The chief executive officer of Australia’s subscription TV platform Peter Tonagh unveiled what he called a repositioning of the Foxtel brand last week at a function in Sydney.
On the day before the public unveiling of the brand overhaul, Tonagh explained to Mediaweek that while Foxtel had an impressive lineup of content, the fact remains only around 30% of Australians are subscribers.
“The challenge for us is how do we go from being the pay TV company for the premium segment, effectively stuck at 30% penetration, to becoming the provider of premium entertainment for all Australians.
“The relaunch is about Foxtel for everyone, rather than Foxtel for the few.
“We are doing that by introducing a new brand mark, marking a shift away from the traditional way that people have viewed Foxtel. Our previous logo was dark orange, perhaps very aggressive, big capital letters which could have been seen as quite loud and exclusive.
“What we have now we feel is much warmer and more welcoming and more inclusive.
“The second important message is that Foxtel is for everyone and everything we now do will make sure that regardless of what platform people want to watch on, and no matter what their budget is, we will have a package that is affordable for them.
“We will also continue to invest in the iQ3 and make it even better than it is today. We will also continue to invest in HD and other enhancements. We will also be focusing more on the cheaper Foxtel packages around the relaunch of Foxtel Play which will be relaunched as Foxtel Now. That will allow us to do a few things including new apps for the delivery of Foxtel Now.
“There are new iOS and Android apps. We are also launching a new web browser proposition using Chrome and we are offering the ability for users to Chromecast Foxtel Now to their big screen. We are also continuing with Telstra TV with a relaunch of our brand on that platform.
“We will start to promote Foxtel much more aggressively. We won’t be shy about the fact we have a product where the entry price is now as low as $10 monthly. Customers can get access to all our sports channels from $39 a month. It is making it a much more affordable proposition for people who don’t want to sign a contract and get a satellite dish installed.
“We offer solutions now for people who want to stream instantly and download the app to their mobile device for instant access.”
It wasn’t too long ago that Foxtel was labelled “the most profitable media business in Australia”. When asked if Foxtel was getting ready for future challenges or if they were already here, Tonagh told us:
“The reality is that the market is changing. Globally there has been much more competition than there has ever been before. One of those changes is the rapid growth of IP streaming services like Netflix and Stan. The one thing that SVOD services have done which we think is a benefit for us is they have made it an acceptable thing to pay for content. That is perhaps an extra 2.5m people monthly who are paying for content.
“My concern is we are the one who could be attracting those customers because we have exceptional content appropriate for those audiences. How do we get those customers who are paying for Netflix or Stan to pay for Foxtel, either instead of or as well as their other subscriptions?
“Once they are using the Foxtel product they may then decide to upgrade to get access to things like sport.”
Lowering the entry level price has always been an option to increase Foxtel penetration. In the past, and perhaps now, it is seen as something as a gamble as people on high-end packages could decide to downgrade, impacting on Foxtel revenue.
So why is Foxtel using that strategy now? Tonagh: “The time seems right. Our research has identified three groups of customers. Customers who watch FTA TV with some on-demand streaming products – the cheaper products from Foxtel, Netflix or Stan. There are others who are our customers at the premium end who are happy to pay $100 for the best of everything. There is also a group of people in the middle who want to have access to sport or a broader range of content, but they want to have more flexibility and they don’t want to spend $100 monthly. They would rather spend between $40-$70 a month. We will now have packages available for all those people.”
Although premium package Foxtel subscribers enjoy a dazzling array of choice, there is much they will never sample simply because they don’t have time to watch everything. “There is more content than ever being produced and ideally we want to continue to offer as much content as possible,” explained Tonagh in defence of their quantity strategy.
“However, the days of having it all in a big package with people getting channels they don’t want doesn’t really work any more.
“In the future there will be fewer channels that are included in our packages while there will be more opportunity for a la carte purchases.”
Tonagh explained that the recent culling of channels available on Foxtel Play was about niche channels that didn’t offer a lot of on-demand content.
