Winners all round in Foxtel success

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This was published 11 years ago

Winners all round in Foxtel success

By Malcolm Maiden

The agreement between Pay TV group Foxtel and the Australian Competition and Consumer Commission that has cleared the way for Foxtel's $1.9 billion takeover of regional pay TV provider Austar has a bit in it for everyone.

From Foxtel's perspective, it clears the way for an expansion that has become crucial as the pay TV group battles growth headwinds caused by soft consumer demand in a weak economy, and a proliferation of "pay-per-view" entertainment alternatives, including Internet-Protocol TV (IPTV).

Foxtel gets to be in a league of its own.

Foxtel gets to be in a league of its own.Credit: Phil Carrick

For pay-per-view competitors of Foxtel, it opens up the market in a way that was impossible before Foxtel agreed to loosen its grip on programming to get its takeover approved.

And for the ACCC itself, it vindicates a tough stance it took in mid 2011, before Rod Sims took over from Graeme Samuel as chairman.

To get the takeover through, Foxtel and its owners, News Corp (25 per cent and management control), Telstra (50 per cent) and James Packer's Consolidated Media Holdings (25 per cent) have agreed to not lock up slabs of content with exclusive agreements, including 60 existing Foxtel channels and movies supplied by more than half the major and independent movie studios.

Programs that can run on internet protocol TV (IPTV) services are the main focus of the deal between Foxtel and the ACCC, but Foxtel has also agreed to not acquire exclusive mobile rights to the same content, extending the agreement to content that could run on wireless devices, including mobile phones and tablets such as the iPad.

The extension of the deal to include mobile devices was negotiated by the ACCC in a final round of talks after groups including Optus and iiNet told the competition regulator that concessions that were limited only to IPTV did not give them the flexibility they needed to pull together a product that could be viewed on a range of devices.

Fox Sports

The deal does not extend to the channels that sit at the heart of Foxtel's pay TV offer - its Fox Sports channels. There is however enough content on the non-exclusive list to give pay per view rivals a much broader menu of options, and a significantly improved competitive position.

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For the ACCC, the agreement represents an important tactical victory.

The regulator first expressed concern about Foxtel's planned takeover of Austar in the middle of last year, and did so after taking what some considered to be a very narrow view of the market that Foxtel was competing in.

The free-to-air television operators and their new digital television channels were excluded, as the ACCC focused instead on the competition implications for three smaller markets - pay TV itself, audio-visual content, and the supply of telecommunications products.

Its view that these markets were important enough in themselves to stand in the way of an un-moderated takeover of Austar was in turn informed by a view that the increasing availability of broadband including the rollout of the new national broadband network, gave alternative pay-per-view operators the potential to be significant competitors - if sufficient content were available.

Foxtel fundamentally disagreed with the analysis. It pointed out that its city-focused Pay TV service and Austar's regional Pay TV service barely overlapped - there is one small common footprint in a piece of the Brisbane market. It also consistently argued that that it was competing directly with the free to air TV networks, and their new, free, digital channels.

Foxtel had market reality on its side. There is no doubt that Pay TV and free to air TV compete, no doubt either that digital free-to-air TV is an important new competitor to pay TV, and a factor is slowing growth in pay TV subscriber numbers.

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In agreeing to carve out slabs of content from exclusive agreements Foxtel is, however, tacitly reinforcing the regulator's narrower view that the emerging market for the provision of TV on the internet, be it landline or mobile, should be nurtured.

The deal is in that sense a win for the ACCC, and one that will shape future decisions it makes as pay TV platforms multiply.

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