The media sphere is about to get much quicker and a little more complicated as Foxtel, owned 50-50 by Twenty-first Century Fox (ASX: FOX) and Telstra (ASX: TLS), wants to stave off further competition by implementing its "triple-play" of bundling pay TV, mobile and broadband services with Telstra.
Pay TV subscriber numbers have not been expanding as desired, and this new bundling service is hoped to push household subscribership up past 30%. It also is urgently needed because US online content provider Netflix (NASDAQ: NFLX) is planning to enter the Australian market.
Netflix is said to be able to supply HD movie and sporting content at a price point much lower than what Foxtel customers are currently paying.
If a customer is only paying for one service, for example, pay TV, then it would make switching easier to do, and that is where the triple-play comes in. By combining the three, customers are less likely to change because of the mobile and internet services, thereby the services become "sticky".
Foxtel also wants to raise more revenue from its most popular channels like Fox Sports and improve viewer numbers, by being able to bid for broadcasting rights of sports events that currently are in the realm of free-to-air TV.
Seven Network (ASX: SWM) and Network Ten (ASX: TEN), as well Nine Entertainment, are all wanting to protect their own ability to show these popular sports, saying that Foxtel is trying to make customers pay for something they are already getting free.
Telstra would also benefit greatly from the triple-play as it, too, must contend with other mobile and broadband service providers. The entertainment media industry is going through a consolidation, and it not only wants to win here domestically, but expand into foreign markets similar to Fox . Firming up its base here can be a model for those new growth regions.
Foolish Takeaway
Investors need an overall view of this industry to understand how the parts are moving. Digital media and online content are speeding up the process, and you can see how essential it is for each area- free-to-air, pay TV, and online content providers- to protect their space.
Look for those companies that have large budgets to make things really happen and have international exposure to expand in new, less-developed markets. They will have the best opportunities for growth.
