2018. IHS Markit believes the merger will ensure Foxtel does not overpay for the rights to Fox Sports programming in the future, and better position the company for a potential listing on the Australian Share Market. Meanwhile, Fetch TV, backed by Malaysian operator Astro All Asia Networks, continues to build its IPTV service, the pitch for which is popular content made affordable and easy to access. Fetch TV packages its content into four ‘skinny’ packs, namely Kids Pack, Knowledge Pack, Vibe Pack and Variety Pack, which cost A$6 ($4.70) per month per pack, with all four packs offered via the Ultimate Pack package for A$20 per

month. By comparison, Foxtel’s prices range from A$26 per month for its base entertainment pack to A$111 per month for its all-channels Platinum HD pack. Fetch TV offers 49 linear IPTV channels as well as 7,000 movies and 200 TV shows (episodes or seasons) to rent or buy. The company partners with ISPs Optus, the iiNet Group (owner of the iiNet, Internode and Westnet services) and Vocus (owner of the Dodo and iPrimus services) as well as several of the country’s major retailers to deliver programming over a broadband connection to the set-top boxes. Fetch’s content offering includes access to free-to-air TV catch-up applications, streaming services Netflix, YouTube and local offering Stan, and pay-per-view mixed martial arts from the UFC. The company continues to expand its offering, announcing a partnership with Discovery Networks in January 2018 that will see Discovery Channel and TCL added to its channel line-up from 1 March 2018. The IHS Markit outlook for the Australian pay TV market remains is a cautiously optimistic one, though we have lowered our forecasts based the latest guidance on Foxtel, which accounts for close to 80% of total pay TV subscribers in the country. The market leader saw its combined cable and satellite subscriber base decline by almost 3% in 2017 to just under 2.8 million by year-end. Total pay TV subscribers remained at just under 3.6 million. Citation policy Request external citation and usage of Omdia research and data via [email protected]. Omdia consulting We hope that this analysis will help you make informed and imaginative business decisions. If you have further requirements, Omdia’s consulting team may be able to help you. For more information about Omdia’s consulting capabilities, please contact us directly at [email protected]. Copyright notice and disclaimer The Omdia research, data and information referenced herein (the “Omdia Materials”) are the copyrighted property of Informa Tech and its subsidiaries or affiliates (together “Informa Tech”) and represent data, research, opinions or viewpoints published by Informa Tech, and are not representations of fact. The Omdia Materials reflect information and opinions from the original publication date and not from the date of this document. The information and opinions expressed in the Omdia Materials are subject to change without notice and Informa Tech does not have any duty or responsibility to update the Omdia Materials or this publication as a result. Omdia Materials are delivered on an “as-is” and “as-available” basis. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness or correctness of the information, opinions and conclusions contained in Omdia Materials. To the maximum extent permitted by law, Informa Tech and its affiliates, officers, directors, employees and agents, disclaim any liability (including, without limitation, any liability arising from fault or negligence) as to the accuracy or completeness or use of the Omdia Materials. Informa Tech will not, under any circumstance whatsoever, be liable for any trading, investment, commercial or other decisions based on or made in reliance of the Omdia Materials.