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the threat to Murdoch's pay TV interests « Previous | |Next »
June 26, 2012

The events of the last few days highlight how the shakeup of the media industry from the digital revolution continues to reduce newspaper's circulations and newsrooms. This shakeup is due to the internet destroying the traditional newspapers model because the industry is left with high level printing cots as advertising revenue plunges. The advertisers have shifted to the cheaper internet platforms that charge a 10th of the rate, and they can be more targeted and effective.

If Fairfax is seen as having it back to the wall, then News Ltd was seen as strategically visionary for increasing its control of Fox Sport and Foxtel by buying out James Packers Consolidated Media holdings.


The internet revolution is not just destroying newspapers. The internet revolution is also starting to affect traditional TV, as improved broadband services are developed and the infrastructure is built to handle the soaring bandwidth needs of their customers. Secondly, new TV sets now include an internet connectivity, which changes the way people view films and videos (it does away with the computer) and also provides an incentive for the TV manufacturers to join with IPTV service providers (ISP's) and film on demand services (Fetchtv and Quickflix).

Online TV may not compete with broadcast television but it disrupts Foxtel because its customers pay around $100 a month (on average) whilst Fetchtv offers entry -level film and TV programs for around $10 a month. The latter have a limited product to offer (limited sport), but it means that consumers no longer have to pay an extra monthly fee when pay TV providers decide to add new features like Web integration to their packages.

Presumably, the limited content access to IPTV will change with intervention of the ACCC to ensure competition in access to sport and films. in allowing the Foxtel merger with Austar, the Australian Competition and Consumer Commission foresaw the ­proliferation of potential rivals and required that Foxtel make content available on commercial terms to facilitate­ com­petition.

So the penetration of traditional pay and broadcast television by the internet will continue and this explains Murdoch's hostility the national broadband network. It threatens his pay TV interests --he is paying $2 billion to acquire Fox Sport and 50% of Foxtel--because the NBN's high speed broadband allows consumers to download film and tv on demand programs quickly and easily. Hence the challenges to the long-term value of pay tv.

If Foxtel's current strength lies in its in sport exclusive content in sport (wholesaler access) and Hollywood movies, then how long can it defend that exclusive access? Therein lies the next battleground. Foxtel and Telstra will try to lock up internet broadcast rights and deny access to others.

| Posted by Gary Sauer-Thompson at 8:36 AM | | Comments (1)


Newspapers have survived pre internet by packaging other things with the news. Tv guides, arts liftouts, realestate, classifieds, job ads, sports and so on. So it isnt just that people are getting their news from elswhere. They are getting these other services from the internet quicker and free.