Foxtel is all about making the customer experience simpler. If you visited Foxtel.com.au recently to investigate a subscription you were perhaps puzzled by the different offers – Foxtel Go, Foxtel Play, Foxtel Anytime – all of which offered a streaming capability.
Tonagh: “As part of the repositioning of the brand we are going to eliminate some of those brands. Now we will have Foxtel Now, which is the pure IP streaming service, and Foxtel which is the satellite or cable service. There will be no Foxtel Go as people will now simply download the app to watch Foxtel on the smart phone or tablet. There are no reasons for the extra names as they only add confusion
“Our goal over the next few years is all about scale.
“The brand repositioning of Foxtel for everyone is important because we have a fairly significant fixed cost base.
“When you have that the best way to address that is to build scale and that is why we are launching Foxtel Now.”
Tonagh: “People like getting full seasons of some of the shows on offer. Binge viewing has become a big thing. We have learnt from that and that is why things like every episode of every season of Game Of Thrones is available on demand.
“The price of SVOD subscriptions is important. I have an SVOD subscription and I don’t watch it very often. But at $12 per month am I going to get it disconnected? Probably not.
“Another thing we have learnt is that regular communication with customers via emails is as much about the product as the content itself. It is a very important skill we need to improve on and tell our customers more about the content that is right for them this week.”
Foxtel’s ad load
SVOD doesn’t interrupt any of its programming with ads. Is that something holding Foxtel back now?
“It was always something that we needed to balance carefully,” said Tonagh. “Unfortunately we have to fill the program schedule on linear TV and you don’t have to in on demand.
“We are not shying away from carrying advertising content. The most important thing is to make sure that it is as relevant as it can be and preferably contextual. We have heavy investments in addressable advertising we will roll out in the next 18 months. The ad that you get will be different from the ad that I get. That is important because all the research shows that if you are receiving an ad that is targeted to you, you are much less likely to change channels.”
Local content commissions
Any glance at the Foxtel top 50 shows each week will see it dominated by sport – especially across the winter months where channels like Fox Footy and Fox League feature heavily. The only non-sport shows that regularly crack the top 50 at this time of year, apart from Game Of Thrones, are local Foxtel commissions. But does the subscription TV offer enough local drama, reality and factual?
“I would like to see us do more of that,” admitted Tonagh. “Last year eight out of our top 10 non-sport shows were Foxtel local productions. We have increased our spend quite dramatically on local content in the last few years.
“We would like to do two things – make the content much more effectively. By that I mean not cutting production costs, but finding other ways to monetise the content. Several of our shows are sold in 100 territories around the world.”
One of their forthcoming productions, Picnic At Hanging Rock, has already been something of a success in international markets before people have had a chance to look at it. “Top Of The Lake: China Girl, which is a co-commission with BBC Worldwide, stole the show at Cannes this year. That sort of edgy drama is very important for us. However, I think it is highly unlikely we could generate something like Game Of Thrones. We are better to focus our efforts on thinking about Australian stories that are globally relevant rather than thinking about trying to create a global blockbuster. For us the core business is the Australian market and we make those shows because we think they are relevant to Australians.”
Network Ten investment
Tonagh was in Canberra recently helping lobbying for change in the media laws. We asked him if Foxtel wanted to do more in partnership with Network Ten, where Foxtel is now a shareholder and Tonagh a board member, would the media laws need to change?
“None of what we could do depends on the media laws changing. We can do all we need to do without a law change. Gogglebox has been a great success for both of us. Common Sense is a spinoff that we shall both be partners on. There is certainly more we can do in the future and none of that depends on us owning Network Ten. In some ways the most important thing is the MCN relationship. If MCN is selling advertising for both of us they are able to tell us about the content that would sell the best if it sits across both platforms.”
CV: Peter Tonagh
Peter Tonagh was appointed chief executive officer of Foxtel on 17 March 2016. Prior to the appointment, Tonagh was chief executive officer of News Corp Australia in 2015. His previous roles also include chief operating officer of News Corp Australia, interim chief executive officer of REA Group, and he held the dual roles of chief operating officer and chief financial officer at Foxtel.