Subscriptions up by 9% as revamped Foxtel prices pay off.
New pricing last November has seen subscriptions lift for Foxtel, but earnings are down.
- Published by David Knox
- on
- Filed under Subscription
Foxtel’s plan to restructure its pricing ahead of streaming competition entering the market has paid off with subscriber numbers lifting by 9%.
The company reported nearly 230,000 new subscribers and churn (cancellations) at 10.9% for the year ending in June, its lowest since 2000. Basic packages dropped from $49 a month to $25 a month last November.
Media reports this week suggest the arrival of streaming services is seeing some Foxtel customers trial new entrants as an add-on to current Pay TV subscriptions.
But according to News Corp, Foxtel’s net income also fell 24% to US$232 million from US$304 million. News Corp said its equity earnings from Foxtel fell from US$90 million ($121.8 million) for the year to US$59 million.
“Last year we took the bold step of changing our pricing model to attract more customers,” said Foxtel CEO, Richard Freudenstein. “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,” he said.
“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%[1] – 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.
“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.”
10 Responses
The 9% increase is interesting but not as much as the revenue. All of the decrease in revenue in the story above is actually related to the devaluation of the US dollar rather than an actual decrease in revenue. According to Telstra’s results announcement today, which are all in AUD, Foxtel revenue has actually increased by 1.9%. Longer term this is not a good sign though as each customer has a fixed cost and i’d rather 100 customers paying me $100 a month than 200 customers paying me $50 a month. Foxtel has peaked and it is all backwards from here for them. The iQ3 has been an absolute disaster and there is no game changer for them on the horizon.
Netflix and other services have much lower marginal cost, but only after you pay the $90-100 p.m. for high capacity NBN broadband to get good value out of it. Iinet are already starting to discount so that should drive prices down.
Pay TV works on economies of scale. Foxtel’s fees has to cover the over 80% of the cost of the Optus and Telstra cable networks and satellite bandwidth plus rights to content. If you split up the bundles the prices for individual channels will rise and you lose the option to watch stuff on other channels occasionally.
Cable shaving is the new thing, keeping the basic Foxtel for FTA, basic cable and an IQ3, and sport (if you watch it) but using Netflix for drama and movies. As long as you don’t want the latest show US and BBC shows that is cheaper.
We’ve been paying around $100 a month for a broadband (100Mbps) and phone package through Optus with no NBN in this area for a few years now so when we added Netflix and Hulu it really only a small increase on what we were paying. Now our package includes Fetch tv for $90 which included Syfy and BBC first.
Over the years we have had Foxtel , Optusvision and even Galaxy but now once again we are going to cancel Foxtel when our current contract is up.
Noone in the house is a sports fan and as we have had no problems with HBO now I can use that when Game of Thrones comes on.
I’ve had subscription TV now for 20 years and now more than ever with so many other options around I struggle to find value in Foxtel. Despite being a customer for so long when we restructured our package in line with their new line up they forced us onto a contract – now – at a time when all we are using Foxtel for is NRL and AFL (both of which are over soon) and the occasional other show here and there we are stuck with it until early next year. Our package is at its lowest ever – basic + sport.
I put it to you – that if everyone was forced onto contracts when they upgraded to new packages prior to Netflix then those who might have left Foxtel in recent months are yet to have been able to. The real story will come when all these contracts run out – unless Foxtel make another restructuring move with even more flexible packages.
They should for example allow you to have sports only without basic for $25 per month. Or allow you to cherry pick channels – even if at $5/per month per channel – some of us will never pay for a for tier just for one channel you want and more often then not just for one show on that channel. Haven’t seen Sharknado 3 yet for that reason.
I can get Foxtel Play on a couple of devices, which at the moment is not worth it as the minimum you pay is $25 pm for Genre picks out of 4 choices. One has 21 channels, 2 x 20 channels and one by 17 channels, then it’s $25 for the Sport, so $50 pm for less channels than on an IQ cable/satellite connection, with them not having to supply a box or do any install. If you could have Sports as a Genre pick for $25 pm I would take that and combine it with my Netflix and Stan subscriptions, however I’m not doing it because of the cost.
Their subscription numbers are only up as they’re now including Presto subscriptions in the overall subscriber numbers – very dodgy! mumbrella.com.au/foxtel-admits-subscriber-figures-include-presto-users-but-claims-cable-still-biggest-growth-driver-311968
Agree this should be spelled out, given Seven is half owner of Presto.
Wow, very dodgy! A Presto subscription is in no way comparable to a Foxtel subscription.
What I take from this is that Foxtel maintained its rigid and overpriced package structure for so long because this was what was most profitable for them and there was insufficient competition to force them to change.
They may be boasting about more customers since the introduction of the lower price point after Netflix forced their hand but won’t be happy that overall profits are down.