Unmade: media and marketing analysis
Unmade: media and marketing analysis
'We couldn't get a pulse back' Patrick Delany on the rationale behind Foxtel's pivot to streaming

'We couldn't get a pulse back' Patrick Delany on the rationale behind Foxtel's pivot to streaming

Welcome to an audio-led edition of Unmade. Today’s edition features an in depth interview with Patrick Delany, the mastermind of Foxtel Group’s pivot away from broadcast TV, towards streaming, and now aggregation.

Also in today’s post, the Unmade Index slips back below 600 as the market reacts badly to updates from Enero Group and Motio.

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‘If we started a business like Kayo inside Foxtel it would get killed’: Patrick Delany sets out Hubbl’s stall

Last week, Foxtel Group reached another inflection point.

After winning the subscription TV wars, the company had lost its way when the streamers arrived. It began to bleed subscribers, and its first, timid, entry into streaming via Presto, a joint venture with Seven, failed fast.

Patrick Delany returned to the business as CEO six years ago and led the sort of strategic shift rarely seen in incumbents, opting to disrupt the company’s own lucrative, but fading, business model by pushing hard into streaming. Sports platform Kayo and entertainment service Binge quickly followed.

Last week the company pivoted again, putting aggregation at the centre of its universe, with the launch of Hubbl. The move puzzled many commentators, trying to figure out why Foxtel Group is putting so much weight behind what appears to be a low margin hardware play. Today’s interview goes some way towards answering that.

The answer is that Foxtel sees its future at the heart of aggregation. The puck and built-in Hubbl Glass TV devices offer consumers the promise of making their multiple subscriptions easier to navigate. Consumers who led Foxtel manage their subs will make savings.

In some ways, that marks a return to Foxtel’s roots. The company began life as an aggregator of other companies’ channels, but over time came to own more and more of them itself.

During the wide ranging conversation, Delany explains the moment Foxtel recognised it had to change after buying expensive cricket rights and broadcasting in 4K format didn’t alter the company’s downwards trajectory in the face of the rise of Netflix. Instead Foxtel Group moved into a clear eyed differentiation strategy - hanging on to existing, lucrative Foxtel subscribers for as long as possible, while creating a whole new product at a cheaper price point and a differentiated brand for younger consumers.

“The first thing we did was, can we get some life back into Foxtel? Can we make it grow? Can we do that through 4K and cricket? We went and spent a lot of money on doing that. We did big campaigns and we couldn't get a pulse back.

“So we flipped into the main strategy which was maintain Foxtel as long as we can, run it for cash, stop doing above the line promotions that annoy subscribers, try and hang on to the subscribers as long as we can so be content with older richer Australian insider Foxtel.”

Alongside the strategic shift, came one of the lessons learned from the Presto debacle. Because Presto sat inside the main Foxtel business, it wasn’t allowed to compete, and was a much weaker product as a result.

“We started talking about the new world but it was pretty clear that if we started a business like Kayo inside Foxtel it would get killed and we'd done that previously - we started Presto, did it on a terrible platform but the culture would be to protect Foxtel.”

Instead came the Streamotion business, which is where Kayo, Binge and news aggregator Flash are housed in a seperate building down the road from the main Foxtel office. Subscribers to the new streaming service don’t even see the name Foxtel on their bills.

In another sign of how central Hubbl is to the new approach, the Streamotion brand is becoming Hubbl. The word Foxtel was not uttered from the stage during the glitzy launch event on Sydney Harbour last week.

Hamish & Andy launch Hubbl

The conversation with Delany also covers communications legislation, ever escalating sports right costs, Foxtel’s relationship with the free to air TV industry, the shock 2015 NRL rights blindside, the question of future plans for an IPO, and whether Delany might one day follow in the footsteps of one of his predecessors Kim Williams and lead News Corp (spoiler: he says not).

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Enero pulls Unmade Index back below 600

The 600-point floor under The Unmade Index broke again yesterday, with our tracker of Australia’s listed media and marketing stocks once again moving below that key level.

A drop of just 0.15% was enough to take the Unmade Index back down to 599.6%, signalling a 40% loss in the value of media and marketing stocks since the index began two years ago.

The worst fall came from holding company Enero Group, which lost 7.32% after releasing its half year results. More on that in Best of the Week on Saturday.

Elsewhere, Southern Cross Austereo - which reports its results this morning - lost 1.04%, and its rival (and potential buyer) ARN Media lost 0.56%.

At the microcap end of town, resources publisher Aspermont recovered by 14.29% yesterday, after losing 22.22% on Tuesday. Yesterday, Aspermont announced it was going to attempt to turn its internal client content studio Content Works into a “fully integrated marketing agency” called Nexus.

And out of home minnow Motio saw its price lose 20%, taking its market capitalisation down to $4.7m, its lowest in more than four years. In its half year results released late yesterday, Motio reported revenues rising 31% to $3.7m for the half, but a net loss of $1.4m.

Time to leave you to your Thursday. We’ll be back with more tomorrow.

Editing was courtesy of Abe’s Audio, the people to talk to about voiceovers, sound design and podcast production.

Message us: letters@unmade.media

Tim Burrowes

Publisher - Unmade

Unmade: media and marketing analysis
Unmade: media and marketing analysis
Media and marketing news with all the in-depth analysis, insight and context you need.
Unmade offers industry news from an Australian perspective, from the founder of Mumbrella and the author of the best-selling book Media Unmade, Tim Burrowes