Foxtel/Austar merger may unlock IPTV goodies

news Pay TV giant FOXTEL has proposed terms relating to its proposed $1.9 billion merger with fellow pay TV company Austar that could see a raft of premium content unlocked for use by competing platforms such as burgeoning Internet video companies FetchTV and Quickflix.

The Australian Competition and Consumer Commission (ACCC), in a statement issued yesterday, announced it had initiated consultation on the proposed undertaking offered by FOXTEL regarding its proposed acquisition of Austar. FOXTEL – a joint venture between Telstra and Consolidated Media Holdings – made its $1.9 billion bid to acquire fellow pay TV operator Austar in May last year, to create a much larger consolidated company which would dominate the subscription entertainment market in Australia.

In a media release, FOXTEL said it had provided ACCC with undertakings covering access to exclusive content and access to channel signals, to address concerns raised by ACCC of its proposed takeover of Austar. ACCC Chairman Rod Sims said: “The proposed undertaking has been offered by FOXTEL to address the harm to competition which is likely to arise as a result of the proposed acquisition.” He added that it was not intended to resolve competition or structural issues that may already exist in the relevant markets and were unrelated to the proposed acquisition.

For ACCC the main areas of concern with the proposed acquisition were for the retail supply of subscription television services, particularly at entry level, in the national market, and for the supply of fixed broadband and fixed voice telephony products in regional markets.

Since the proposed acquisition would bring together the two main subscription TV industry players in Australia, each with a substantial customer base and significant access to key content, Sims said this would give Telstra, FOXTEL’s largest shareholder, greater market power in fixed broadband and telephony markets.

FOXTEL’s undertakings covered four main areas: non-exclusivity over a broad range of channels including Disney Channel, SKY NEWS, ESPN, 13th Street and KidsCo, making content available to existing and future competitors; non-exclusivity over transactional video-on-demand movie rights to new release movies, creating opportunities for new and existing competitors to develop differentiated and more affordable TV offerings; signal access to facilitate IPTV delivery by third parties, enabling IPTV players to receive signals for channels to which they had agreements; and extension of the special access undertaking to Austar set-top units, making it possible for content suppliers to gain access to the more than 2.2 million combined FOXTEL and Austar customer base.

The terms of the undertaking offered a fair chance for competitors of FOXTEL and Telstra, according to the pay TV company. It also aimed at lowering barriers to entry, promoting effective competition in telecommunications and subscription television markets.

The ACCC had believed issues of competition might arise around FOXTEL’s ownership of exclusive sports rights, but these, it felt, were independent of the proposed takeover. Though premium domestic sport was not offered as part of the undertaking, the ACCC considered that the package of content made available would be sufficient to address the competitive harm likely to arise as a result of the proposed acquisition.

With the proposed undertaking now public, ACCC has now sought views from market participants to assist its consideration of the proposed undertaking and determine if the proposed undertaking would be likely to alleviate ACCC’s potential competition concerns. Following market consultation, the ACCC will decide whether to accept or reject the proposed undertaking. Submissions are due by March 20th, 2012, and the ACCC has set March 29th, 2012 as the tentative final decision date on the proposed undertakings.

Welcoming ACCC’s decision to go for market feedback into its proposed undertakings, FOXTEL CEO Richard Freudenstein said FOXTEL strongly believed the acquisition would not lessen competition; in fact it would ‘create a great Australian media company, good for consumers and good for business’. He affirmed that FOXTEL would continue to work constructively with ACCC.

FOXTEL said it had provided ACCC with the undertakings, which have a term of eight years, to facilitate a more expeditious completion of the transaction than would otherwise have occurred in the absence of the undertakings.

Could the merger of FOXTEL with Austar, ironically, finally unlock some of the top-level content which companies like FetchTV and Quickflix (and potentially even Apple) need to vault their IPTV offerings to a competitive level with pay TV? It’s certainly possible. With the pay TV company promising access to channels such as Disney, Sky News and ESPN — as well as a range of new release movies and so on — there’s a lot of goodies which could come out of this deal for the IPTV companies.

The IPTV services are growing fast in Australia and rapidly adding content, but that content often tends to be legacy rather than the new hotness — older movies instead of new releases, second-tier or publicly available channels instead of the latest breaking news through channels such as Sky, and TV shows that are the remnants left over after the pay TV and commercial TV networks grab the latest and greatest releases. If some of this fresh content makes it to the IPTV operators, they could start to look a whole lot more attractive.

Image credit: Michal Zacharzewski, royalty free. Opinion/analysis by Renai LeMay.


  1. This concerns me – greatly. You now have ONE satellite / PayTV provider (of any consequence). WStill offering the same lame restrictive packages, the same lame customer service, the same repeats and reruns and, more importantly to me, THE SAME BLOODY ADS.

    While I can understand that so-called “free-to-air” TV needs to generate a revenue stream from advertising, and I have no problem with that, if I’m PAYING for the programs I want to watch I’m NOT PAYING TO WATCH ADS !

    I cancelled Foxtel some two years ago over this, and before doing so did some research – on average, there are 25% MORE ads on Foxtel than on Free-to-Air in the same time slot .

    WTF, people !! Take them off or provide a “skip” function.

    • I no longer watch virtually any free to air TV because of all the ads. I just can’t stand people shouting at me from the television every night to buy something.

