Can Foxtel pre-empt Netflix with Presto?

A new subscription video offering from Foxtel appears to be a defensive move against new challengers coming into the Australian market, according to market analysts.

Foxtel today revealed Presto, a $24.99 monthly video streaming service that gives customers unlimited access to on-demand movies and Foxtel’s premium live movie channels. The deal is similar in design but more expensive than offerings from Quickflix in Australia and Netflix in the US.

While Foxtel has announced pricing, the service won’t be available until later this year. It will launch first on PC and Mac computers and then expand to compatible iOS and Android tablets shortly after.

“It's clearly a defensive move,” IBRS analyst Guy Cranswick. “It ring-fences the existing customers with this service and makes it clear that its offer is potentially appealing to new customers.”

Telsyte analyst Foad Fadaghi agreed that Presto “seems to be a pre-emptive move against a number of parties that are going to be vying for the Australian streaming video market in 2014.”

“The challenge for Foxtel will be its perception in the eyes of its non-customers (around two thirds of households) who have not bought into Foxtel’s current offers and might have a tainted view of the company and its offerings.”

Foxtel chief executive Richard Freudenstein framed Presto as a way for Foxtel to reach new customers. “The launch of Presto as a second brand allows us to meet the needs of different customer segments more effectively and is another way Foxtel is continuing to make its content more accessible,” he said in a statement.

While Presto may look like Netflix, the price is nearly three times as high. In the US, Netflix sells a streaming-only plan for US$7.99. In Australia, Netflix clone Quickflix sells a video streaming service for $14.99 monthly that also includes unlimited DVDs (one at a time) by post per month. Customers pay extra to stream new-release movies.

Presto does provide a discount on Foxtel’s previous plans for customers who only want to watch movies. Under Foxtel’s Play streaming plan, released earlier this year, customers pay $25 for a set of basic channels and then an extra $25 monthly for Foxtel’s premium movie channels.

Even with Presto, however, customers still pay additional rental fees for pay-per-view titles. Foxtel said Presto will at launch include “access to the box office release office releases of 2012” and “the Foxtel Movies vault of recent and older favourite movies.”

“The offer is quite good but the price is not very good value and the obvious inference is that Foxtel didn't read any of the reports following the technology pricing hearings in Canberra and the very feeble reasons why Australians pay so much more for equivalent services,” said Cranswick.

“Foxtel could sweeten the offer and really make it hard for any other competitor to enter the same market with a better price, after all every potential customer knows what it costs in other markets.”

Fadaghi pointed to several other factors that will determine the success of Presto.

“Critical to the viability of streaming offerings will be the flexibility of viewing options, quality of picture, pricing and the user interface,” he said. “Another important option will be access through smart TV apps, which provide a convenient way for consumers to get content on their big screens.”

Netflix has not announced plans for the Australian market, but for expansion.

“Australia is a great target because of our high prices for subscription TV, high dollar and relevantly strong consumer economy,” said Fadaghi.

Last year, a Quickflix executive revealed that his company was moving fast in an effort to keep Netflix out of the market.

“We’re trying to move as fast as we can because we’re scared of these other big competitors and we’re scared of people like Netflix … who might be coming to Australia,” Quickflix chief innovation officer, Tim Parsons, said at last year’s CeBIT Future of Payments conference.

Foxtel has been contacted for further comment.

Follow Adam Bender on Twitter: @WatchAdam

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Copyright © 2013 IDG Communications, Inc.

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