News Corp chief executive Robert Thomson has shrugged off the threat that US streaming giant Netflix and other video streaming operators pose to his company's half-owned pay TV monopoly Foxtel.
Foxtel, which News owns together with Telstra, slashed the price of its basic subscription package from $50 to $25 last year to combat the arrival of Netflix Australia and grow its stagnant market share.
It has also created its own subscription video-on-demand (SVOD) service, Presto, with Seven West Media which also competes with Stan, a $100 million joint venture between Nine Entertainment and Fairfax Media, publisher of BusinessDay and The Australian Financial Review.
Mr Thomson was adamant Foxtel could bolster its market penetration, which has been lingering around 30 per cent, despite the intense competition between SVOD players.
He said the new Foxtel pricing was already attracting more subscribers and predicted that trend would continue.
New customer sales are up 52 per cent year-to-date and from November to the end of March, they climbed 75 per cent, Mr Thomson said. Foxtel has about 2.8 million subscribers now.
The growth came despite a study, released in March, from Venture Consulting finding that 10 per cent of Foxtel's customers were considering cancelling or downscaling their subscriptions amid the arrival of Netflix and the rise of other SVOD services in Australia.
"Certainly we had to do something different," Mr Thomson said.
"We have long indicated that we were unhappy with the level of penetration of Foxtel in Australia. We believe it's a great service that if people experience it, they'll like it."
Mr Thomson said the quality of programming at Foxtel – Australia's most profitable company – strengthened it against its SVOD rivals.
"You have a period now of a certain amount of flux in the Australian market and I think it's flux that should work in our benefit given the quality and quantity of our programming compared with that of our inferior competitors," he said.
"There is no doubt that [Foxtel's] programming is pre-eminent."
Foxtel's subscriber growth is yet to translate into revenue, News Corp chief financial officer Bedi Singh said.
News' equity earnings from affiliates, including Foxtel, slumped from $US23 million ($29 million) to $US7 million in the three months to March 31.
The company again cited a strengthening US dollar for the drop, with Foxtel's revenue plunging $US77 million to $US620 million. On a local currency basis, the pay TV company's revenue rose 1 per cent.
Mr Singh said increased spending on marketing Foxtel's new pricing structure had also eaten into revenue.
"Obviously with the launch of the new pricing package and the launch of Presto there was a marketing and customer service investment," Mr Singh said.
"Clearly the subscribers have come on, but the full impact of their revenue probably hasn't been felt in the quarter," he said, predicting the investment would "translate into better profitability as we go forward."