      • i love my PVR. its set to record what i want to watch, and i dont try to show up to watch as the show starts.

        instead i amble along 10 mins later maybe, and start chase play. every ad break gets passed with great speed, giving me minimal disruption to what i want to watch and by the end of the show you arent far off live TV once again.

        you DEFINITELY need to leverage a little tech in your life if you want to keep watching FTA these days. personally ive never seen the value in paid TV, so i guess im stuck with FTA and my PVR for the time being :)

        i know im not the only one here doing it (looking at the rest of the comments) but it jsut makes me shake my head when people are living in the last century and actually sitting through ads unnecessarily … there is a better way! :p

        as far as the non exclusivity proposal goes, i like it a lot. Telstra gets its rights to broadcast but its doesnt exclude others, which while they wont like it essentially is a capitulation over Tv Now.

        if it indeed opens up sports for IPTV shared broadcasts i can see myself using quite a lot of sports broadcasts via that route. heres hoping that or something like it happens!

  2. Re: Ads
    I record everything I watch on my PVR so I can skip the ads (FTA). If I had foxtel / Austar I would get a device with a recorder so I could do the same thing…

  3. I can’t see this freeing up the sport which is the bit that most people want. I’d be very happy to pay $20 or $30 a month to get the sport channels over IPTV. Or perhaps $5 a game for the things I want to watch.

  4. Where is Austar in competition with Foxtel? I thought their only market was the 30% who couldn’t get Foxtel. They basically just repackage the same product.

      • I think that the Gold Coast is the only area where they overlap. And speaking as someone who moved from Foxtel’s IQ2 to Austar’s MyStarHD the merger can’t come soon enough.

        • Definitely agree there, I am moving from Perth to Ballarat, and can only get AUSTAR. There is no way in hell I am paying more for the same thing, with a crappy STU like Mystar.

    • austar basically does anywhere that foxtel doesn’t and i’m pretty sure foxtel only does metro area’s. maybe large regional centres as well?

      i do know that foxtel does the entire state of WA. there is no austar presence at all.

  5. I think that Foxtel and Austar should go the opposite way. Many countries bigger and smaller than Australia have competitive pay TV offerings, but Foxtel and Austar have a virtual monopoly in almost all of Australia. So instead of merging, they should be restructured so that Foxtel is on cable only and Austar is on satellite only, and they should compete with each other.

    Austar will have the advantage of wider coverage, but Foxtel would have the advantage of being able to provide more local content and more channels.

    • We did have a competitive pay TV market back in the 90s. Three main players, in fact, with almost no overlap. It didn’t last five years.

      Thing is that rights to content are usually exclusive. So, if there are multiple platforms you will usually only see a certain movie / sport / TV show on one of them. The inevitable outcome of this is that whoever buys up the most desirable content wins and other players either consolidate or fail – same outcome either way.

      Foxtel (and/or Austar?) control most of the popular channels here outright. This is different to some other parts of the world, where channels are actually run independently and access rights sold to any provider willing to pay. Foxtel’s control of the popular channels here has kept them Foxtel exclusive, and they’re well within their rights to do so as it’s a luxury product. A promise from Foxtel/Austar to allow IPTV providers access to their content is therefore a huge step and probably the best we’re going to get.

      • Yes and it will probably be done on a movie by movie or match by match selection. I cant see Foxtel offering IPTV users a channel to subscrobed to. If thats the case I would dump foxtel and get IPTV and buy only the sport package for 30 dollars.

    • Problem is in Perth cable is availible only in selected areas so Foxtel would provide coverage only in 3 suberbs. Does Foxtel have superior coverage ?
      Also havng too many pay TV companues can result in sports coverage being spread across multiple different providers. Example EPL for foxtel , super rugby for for another competitor. I already subscribed to setanta to get England soccer inernationals and Im sure setanta already has complete coverage of Euro Soccer 2012 champs. I pay 16 dollars a month for that channel. Im gllad setanta isnt like foxtel with own boxes needed.

  6. having had both services, there is little real differentiation between the services, even down to the remote control design. I think this needs to happen so long as they pass on the cost saving (more customers = cheaper movies for them to buy as a whole) as it is now austar and foxtel have to negotiate seperately in their buying power with hollywood and other content providers.

    This is somethign that so long as there are protections put in place has been a long time coming. Foxtel = cities, austar = everywhere else.

  7. I just want Foxtel available on my tbox for regional Victoria. Its far cheaper than Sat/Cable Foxtel.

    Hurry up ACCC!

  8. Cannot see this happening, a monopoly usually ends up with the customer paying more for less.

    • This is not a monopoly!! They provide separate areas! You cannot get FOXTEL where you can get AUSTAR and vice versa. (Except for the Gold Coast).

      And there is no way in hell I would sign up for AUSTAR.

  9. Vijith, if I read this correctly, if approved I can only watch Foxtel “online” if I agree to pay for a Telstra / Bigpond account.

    Can News Ltd or fairfax then stipulate that they’ll only provide their digital content to me if I sign up with iiNet, TPG or Dodo?

    I appreciate that it would be a stupid move for News Corp to restrict me to one ISP. So why is it different for Foxtel? What;s the benefit to them? Maybe the benefit is to a 50% stakeholder, Telstra.

    Perhaps if iiNet procurred a 50% interest in News Corp or fairfax, they’d want to cut a similar deal.

    When will common-sense prevail? Wouldn’t it be a great world if you could choose your RSP / ISP and then go shopping for content?

    I know, what a crazy concept.

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