Foxtel, which is owned Telstra Corporation Ltd (50%) and The News Corporation Ltd (50%) seems to have an uphill battle ahead.
Executives at the Telco and Media Giant (Rupert Murdoch and Sons) have decided to start the price war early and sign up annual membership with an offer as never seen before in Australia. The basic package which previously cost between 45 and 60 dollars across Australia has been reduced to $25.
This is a play by play repeat of the historic failure of OneTel Australia, which was led by Lachlin Murdoch (son of Rupert Murdoch) and a young James Packer, and which ultimately failed due to irresponsible pricing policies introduced in order to compete.
Foxtel executives know that the power of Netflix, both public interest and economically speaking, stands far taller than the value proposition currently offered by Foxtel. The long term contracts being signed currently are designed as market entry barriers for Netflix but more likely to lead to vast customer complaints ahead.
Foxtel is riddled with negative customer opinion due repeat programming which remains for 7 days on average. And even with the ability since 2010 to watch Foxtel programming on phones, PCs, laptops and tablets have failed to give Foxtel the edge to effectively compete with Netflix.
Netflix is likely to dominate the market from the get go and we are looking at a vast level of uptake. Whilst we are long on Netflix we believe that News Corporation Ltd will take a hit on its books by this new player from March 2015 and whilst Telstra may make some dollars on the increased streaming and bandwidth usage the Foxtel collapse will be show negative earnings on the Telstra books.