AustLit

FOXTEL

Foxtel is the largest pay television provider in Australia, broadcasting more than 200 channels to approximately 2.4 million households. Foxtel provides cable, direct broadcast satellite television and Internet Protocol Television (IPTV) services, the means by which live television and internet services are delivered through high-speed access channels.

Foxtel was formed in 1994 as a joint venture between the Australian government-owned Telstra and Rupert Murdoch’s News Corporation to deliver—initially at least—a cable-based pay television service. The service was designed to help Telstra defend its dominant market position in fixed-line telephones in the face of a new competitor, Optus, which had earlier announced a cable rollout and multi-channel pay TV service to help attract phone customers. Optus had promised to deliver its phone service and multi-channel pay TV on the same cable. Foxtel would only provide the pay TV service, because Telstra already had the phone infrastructure in place. News Corporation, which owned the 20th Century Fox studio in Hollywood, would provide the programming for the Foxtel service.

Legislators in Australia had been focused on the use of satellites to deliver multi-channel pay TV, and in 1994 a new company, Australis Media, paid approximately $200 million at auction for satellite licences, as well as for providing digital set-top boxes in homes. By comparison, there was no bidding system for cable, and News Corporation was able to secure its cable licence for a mere $1570 (the Australian Broadcasting Authority fee for two or more cable licences). Additionally, Foxtel faced no restrictions on the number of channels able to be delivered by cable, and the Keating Labor government gave Foxtel (and Optus) the right to decide on exclusive access to their cable networks.

The justification for this monopoly access was ‘not to delay the rollout of cable in Australia’.

News Corporation and Telstra initially invested $150 million in a joint company to manage their cable venture. Telstra, however, funded the $3–4 billion extensions to its existing cable network, reflecting the importance it placed on defending its phone business from an aggressive new competitor. News Corporation executive chairman Rupert Murdoch himself described this pay TV alliance, in which Telstra would pay for the cable infrastructure and the connection into the home, as ‘the deal of the century’.

The cost of the licences and the expensive development of a unique MPEG digital technology to deliver its Galaxy service became too much for Australis, and it collapsed in 1998, with Foxtel acquiring the Galaxy subscribers from the Australis liquidator. That year, Kerry Packer’s Publishing and Broadcasting Ltd, which had previously backed the rival Optus Vision consortium, purchased half of News Corporation’s shares, giving each a quarter ownership of Foxtel. This was sold back to News Corporation in 2012 for $2 billion, thus restoring the 50 per cent ownership of Foxtel by News.

Foxtel announced its first profit in 2006, after incurring a cost of nearly $10 billion in developing satellite and cable infrastructure, and obtaining sport and movie programming. It has expanded rapidly, boasting a penetration rate of approximately 35 per cent, and its programming is available to over 70 per cent of Australian homes. However, this rate is significantly lower than market penetration rates in the United States, and subscription fees are higher than in either the United States or Europe.

Cable subscriptions are sensitive to global economic conditions, and Foxtel is also under pressure from providers of streaming video, including Netflix, Hulu Plus and Amazon. In response to these challenges, in 2013 Foxtel introduced Foxtel Play, a broadband streaming service that does not require a set-top box and operates by monthly subscription instead of contract periods.

REF: M. Minehan, ‘Pay TV in Australia and the Concentration of Media Ownership’, MIA, 92 (1999).

MIKE MINEHAN