Thursday, 13 August 2015 17:54

Foxtel price drop was right anti-churn Fixtel


When Foxtel dropped its prices last year, the Foxtel anti-Netflix fix was in, validated by ‘strong growth in customer numbers supported by record low churn.’

With a lower price, Foxtel has presumably lost some profit, but has seen subscriber numbers grow 9% or nearly 230,000 new customers while churn declined 1.6% to 10.9%, the lowest since ‘at least’ the year 2000.

The news comes as Foxtel publicly ‘welcomed the release by its shareholders (Telstra Corporation and News Corporation) of full year results,’ which Foxtel says provides ‘evidence that its new pricing and packaging strategy has reignited subscriber growth.’

Richard Freudenstein, Foxtel CEO had several things to say about the development, stating: “Last year we took the bold step of changing our pricing model to attract more customers. These results demonstrate that was the right call.

“Subscriber numbers grew by 9% or nearly 230,000 driven mainly by take up of our traditional cable and satellite products. Significant growth continued all the way through the financial year.

“At the same time churn declined by 1.6 percentage points to 10.9%, the lowest recorded since at least 2000. This is a reflection on the quality of programming available to Foxtel customers across all genres, combined with the additional value given to existing customers during the period and the range of price points now available.

“On average customers now remain with Foxtel for nine years, an extraordinary period for a discretionary entertainment product.

“The growth in subscribers resulted in an increase in revenue, although this was partially offset by the impact of a soft advertising market. Subscriber revenues were up 2.4% - lower than subscriber growth, which is to be expected as we launched in November and therefore most of that increase came in the second half of the year,” Freudenstein said.

Foxtel notes the 2.4% figure ‘relates to the result in AUD prepared under Australian IFRS’ (International Financial Reporting Standards).

Freudenstein continued: “Additional activity driven by the new pricing model, plus initiatives such as iQ3, Presto and triple play and investments in new sports such as Formula 1 and V8 Super Cars, saw EBITDA decline in line with our expectations.

“ARPU has held up very well since the price reduction. Broadcasting ARPU was down by only 2% to $93. This decline was anticipated as part of the pricing changes. It is important to note that the vast majority of new customers took up one or more tiers in addition to the $25 Entertainment pack.

“This is a great result in an increasingly competitive space. It makes it clear that consumers understand the real benefits that only Foxtel can offer,” he concluded.

The news comes two days after Roy Morgan Research had some interesting findings to report concerning Netflix vs Foxtel, which iTWire colleague Graeme Philipson wrote about in an article entitled “Netflix coexisting with Foxtel”. 

In Graeme’s article, a couple of interesting points are that Roy Morgan believes ‘Netflix has hit 8% of Australian homes reaching 1.89 million people aged 14 and over in July’ and that ‘one third of Australian households now have some form of pay or subscription TV, up by almost 30% since the start of 2015.’

Roy Morgan estimates Netflix has ‘737,000 household subscribers’ and that 7.3% of Foxtel homes were also subscribing to Netflix, which ‘suggests that many of [Foxtel’s] customers are, for now at least, trialling Netflix as an add-on to their main pay TV provider,’ and that ‘conversely, it also means that the great majority of Netflix subscribers also subscribe to Foxtel.’

More detail in Graeme’s article here

Either way, Foxtel has managed to stave off any implosion or mass cord-cutting defection with price drops clearly being a key way to keep price sensitive customers happy.

The next stage in the great cable/streaming and packaged price/à-la carte content wars can begin!

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Alex Zaharov-Reutt

One of Australia’s best-known technology journalists and consumer tech experts, Alex has appeared in his capacity as technology expert on all of Australia’s free-to-air and pay TV networks on all the major news and current affairs programs, on commercial and public radio, and technology, lifestyle and reality TV shows. Visit Alex at Twitter here.



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