Buyouts mean the future of Australian video-on-demand is hard to picture

The dust is showing no sign of settling on Australia’s video-on-demand (VoD) media landscape. The past week has seen two seismic shifts which will have a flow-on effect on almost anyone who watches subscription-based television.

First came the news of Foxtel’s takeover of Presto, with the latter’s customers being transferred to Foxtel Play when Presto shuts down next year.

Then the ailing VoD service Quickflix gained a surprise stay of execution, being saved by a US buyer after going into voluntary receivership earlier this year.

The shakeup has left viewers wondering where their subscription fees are going to end up, and what content they will be able to access once the merry-go-round stops.

Quickflix’s future?

Quickflix’s problems began in 2014, when former stakeholder HBO sold its shares to Nine Entertainment. The following year the shares were transferred to Stan, Nine’s new joint VoD venture with Fairfax Media.

When Quickflix went into voluntary receivership, it stated Stan’s unwillingness to bargain with potential buyers as a key reason for its demise.

Quickflix has now been saved, although it is not clear what it will become or what its focus will be. US media entrepreneur Erik Pence has paid A$1.3 million, and the holding for the purchase, Karma Media, plans to retain 24 employees and pay entitlements to former employees.

There will reportedly be more investment in marketing and a shift towards more niche content. This latter strategy has been a globally successful tactic for other VoD and online platforms such as Netflix, YouTube and Fullscreen.

But it is unclear whether Quickflix’s new service will support the production of Australian content in any way – or even whether it will primarily offer movies, television series, or both. This makes it difficult to analyse the impact its re-emergence will have on the Australian VoD landscape.

Hey Presto

In contrast, the future of Presto has been made very clear indeed. Foxtel has acquired Seven West Media’s interests in the service and confirmed that it will cease on January 31, 2017.

This arguably makes Presto the first real casualty of the battle that has sprung up in Australia’s crowded VoD landscape.

Presto has been constantly reported as struggling for subscribers against competition from Netflix and Stan. A recent Roy Morgan report from this year showed how far Presto was behind its competition.

Presto had 142,000 subscriptions, less than half of the 332,000 signed up to its local competitor Stan. Even combined, these numbers are far short of international giant Netflix, which has 1,878,000 Australian subscriptions.

Foxtel plans to move Presto’s subscribers over to its internet-delivered service Foxtel Play by the end of this year. In a media release Foxtel promised that “Presto customers will get access to more premium first run television programs and more recent movies than ever before” – raising the question of whether they were holding back on content before the takeover.

The Foxtel Play service also may not be what current Presto customers are expecting, nor is there a guarantee that it will end up costing the same.

Does Foxtel really want to compete?

It is clear that Foxtel is trying to compete with current VoD services, as underlined by its recent announcement that Foxtel Play entry prices will be cut to A$10 from the current A$25. But Foxtel Play’s subscription pricing structure is much more complicated than other VoD services.

Unlike Netflix or Stan, which charge a flat fee for all content (although Netflix charges extra fees for more screens and HD qaulity), Foxtel Play has different prices for different content packages, much like Foxtel’s pay TV pricing structure. The content on Foxtel Play is not HD, although will reportedly be upgraded in 2017.

Foxtel Play’s packages include a basic offering of Documentary, Lifestyle or Kids programming at A$10 each per month, plus Premium Drama and Premium Entertainment options at A$15 each per month. Customers can also add Sport (A$25 per month) or Movies (A$20 per month) on top of these. So it seems likely that many customers end up paying more than those subscribing to other VoD services.

At first glance, Foxtel shutting down Presto could appear to be a way in which it can gain new Foxtel Play subscribers while dissuading viewers from defecting to Stan or Netflix. But the actual numbers may be small, according to Roy Morgan’s recent research.

Of the 143,000 Australian homes with Presto, 77% already have an alternative VoD or pay TV service, which could include Netflix, Stan and Foxtel. Of Presto households, 55% also use Netflix and 27% have signed up to Stan.

Meanwhile, almost half of Presto subscribers already have Foxtel, mainly through its traditional set-top box service. Foxtel itself has admitted to using Presto subscription numbers to bump up its own quoted subscriber growth numbers for 2015.

But Foxtel has two key advantages over Netflix and Stan. The first is HBO content, most notably the wildly popular series Game of Thrones. Next year Foxtel will significantly increase the amount of HBO content it offers.

The second advantage is sport, which fittingly is where the fiercest competition is set to play out among rival platforms.

Into the sporting arena

Sport streaming is poised as the next battleground in Australian video streaming, VoD and video subscriptions. If planned changes to anti-siphoning rules are made, the battle will become even more intense.

Foxtel Play’s pricing will allow access to Foxtel’s sports package for A$35 a month, A$15 cheaper than its pay TV sports package. But is it cheap enough?

Telcos themselves have now become sports broadcasters, with both Telstra and Optus heavily invested in sports streaming – the latter after sensationally pinching the rights to the Premier League from Foxtel.

Seven’s recent broadcast of the Rio 2016 Olympics also raised many questions about future sports broadcasting and media rights. With Seven no longer involved with Presto, it could set its sights on sport and furthering its partnership with Telstra.

If Telstra were to sell its stake in Foxtel, it may decide to invest more money in becoming a direct competitor to Foxtel Play.

This will open opportunities for streaming not only for major international competitions, but leagues that currently enjoy less funding and publicity. The Women’s AFL could be a perfect place to start – offering a homegrown product to homegrown viewers.