Subscription television

Authors: Will Jeffries, Briony Oayda and Scott Walsh

Executive summary

2017 saw Netflix cement its position at the top of the subscription video on demand (SVoD) market in Australia and Foxtel experience its first decline in overall subscribers. Amazon entered the market in 2017 with its SVOD service, Amazon Prime; and in early 2018 Foxtel and Fox Sports merged diluting Telstra’s ownership of the merged entity. Telecommunications companies are still active in subscription video, with Optus, iiNet, Telstra and others competing on premium and SVOD bundles in order to secure
more ‘sticky’, ie longer-term customers. Content rich studios like Disney and NBC Universal will put pressure on SVOD aggregators by withdrawing their content and going direct to consumers over the forecast period.

Watch our forecast for 'Subscription television', or jump to a particular segment through the chapter tool.

Forecasts at a glance

 SVOD grows strongly over the forecast period, surpassing premium box delivered revenue in 2022


Australian snapshot

SVOD bundles popular but internet speeds still a challenge

Internet service providers (ISPs) bundling SVOD with data and access are a common part of the subscription TV market now, prompted by ISPs seeking better customer retention and consumers wanting greater value for money. Approximately 70 percent of households who purchase a data bundle add at least one STV service, according to Scott Lorson, CEO of Fetch.1 It is expected that rollout of the National Broadband Network (NBN) will assist growth in bundled offerings over the next three years as customers switch over and consider new plans.2

Bundling gives SVOD providers greater exposure to potential customers and more certain revenue streams. An ongoing challenge within the industry facing ISPs is the provision of adequate internet speeds and bandwidth to SVOD customers. This is evident in the recent announcement by Foxtel to no longer distribute via Hybrid Fibre Co-Axial (HFC) cabling in favour of satellite technology.3

'In a new world of media options, we see a fragmentation of viewing behaviours. Using a grocery analogy, consumers visit a range of stores - the baker, butcher, fruit & veg and a convenience store.' Fetch aims to provide the equivalent of a supermarket, offering the convenience of everything they need under one roof - a set top box, a single remote and one bill.

Scott Lorson, Fetch TV

Foxtel and Stan differentiate by offering more premium Australian content

foxtel now Netflix Australia Stan Amazon
(minimum spend per month)
$10 $9.99 $10 US $2.99
(maximum spend per month)
$104 $17.99
(4K, stream on four devices at once, offline viewing on four devices)
(4K, stream on four devices at once, offline viewing on five devices)
US $5.99
Quality 1080P 4K 4K 4K
Offline downloads No Yes Yes Yes
Duration of the free trial 2 weeks 1 month 30 days 7 days
Supported devices iOS, Android, PlayStation 4, Google Chrome on Windows and Mac, Telstra TV, Chromecast. PlayStation 3 and Xbox One run the older Foxtel Play app (can access the same content, but won't play HD videos)
iOS, Android, Windows Store, web browsers on PC and Mac, most smart TVs, Apple TV, Telstra TV, Fetch TV, Chromecast, Xbox One, Xbox 360, PlayStation 4, PlayStation 3,
and Wii U
iOS, Android, Windows Store, web browsers on PC and Mac, Xbox One, PlayStation 4, PlayStation 3, Apple TV, Telstra TV, Fetch TV, Chromecast, and selected smart TVs iOS, Android, web browsers on Windows and Mac, Apple TV, Amazon Fire TV Stick, PlayStation 4, PlayStation 3, Xbox One, Xbox 360, and selected smart TVs
Exclusive/original/ Australian content (selected) Live sport

Exclusive content includes HBO shows such as Game of Thrones, Silicon Valley and Westworld

Australian content includes Wentworth, Open Slather, A Place to Call Home and The Kettering Incident
Netflix original content include Stranger Things, Orange is the New Black, BoJack Horseman and Narcos Exclusive/first on Stan content includes new seasons of Will & Grace, Twin Peaks, Billions and I'm Dying Up Here

Australian and Stan original content includes One Night Stan,Wolf Creek TV series, The Other Guy and No Activity
Amazon prime original content includes The Grand Tour and Bosch

Exclusive content includes American Gods

Content studios choose to go it alone

A large risk facing SVOD providers is that content-rich production companies such as Disney, HBO and NBC Universal are, or have, signalled their plans to pull their content from aggregator services such as Netflix and start their own platforms.4 While Netflix and Amazon shelter themselves with significant investment in original content, research shows that the majority of viewing on aggregator platforms is licensed content, not originals.5

'TV isn’t dying, TV is having babies. If you look at the rich range of BVOD (Broadcaster Video-on-Demand) and SVOD services and live-streaming, TV is healthier from a content and audience point of view than ever. It is enabling its content to be consumed by Australians across multiple devices at any time of day for the length that they choose.'

Kim Portrate, ThinkTV

Foxtel-Fox Sports merger

The Foxtel and Fox Sports merger was approved by the ACCC in December 2017,6 giving Foxtel better cross platform access to Fox Sports’ 400 live sporting events. The merger, along with a six year broadcast and streaming deal with Cricket Australia secured in April 2018, further cements Foxtel as Australia’s leading subscription sports provider. With Netflix already announcing they will never broadcast sporting content,7 focusing instead on scripted content like drama, Foxtel’s differentiation may be unchallenged by competitors in Australia, even though in other markets like the US, over-the-top players like YouTube are entering the subscription TV market with a focus on local news and sport.8

Code Right holders Total deal (A$) Annual value (A$) Year struck Percentage change from previous deal
AFL Seven, Foxtel, Telstra $2.5bn, 6yrs $418m 2015 +67pc
NRL Nine, Foxtel, Telstra $1.8bn, 5yrs $360m 2016 +70pc
Cricket Australia Foxtel, Seven $1.2bn, 6yrs $200m 2018 +100pc
Tennis Australia Nine $300m, 5yrs $60m 2018 +50pc
Football Federation of Australia Foxtel $346m, 6yrs $58m 2016 +45pc
Rugby Australia Foxtel, Ten $285m, 5yrs $57m 2016 +148pc

Subscription television data tables

Subscription television total market (A$ millions)
Historical data Forecast data
AUD 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2018-2022 CAGR
Australia 3,058 3,200 3,356 3,656 4,090 4,640 5,181 5,618 6,100 6,602
% change 4.6% 4.9% 8.9% 11.9% 13.5% 11.7% 8.4% 8.6% 8.2% 10.1%

Premium box delivered (A$ millions)
Historical data Forecast data
AUD 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2018-2022 CAGR
Australia 2,531 2,593 2,565 2,616 2,631 2,673 2,710 2,739 2,764 2,789
% change 2.4% -1.1% 2.0% 0.6% 1.6% 1.4% 1.1% 0.9% 0.9% 1.2%
2016 figure has been updated to reflect most recently available information

Subscription VOD (A$ millions)
Historical data Forecast data
AUD 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2018-2022 CAGR
Australia 1 7 149 419 850 1,350 1,850 2,250 2,700 3,167
% change 600.0% 2028.6% 181.2% 102.9% 58.8% 37.0% 21.6% 20.0% 17.3% 30.1%
Source: AHEDA

Subscription television advertising (A$ millions)
Historical data Forecast data
AUD 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2018-2022 CAGR
Australia 526 600 642 621 609 617 622 629 636 645
% change 14.0% 7.0% -3.4% -1.9% 1.4% 0.8% 1.2% 1.1% 1.4% 1.2%
2013-16 figures have been updated to reflect most recently available information

Follow PwC Australia